Japan Trade Policy Review: Structural Reforms, Abenomics in Focus

16 March 2017

Japan’s trade policies and larger economic context came under the spotlight last week at the WTO’s Geneva headquarters during its biennial trade policy review, as members reviewed the latest developments in the Asian trading giant in areas ranging from agricultural policy reform to automobile market access.

These trade policy reviews include the issuing of two reports – one by the WTO secretariat and another by the government – along with a two-day meeting where members can ask questions on the various aspects of the trader’s policies.

Japan’s policies are reviewed every two years, as are those of the US, EU, and China, given their large share of world trade. The timing for other WTO members varies between four and six years, or longer for some of the organisation’s poorest members, with the frequency depending on that country’s share of global trade.

“Abenomics” in progress

The secretariat report noted that the overall orientation of Japan's trade policies has remained generally consistent with what was in place two years ago, at the time of its previous review. (See Bridges Weekly, 12 March 2015)

In terms of factors influencing that context, the report provided an overview of the “sluggish” economic performance during the past two years, underlining how the Asian archipelago is now struggling with an increasingly ageing population and a related population drop, along with the long-term ramifications of natural disasters that have strained public resources.

WTO members therefore pushed Tokyo to continue its efforts at implementing all “three arrows” of “Abenomics,” the eponymous economic strategy of Japanese Prime Minister Shinzo Abe which is based on monetary easing, fiscal stimulus, and structural reforms. That third pillar drew particular notice last week, given its implications for trade policy and open markets.

Agriculture

As in previous years, Japan’s farm trade policy drew significant attention from WTO members during last week’s review. As in 2015, the secretariat report acknowledged the historical and cultural importance of Japan’s agriculture sector, while noting that it contributes around 1.2 percent of GDP, and 4.6 percent of total employment.

The report also noted Japan’s trade deficit in agricultural goods, with imports of over US$53.7 billion and exports of US$3.6 billion in 2015.

Since its last trade policy review, Japan’s Food, Agriculture and Rural Areas Basic Plan has been updated, with the latest iteration setting the goal of boosting farmer incomes significantly over the coming decade through a series of policy changes, included efforts at structural reforms and productivity improvements.

Some WTO members reportedly raised questions over the pace of Japanese farm trade reforms, citing concerns over the continued difficulties in accessing the country’s heavily protected agricultural market.

In addition, WTO members also called for greater transparency from Tokyo, including with submitting notifications on its agricultural support to the global trade body, according to the chairperson’s concluding remarks.

Non-tariff barriers, public procurement, other issues

One of the topics that drew particular attention during the review involved the use of non-tariff barriers, especially in automobile trade. The issue was raised, for example, by the US, which has long tabled concerns in this area on the grounds that such measures make it more difficult to enter the Japanese automotive market.

“The United States urges Japan to remove non-tariff barriers that impede US manufacturers’ ability to compete on a level playing field with their Japanese competitors, both in the area of automobiles and beyond,” a US statement at the review read.

Furthermore, Japan’s sanitary and phytosanitary measures (SPS) and technical barriers to trade (TBT) measures also came under scrutiny during the review, according to the chairperson’s summary, which noted concerns raised in some quarters over these going beyond what is required under international standards. The EU was among those to raise this issue, urging Japan to “accelerate the speed of its approval procedures and to assure that its SPS measures are based on science and are fully consistent with international standards.”

Regarding the area of government procurement, the WTO secretariat report highlighted a change in Tokyo’s regulatory framework, referring specifically to a new system of “multiple bids,” and noting that public procurement provisions have become a common feature in Japanese economic partnership agreements.

During the review, some WTO members also welcomed some of the Asian economy’s recent steps aimed at making it easier for smaller companies to play a part in government procurement. Separately, Tokyo’s efforts in the support of renewable energy sources were also praised during the meeting, according to the chairperson’s concluding summary.

Japanese Ambassador Junichi Ihara also raised Tokyo’s concerns over the “growing mistrust” in the area of free trade and also reiterated his government’s support of the global trading system, which the chairperson noted drew a strong welcome from other members, especially in light of the ongoing rise of inward-looking policy rhetoric in some parts of the world.

ICTSD reporting.

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