Mr. GIBBONS. Mr. Jones.

Mr. JONES. Thank you, Mr. Chairman.

I would like to thank each of the witnesses for their testimony. would like to underscore what has already been said about th NTT negotiations. In our work on the United States-Japan trad task force we have been repeatedly rebuffed by NTT representa tives on the question of opening up NTT procurement to America producers.

This is perhaps right now not a front burner issue as far as th politics of it is concerned. I think in the future it is going to be highly volatile, front burner issue and I hope you will get tha across to those with whom you are negotiating.

There is a significant amount of interest in achieving some sor of reciprocity by changing the Communications Act to disallow purchases in this country from any country that does not have reciprical trade agreement with us in telecommunications.

I hope that before this year is out we can have substantia progress on the NTT negotiations.

I would like to ask two or three things with regard to questions raised in the first report of our task force with regard to United States-Japan trade. First of all, the standards issue. What issues are still outstanding in the standards field and what negotiations are underway to resolve those?

Mr. HORMATS. We have had several sets of discussions on standards. We have reached agreement in some areas. Having been on vacation during the last week, there may be some additional items which were discussed and on which I am not up to date.

What I will do is give you a specific written report on each of the standards. There are numerous elements of the problem, as you know. Rather than mislead you or not be up to date, let me give you a written response. Maybe Mr. Biltchik can respond. [The following was subsequently received:]

STANDARDS-RELATED ISSUES WITH JAPAN

Efforts to resolve standards-related issues with Japan have included negotiations on the MTN Agreement on Technical Barriers to Trade (standards code), several bilateral initiatives, such as the Trade Study Group (TSG)-Trade Facilitation Committee (TFC) structure, and two joint statements: the June 1979, "Strauss-Ushiba' Statement and the December 7, 1979, “Joint Statement on Standards, Testing, and Certification Activities."

STANDARDS CODE

The standards code specifies certain criteria that should be adhered to when signatory nations engage in standards-related activities. For example, if an international standard is not used, signatory nations are to use open procedures when developing standards or certification systems. Furthermore, the code encourages the acceptance of test data from other signatory nations, recognizing that consultations may be necessary before such data can be accepted.

JUNE 2 JOINT STATEMENT

The Joint Statement of June 2, 1979, between the Governments of the United States and Japan, contains an agreement to negotiate mutually acceptable and reciprocal approaches to testing procedures and certification by the end of 1979. No specific standards-related issues were mentioned in the June 2 Statement.

DECEMBER 7 STATEMENT

Part of the goal of the June 2 Statement was achieved in December, 1979, when the two governments initiated the "Joint Statement on Standards, Testing and Certification Activities." Under this statement, containing eight principles govern

ing standards-related activities, it was agreed that specific product sector technical discussions would take place within the coming year. The United States initially notified the Government of Japan of twelve standards-related issues that might be raised under this Joint Statement. At this time only the following five issues have been the subject of discussions: small boats, telecommunication equipment, electrical appliances, processed foods, and cosmetics. Although automobile standards-related issues have not been raised under the Joint Statement, they have been raised in discussions on general automobile issues.

Small boats

Japanese and U.S. standards differ for small pleasure craft in such a way as to discourage the importation of U.S. built craft into Japan. Discussions on this issue started in the Trade Study Group, were incorporated into the December 7 Joint Statement talks, and were essentially resolved during the Spring of 1980.

Telecommunication equipment

Japanese practices involving the testing and approval of telecommunication equipment for the interconnect market create a barrier to importation of U.S. products. During recent "Government Procurement" discussions with the Government of Japan, the United States has called for agreement on 9 points that would resolve this issue by facilitating access to the Japanese market. It is likely such agreement could be reached quickly, once the "Government Procurement" problems are resolved.

Electrical appliances

Japanese practices for the testing and approval of certain electrical appliances presently create barriers to the importation of U.S. products. As a result of recent discussions, Underwriters Laboratories, Inc. (UL)—American's largest private sector certifying institution-and the Japan Electrical Testing Laboratory (JETL) are establishing a method whereby test data generated in the United States will be accepted in Japan for use in obtaining approval of electrical appliances.

Processed foods

In July, 1980, during general standards talks, it was agreed that specific discussions would begin on problems encountered by U.S. suppliers of processed foods in exporting to Japan. U.S. suppliers have complained about the restrictive nature of the "positive list" of acceptable food additives, and the arbitrary nature of decisions made by customs officials on food products' acceptability. Specific technical discussions are planned to begin before the end of 1980.

Cosmetics

In July, 1980, it was agreed to also begin discussions on problems U.S. cosmetic suppliers encountered in exporting to Japan. In addition to issues surrounding the Japanese list of approved substances, U.S. suppliers believe that greater acceptance of U.S. tests and test data would facilitate trade. Specific technical discussions are to begin before the end of 1980.

Automobiles

Differences in Japanese and U.S. automobile standards-related practices have created disincentives to the importation of U.S. automobiles to Japan. After an initial exchange of issue papers, specific consultations were held in Washington, and Tokyo during April 1980. In May, the Government of Japan issued a statement in which they agreed to meet a majority of U.S. requests, including positive action on three top priority U.S. requests: acceptance of certain test equipment and procedures, approval of existing catalytic converters, and simplification of documentation requirements. The Government of Japan has proceeded to implement its agreements of May, 1980, although some issues remain to be clarified, especially concerning the acceptance of existing catalytic converters and acceptance of representative vehicles.

OTHER ISSUES

During the July, 1980, general standards discussions, three issues were raised which it was agreed should not necessarily be the subject of further technical discussions. The United States noted its concern about problems involving the exportation of agricultural chemicals to Japan, and the Japanese noted problems relating to the certification system for boilers and nuclear components maintained by the American Society of Mechanical Engineers (ASME) and the electronic certification program of UL.

Mr. BILTCHIK. Negotiations on standards problems in the area agricultural chemicals processed foods, and cosmetics were held Tokyo in late July. Identification of problems in these sectors w the result of TFC work. Agreement was reached on major issu involved in the agricultural chemical talks.

Working groups are being set up to continue the negotiations the other two areas.

Mr. JONES. Secondly, since you mentioned TFC, can you give n a report of what is presently pending before the TFC, what you scorecard or grade card would be on the TFC and TSG at th present time?

Mr. HORMATS. Commerce runs the TFC.

Mr. BILTCHIK. I can submit for the record a brief report on tha In summary, to date TFC has favorably resolved 15 formally pr sented cases and is near resolution on several others, openin access to Japanese markets on shock absorbers, fertilizers, modifie food starches, and some other products.

We are working, as you know, on the problem of importation o tobacco products. Japanese requirements for testing and approving U.S. electrical appliances and pleasure boats was made consider ably less burdensome as the result of bilateral consultations held under TFC auspices.

I can give you a written report on that. [The information follows:]

This report has been prepared by the U.S. Japan Trade Study Group (TSG) in Tokyo to document its progress to date in its main areas of activity and to highlight some of the specific issues on which it will be focusing its efforts in the future.

The TSG was organized in late 1977 as a bilateral group of Japanese and American volunteers from the U.S. business community in Tokyo, the U.S. Embassy, the Ministry of International Trade and Industry (MITI), the Japan External Trade Organization (JETRO), the Federation of Economic Organizations (Keidanren), the Japan U.S. Economic Council, the Foreign Trade Council of Japan, the Japan Chamber of Commerce and Industry, and others from the Japanese business and government communities, all acting in an individual capacity.

The members of the TSG are dedicated to free trade, and particularly to increasing trade between Japan and the United States. In recent years, this two-way trade has been heavily weighted in Japan's favor to an extent that may be politically unacceṛtable in the United States, creating the risk of the imposition of artificial barriers which would be against the longterm interests of both countries.

We recognize that this trade imbalance has resulted more from the disparity between the efforts made by Japanese exporters to develop U.S. markets for their goods and the efforts made by U.S. companies to develop markets for their goods than from any remaining Japanese non-tariff barriers. The Japanese government's positive attitude towards the export efforts of Japanese firms has contributed to this disparity. Any long-term improvement in the bilateral trade imbalance will depend more on improved performance by both U.S. business and government in promoting exports than on the removal of remaining Japanese non-tariff barriers.* We also believe, however, that remaining non-tariff barriers in Japan are a con tributing factor to the bilateral trade imbalance and act as a major irritant in U.S. -Japan economic relations.

* Lists of steps to be taken are set out in the May 1979 White Paper on U.S.-Japan Trade published by the American Chamber of Commerce in Japan and in Arthur D. Little Iac.'s May 1979 report on American views concerning non-tariff trade barrier issues funded by the Japanese National Institute for Research Advancement (NIRA).

As the members of the TSG live and work in Japan, our main efforts to date have been to study marketing opportunities for U.S. -roducts and to analyze various impediments to increased sales of U.S. goods and services in Japan in a non-confrontational setting, and to recommend to the parties concerned ways in which those impediments might be overcome. We believe that such efforts will be to the economic benefit of both Japan and the United States, and will at the same time reduce some of the tension in the current trade relations between the two countries.

The actual work of the TSG has had two related points of emphasis. The first has been to identify, analyze and make recommendations with respect to laws, regulations, procedures or practices in Japan which inhibit increased sales in Japan of U.S. goods and services. The second has been to encourage efforts by U.S. companies to gain a position in the Japanese market through participation in specific trade promotion programs and to communicate directly or indirectly with U.S. businessmen about the nature of, and positive results from, our work.

These two aspects of the TSG's activities are reflected in its current structure. As indicated by the chart in Appendix A (1), the TSG is divided into four principal committees: the Generic Program Committee, the Products Program Committee, the Communications Program Committee and the Promotion Program Committee. The first two committees deal with specific product areas or issues which cut across all product areas. The main work of the Products Program Committee is in turn conducted by a series of Product task forces. The second two committees deal with communications and promotional activities designed to increase participation by U.S. companies in the Japanese market. The organization of this report follows the committee structure.

The purpose of this report is to inform as broad an audience as possible within the business and government communities in both Japan and the United States of our findings to date. In the area of Japanese non-tariff barriers, we have spelled out apparent problems in considerable detail, recorded progress made to date in solving those problems and suggested further steps which might be taken. While we recognize that U.S. nontariff barriers exist, our efforts to date have not been directed towards analyzing them.

We hope that the evidence of progress in some of the product areas covered will convince public and private leaders in both countries that progress can be made on trade issues in a non-confrontational setting to the mutual benefit of the parties involved.

We recognize that even the total elimination of non-tariff barriers would not have a dramatic effect on U.S.-Japan trade, at least in the short run. There are more fundamental and difficult steps to be taken to reduce the trade imbalance, particularly on the side of the United States.