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Never:heless, we feel that it would be to the benefit of both countries, and the relationships between them, to reduce impediments to trade whe:ever possible. We shall continue to work to that end.

During the course os preparing this progress report, the TSG has asked individuals from various Japanese government agencies for vezüication of the contents as well as for advice. The TSG would like to take this opportunity to express its appreciation for their valuable input.

Not all the comments and suggestions made by them are included in this report. Therefore, the TSG would like to make it clear that the omission of some comments, for various reasons, from the report is not the responsibility of the individuals from the various Japanese government agencies as this is a TSG report and the contents do not reflect the ofiicial position of the Japanese government.

We are grateful for the financial support gived to us by the Japan U.S. Economic Council, and to the broad administrative support and assistance received from JETRO.

GENERIC PROGRAM COMMITTEE

INTRODUCTION

The Generic Program Committee (GPC) was established in February 1979 as part of the overall reorganization of the TSG. It was directed to investigate, analyze and propose solutions to aon-ta riff berriers which were not specific to any one product category. The GPC works closely with the Products' task forces, studying cases referred to it and giving the task forces analytical support.

As an initial step, the GPC attempted to develop a comprehensive list of potential generic problems. This list included the following:

1.

Technical barriers to trade (including problems with standards, inspection methods, certification systems and "marks" of approval).

2.

Customs related problems in cluding customs classifications,
quota administration, customs valuation and clearance
procedures.

3.

Financing problems, including exchange regulations and import financing.

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After studying the list, the Committee decided that the areas in which it could make the greatest initial contribution were items and 2, technical barriers to trade and customs related problems.

HISTORICAL BACKGROUND

Before going into a detailed discussion of the Committee's work on standards and other specific matters, we believe that it will facilitate mutual understanding is we provide some historical background on the development of Japanese regulations, procedures and practices, and contrast these with the system which developed in the United States.

With the exception of quotas, governmert procurement and buy "local" practices, most oi the Japanese regulations, procedures and practices which pose a problem for U.S. and other exporters were not created with

a specific intent to discriminate against foreign goods. Very ofter, the core of the problem is that the exporter does not have sufficient informe. tion or ability to influence decisions affecting his interests to operate eliectively in Japan.

This problem has resulted from the paternalistic relationship between the Japanese goverament and business since the Meiji period (1867-1912). la contrast to the United States, Japanese industry was initially created largely by government initiative as an instrumect to ward off foreign domination. Therefore, irom the start, the government has taken a much more dominant role in economic decision-making than in the United States. Among other things, the government has gone to great lengths in protecting the public from dangerous or defective goods by setting strict standards, testing requirements and health and safety regulations. It was impossibic for the government to rely on voluntary efforts or standards to the same extent as in the United States or in Europe because private standards-making groups did not exist in the initial period of Japanese modernization.

As a general matter, the Japanese government has set very strict (though often ambiguous) basic rules in establishing technical regulations, but has given the administrative officials who deal directly with the public wide discretion to relax regulations in individual cases. This practice has given the bureaucracy a combination of firm control plus the flexibil. ity to deal with changing technrlogy and economic circumstances. Vafortunately, this approach has tended to work to the disadvantage of foreigners, who usually have not bad the experience or relationships necessary to take advantage of the system's flexibility. '

In the development of American practices, on the other hand, businessmen assumed responsibility for regulating themselves.“ Standards writing goes back to an 1838 document dealing with the problems of steam boiler explosions. Participa ting in the drafting of that standard were producers, consumers, academicians, government officials ard genera! interest groups. That "mix" of participants has persisted in the American system up to this day. Free access to the standards-writing process is protected by the scrutiny which the U.S. Justice Departmeat's Anti-Trust Division maintains over standards-writing to easure that all aspects of "due process,

" including the right of appeal, are maintained. In particular, membership in standards-writing associations cannot be a prerequi. site to participation, nor can interested foreign individuals, firms or associations be barred from taking an active part in the standards-writing process (for specifics on foreign participation on American committees, please see "Standards" below).

The "end product" oí these standards-writing groups seldom acquires the force of law. Whea it does, it is through legislation gene:ated at the municipal, county or state level. Far less frequently, federal legislation

is eracted to adopt one of these standards. As a result of this federal system, there is no walio r. rule which a manufacturer may follow in orde: to be sure that his products will be acceptable in all parts of the United States. The existence of many local techcical regulations in the United Siates does create a severe marketing problem for some products, affeciirig American and foreign goods alike. In this area, Japanese firms may need assistance in gairing access to the U. S. market.

Thus, both the Japanese and the U.S. standards-writing systems developed largely in response to local historical circumstances and were not designed to impede foreign trade per se. At this time, however, each country will need to make significant changes in its existing practices in orde: to implement the Multinational Trade Negotiation (MTN) agreements and to accommodate better the needs and interests of foreign traders. ticular, Japan's role in the international trading system has become so great as to make such accommodation necessary. Under "Recommendations" below, the GPC makes certain proposals as to how this might be accomplished.

In par.

STANDARDS

The.GPC decided initially to analyze the procedural and substantive esposis of Japan's standards from the perspective of the basic rules set forth in the "Code of Conduct for Preventing Technical Barriers to Trade," better known as the GATT "Standards Code,'" which was adopted as part of the icecat MTN agreements and became effective on January 1, 1980.

Simply stated, the Code is intended to ensure that there is no discrimination against foreign goods in standards-writing, inspection methods, ceriification systems and "marks" of approval. It requires that public notices of intent to prepare standards or certification systems be given, comments be solicited from all interested parties, and those comments be considered in drafting the final standard or instituting the new certification system. Procedures are to be no more complex nor less expeditious for foreign goods than for doniestic goods. Information and assistance on how to comply with technical regulations is to be provided by each adhering count:y. Finally, a central point of inquiry is to be established by each government.

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The Committee first turned its attention to a comparison oi existing Japanese procedures with the requirements of the Code. The first problem area identified was limited foreign participation in the Japanese standards-writing process. In order to update the prewa: japan Eagineering Stacdards, which proved to be inadequate to meet posiwar international competition, the government enacted the lndustrial Standardization Law of 1949, unde: which the Japanese Industrial Standards Committee ("JISC") was created. JISC has the respcnsibility for developing a group of standards entitled Japanese Industria! Standards (JIS). The competent ministries award a "JIS merk"' to products meeting the appropriate JIS, 2nd niade by factories whose production and quality control facilities meet the ministry's requirements in a departure from other "marks," the JIS mark relates to the product and the process.

A second major source of Japanese standards are the technical regulations issued by ministries covering goods within their respective jurisdictions. MITI, for example, issues mandatory "marks" of approval which are given only to products meeting certain requirements. These marks include the following:

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3.

Passed Mark.(Law concerniag Maintenance of Safety and
Normalization of Transactions of Liquefied Petroleum Gas).

4.

Approved Mark (High Pressure Gas Control Law).

5.

Safety Mark (Consumer Product Safety Law).

6.

"T" Mark (Electrical Appliances and Materials Control Law).

In formulating such requirements or standards, MITI and other ministries either rely on recommendations from the standards-writicg committees of various industrial associations or call together ad-hoc groups established for drafting a specific regulation. Thus, Japa..ese standards are usually issued by official or semi-oiiicial bodies in contrast to voluntary consensus groups in the United States such as the American Society for Testing and Materials, the National Fire Protection Association, or the American Society of Mechanical Engineers.

The Japanese system described above has discouraged the participation of foreigners in the creation of standards which afiect their products, despite the absence of any formal rules barring such par. ticipation. In some cases, foreigners have not been invited to participate in committees which make recommendations on standards or to present their point of viow to the ofiicial bodies involved ia promul. gating standards. In other cases, U.S. iirms resident in Japan. have sometimes been reluctant to participate because of potential U.S.

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