I

B.

Elimination of the need for total prevention of light refraction tween segments of vehicle tail light assemblies.

C.

Status: Potential progress. Illustrative samples have been furnished to MOT for study of potential tolerances for light leakage. Potential standards would be applied to both domestic and imported vehicles.

Elimination of the requirement for a 30 mm diameter, clear reflective area as a rear reflector, when the vehicle tail lamp provides a larger area of reflective surface, even though the reflective surface may not be free of ornamental design effects.

D.

Status: Very little progress. MOT might consider another review of reflective standards on a low priority basis.

Elimination of a dual requirement for speed warning devices in the form of visual identification on the speedometer as well as audible indication through the use of buzzer or chime.

E.

Status: No progress. MOT feels that the dual requirement is
justified.

Elimination of exhaust heat shieldings in addition to those provided by the manufacturers.

F.

Status: No progress. U.S. data showing that initial concerns about glass fires caused by exhaust system temperatures were not justified, and that the original design protection is adequate, were submitted to MOT.

Acceptance of aerodynamic styling as a part of vehicle design regardless of being integral or add-on.

Status: No progress. Aerodynamic styling is acceptable only if an integral part of the vehicle design, and must meet Japanese standards for projections. Add-on design is not acceptable, e.g., rear-end airspoilers.

SECOND CHANNEL: MINISTRY OF FINANCE

tax.

Another vital area of concern to the Task Force is that of commodity
Discussions on this matter are being conducted with MOF.

On August 7, 1979, U.S. automotive manufacturers participating in industry studies by the TSG made a presentation to MOF highlighting two commodity tax issues:

I. The Japanese commodity tax is currently assessed on imported foreign cars on a CIF basis, while Japanese cars sold in Japan are assessed on en ex-factory, manufacturer's sales price basis. If the ex-factory basis were also applied to foreign imports, the cost of selling U. S. cars in Japan would be reduced by $100 to $300.

II. The current tax rate system provides only two rate categories (15 and 20%), the lower of which excludes all vehicles with engines larger than 2000 cc. Since almost all U. S. vehicles have engines larger than 2000 cc, they fall in the higher tax bracket whether they are small economy cars according to U. S. vehicle-size standards or larger luxury cars.

Furthermore, cars with engines larger than 2000 cc are assigned class 3 license plates which psychologically conveys a "spend-thrift" image, a further deterrent to U. S. car sales in Japan.

Status: A tax expert from the MOF took strong exception to any changes in the commodity tax. He argued that it is generally accepted internationally that excise taxes such as the Japanese commodity tax should be based on imported CIF value in the case of foreign cars and the manufacturer's sales price in the case of domestically manufactured vehicles. The U. S. manufacturer's excise tax (which is now zero for passenger cars) is based on importer's sales price (higher than CIF value) in the case of foreign cars.

He stated that the 20% tax on cars over 2000 cc is part of a graduated tax system which ranges from 5% on motor bicycles to 30% on large motorboats, taking into account ability to pay. He emphasized that the higher rate applies to Japanese as well as to foreign cars. Two-thirds of the vehicles on which the higher 20% rate is imposed have been made in Japan.

He argued that a 5% difference in commodity tax is irrelevant to the poor demand for foreign vehicles in Japan. He took the position that the relatively restricted volume of foreign car sales in Japan is due to such factors as a consumer preference for small cars and pricing factors.

However, MOF officials have indicated that they are willing to continue to discuss the commodity tax issue with the Task Force.

Specific concessions on the issues discussed in this task force report would have a very favorable impact on U.S. opinion at negligible cost to Japanese producers. Japanese automobile manufacturers have little to fear from foreign competition in their home market and the resulting increase in imports is likely to be quite modest in absolute terms.

Appropriate concessions in the sector with the greatest imbalance would, however, do a great deal to convince Americans of Japanese good faith in further opening up their market to foreign goods.

FOREST PRODUCTS TASK FORCE

The United States enjoys a very favorable balance of trade in forest products with Japan. Any current problems in the forest products area are being dealt with outside TSG by a binational U.S. Japan Forest Products Committee, which resulted from special recommendations of the Strauss/Ushiba forest products mission in 1978. The sessions of the Committee will be held on a yearly basis, or more frequently if mutually agreed, beginning November 1979. Although much of the work on forest products will be done by this committee, the TSG will continue to keep closely informed and will stand ready to lend any assistance necessary. It will also pay close attention to issues which might be suitable for study by the Generic Program Committee.

The following is a look at the purpose of the Committee and some of the issues with which it will deal.

The purpose of the U.S. - Japan Forest Products Committee is to expand and upgrade U.S.-Japan forest products trade through the free operation of market forces and to exchange information. The Committee will examine opportunities, for developing additional forest product markets, looking at construction trends, technical standards and other areas. The Committee will also seek solutions to problems which may impede the development of this trade.

Grading of lumber may now be made at the import site. However, every piece of so-called "dimension lumber" must in practice be stamped with a JAS mark (see Generic Program Committee report) if it is to be used in a home with any Housing Loan Corporation funding. Plywood used for platform construction houses must still be reinspected and tested offsite.

A major problem is that U.S.-size standards are not basically the same as those used in typical Japanese construction. Most potential U.S. forest product exporters have not yet seen sufficient economic justification to make the major manufacturing modifications to adapt to the Japanese market.

The areas of interest to the Forest Products Task Force are as follows:

In the recently concluded "Tokyo Round" of the MTN, Japan did agree to reduce its tariff on specialty plywood from 20% to 15% between 1984 and 1987, but did not agree to reduce its 15% duty on regular sheathing and sanded plywood. Japanese representatives state that the reduction on

specialty plywood represents their maximum effort to comply with U. S. requests. The U. S. industry would like Japan to reconsider its position, and to reduce this duty (or at least the applied rate), either in line with the U. S. reduction, or with its own reduction on tariffs for other imported forest products.

The U. S. reduced its tariff on imported hardwood plywood, for example, from 20% to 8%. In addition, the U. S. industry remains somewhat concerned over the delay in implementing certain tariff reductions. Most of the U. S. duties begin to drop in 1980, but most Japanese reductions will not begin until 1984, with the exception of fiber products.

II. Japanese Agricultural Standards (JAS)

Overall, U. S. and Japanese softwood lumber standards have been almost totally harmonized, although this is not, the case for softwood ply.wood. The JAS standards for imported softwood plywood need to be either improved or rewritten. Currently, these standards limit the market for U. S. softwood plywood by restricting use in platform frame houses to Japanese conventional sizes and construction applications. *

III. Specifications

It would be helpful if Japan could precisely quantify the physical and other performance specifications that must be met by U. S. plywood in order to be acceptable in the Japanese market.

IV. Log Exports

Finally, the Committee may also be helpful in defusing some of the political pressure surrounding log exports by providing a forum where some of the issues can be worked out before they become crises.

Government authorities assert that the main factor currently limiting these sales is lack of demand.

BACKGROUND

AGRICULTURAL CHEMICALS TASK FORCE

The Agricultural Chemicals Task Force was originally organized in September 1978 in direct response to a directive issued by the Ministry of Agriculture, Forestry and Fisheries (MAFF) on August 15, 1978 which required that all toxicology (safety) studies, except one acute and one chronic study, be conducted in Japan in public laboratories. The excepted studies could be done outside Japan in private or public laboratories.

The National Agricultural Chemicals Association (NACA) of the United States agreed to the formation of the Japan Agricultural Chemicals Task Force, and appointed a U. S. -based Ad Hoc Committee to work with the group in Japan. Decisions regarding objectives, strategy, and coordination with government agencies have been discussed in both the U.S. and Japan-based committees. The Japan Task Force formally associated itself with the Trade Study Group (TSG) in early 1979.

POSITION

The Agricultural Chemicals Task Force has also worked with representatives of the European Community (EC) agricultural chemicals industry in Japan in order to share opinions and agree on objectives and strategy. As a result of this coordinated effort with various U. S. government agencies, the EC agricultural chemicals industry, and the NAÇA Ad Hoc Committee, it was agreed that the MAFF directive was:

1.

Expensive, in that it required costly duplication of research and slowed the process of product development. The latter point relates in part to the inadequacy of public toxicology laboratories in Japan.

2.

Non-reciprocal, in that the international tradition of accepting other countries' safety data was disregarded.

3.

Discriminatory, in that private industry, which had invested extensively in personnel and facilities to conduct safety studies in house, was told that private data were not generally acceptable.

ACCOMPLISHMENTS

During the past year the Task Force has accomplished several of its key objectives. The important accomplishments are: