Dec 4, 1987

PANEL RULES AGAINST JAPAN ON AGRICULTURAL IMPORTS.

GENEVA DECEMBER 2 (IFDA/CHAKRAVARTHI RAGHAVAN) -- Japan baulked Wednesday at accepting and implementing in full the report of a GATT panel that held Japanese import restrictions on some 12 agricultural product groups to be in violation of GATTís general prohibition of Quantitative Restrictions (QRS).

The three-member panel had recommended that Japan should be asked to eliminate or bring into conformity with GATT its QRS on the import of these products.

Japanese delegate Amb. Yoshio Hatano found fault with the panelís interpretations of the relevant GATT articles and its findings, as also its "fairness", but offered to allow adoption of the panelís recommendations in all but two product groups Ė certain dairy products (which he did not specify), and starch and inulin.

Also, if this were accepted, the Japanese government would be willing to take appropriate measures to implement it despite domestic difficulties.

The U.S., which had raised the complaint, as well as several of the GATT parties with interest in the matter (Argentina, Australia, New Zealand, Uruguay, Asian, brazil, Chile and Hungary), rejected the Japanese offer of partial adoption and implementation, and insisted on full implementation.

Hatano said the Japanese delegation would reflect further, and consider what their position should be in the light of views expressed at the meeting.

The subject came up at the session of the GATT Contracting Parties now in progress, when it took up consideration of the report of the GATT Council.

At the instance of both Japan and the U.S., the report of the panel which had been published and circulated to members only a fortnight ago, and hence could not be considered by the GATT Council itself, was given priority consideration.

The U.S. complaint covered restrictions maintained for a very long number of years on imports of milk and cream, preserved, concentrated or sweetened; processed cheese; dried leguminous vegetables; starch and inulin; groundnuts; meat of bovine animals, prepared or preserved in airtight containers; other sugars and syrups not contained added flavouring or colouring; fruit puree and pastes; fruit pulp and pineapple, prepared or preserved; fruit and vegetable juices, excluding certain juices; tomato ketchup and sauce; and, food preparations not elsewhere specified.

In the beginning Japan justified these restrictions to GATT on the basis of its balance-of Ėpayments position under article XII. But after 1963, it withdrew this plea.

Article XI of GATT has a general prohibition against use of QRS, subject to certain specified exceptions and conditions.

One of the exceptions, under IX: 2 (C) (1), is where there are governmental measures to restrict domestic production or marketing of like products or where an imported product could be substituted.

The panel found that while there were no direct government restrictions on domestic production or marketing, in Japanese society, where policy is based on consensus and peer pressure, "administrative guidance" by the government played and important role, and such guidance was equivalent to enforced government measures.

The panel also noted that while in the beginning it had difficult in establishing the nature of domestic restrictions, Japan had fully co-operated in providing detailed information about the administrative guidance.

The findings of the panel, specifically restricted to characteristics of Japanese society, about role of "administrative guidance", will in future outweigh vis-a-vis Japan the actual findings, and could support those who contend that without any formal restrictions the Japanese government has the capacity to, and does freeze out imports from its domestic market, and that existence or otherwise of legal restrictions is not of great consequence.

The panel held that the QRS on all the products, except fried leguminous vegetables and groundnuts, were not covered by the exceptions to the prohibition of QRS.

Even in respect of the two which were covered by the exceptions, Japan had been unable to prove that the import restrictions were not being applied in a manner to reduce the level of imports relative to domestic production that would exist in absence of restrictions.

In several of the product groups, the panel found that Japan placed no restrictions on the natural or semi-processed forms which could be inputs for industry for further processing, but had QRS or prohibited imports on the processed products (as in case of processed cheese or starch).

In imposing the restrictions Japan was also found to be not complying with other requirements for transparency like public notice of imports allowed.

Apart from its stand on the interpretation of the articles and the facts, Japan had also argued before the panel that similar restrictions on agricultural imports were also being maintained by other Contracting Parties, that the whole issue of trade in agriculture was on the Agenda of the Uruguay round, Japan should not be singled out to change its policies and end its restrictions.

The panel rejected this view, and Hatanoís complaint to the CPS about "unfairness" against Japan presumable related to this.

Japan itself did not specifically raise, nor did the panel deal with the fact that the U.S., the main complainant, is itself maintaining many import restrictions on agricultural products. The U.S. is doing so under the waiver from GATT obligations including those of article XI that it obtained in the 50ís.

The EEC, which also argued before the panel that its exports of six product groups were affected by Japanese QRS, also protects its own domestic markets under its common agricultural policy and variable levies.

The panel agreed that QRS and other trade barriers were widely practised in agricultural trade, but only a few CPS had justified them under exceptions in article XI. Other CPS had invoked other exceptions in GATT or had sought and obtained weavers.

The panel also agreed that all the issues, including modification of article XI: 2, and rollback of measures inconsistent with GATT obligations, was on the agenda of the Uruguay round, but noted that these did not curtail rights and obligations of CPS under the general agreement.

The panel added: "Japanís actions could, appropriately, be judged only against its obligations ... and not against practices of others. Nor did the panel consider it appropriate to prejudge the outcome of the MTNS".

The practices of other countries, the existence of the MTNS, and the special characteristics of Japanese agriculture, the panel further found, could not be "pertinent elements" that the panel had been asked to take into consideration in arriving at its conclusions.