EU-Japan Economic Partnership

by
Some EU Trade Relationships

Tariffs- Trade in Goods Market Access

Japan will liberalise 91% of its imports from the EU at entry into force. At the end of the staging period 99% of its imports from the EU will be liberalised, while the remaining imports (1%) will be partly liberalised through quotas and tariff reductions (in agriculture). In terms of lines, Japan fully liberalises

86% of its tariff lines at EIF, going up to 97% after 15 years. The overall level of liberalisation of the EU is set at 99% with 96% of its lines eliminated at EIF. In terms of imports, the EU liberalises only 75% at EIF but rising over 15 years to close to 100%. Tariff lines on automobiles will be fully liberalised in 7 years, car parts varying from EIF to 7 years.

The only full exclusions are the mutual exclusion for rice and seaweeds.

The disparity in terms of levels of liberalization on both sides is justified by the commitments undertaken under this agreement by Japan to eliminate non-tariff barriers to EU exports, notably virtually total alignment on international standards in the automobile sector.

Agricultural and processed agricultural goods

Around 85% of tariff lines concerning EU agri-food products exported to Japan will be allowed to enter duty-free over time, corresponding to 87% of current exports value for agricultural products.

Pigmeat is the first agricultural export to Japan. Japan reduce its tariffs considerably. Wines and aromatised wines, which are currently subject to a 15% tariff, will be liberalised at entry into force (EIF) as well as most of the other alcoholic beverages (except some traditional Japanese drinks such as shochu and sake). It will allow wine and spirits EU industry to compete on equal footing with other competitors (in particular Chile) as soon as the agreement enters into force.

For cheese and dairy products, significant market access improvements were agreed for EU’s core export products to Japan. The agreement will provide for full liberalisation of tariffs for hard cheeses (eg. parmesan, fontina, gouda, cheddar…). Tariffs of up to 28.9% will be eliminated over 15 years. A tariff rate quota will grant meaningful access for other cheeses like fresh and processed cheese including mozzarella, blue-veined cheese and soft cheeses such as camembert, brie, and feta. The tariff rate quota will cover fully EU’s current export and will be growing over time in line with the growing cheese consumption in Japan.

For other dairy products like whey, mineral concentrated whey, whey infant formula, and whey permeate) the agreement provides for a duty-free Tariff Rate Quota (TRQ), for whey products with specific protein content tariffs will be reduced by 70%.

There will be a considerable improvement of market access conditions for EU’s exports for bovine meats including veal. The agreement will foresee a tariff reduction over time (from the initial 38.5% to 9% with an initial cut bringing the tariff down to 27.5%) and a volume based safeguard functioning on a model similar to the one agreed by Japan in the TPP. The EU export potential is fully reflected in the size of the safeguard which will disappear in 15 years if not used over four consecutive years.

For food and processed agricultural products (PAPs), this agreement will achieve liberalisation of key PAPs such as pasta (in 10 years), chocolates (10 years), pure cocoa powder (EIF), candies (10 years), confectionery (10), biscuits (5 to 10 years), starch derivatives (5 to 10 years), egg albumin (EIF),prepared tomato and sauce (5 years), lactose and lactose syrup (EIF), gelatin (EIF to 15 years), etc.

Malt and potato starch will get a meaningful duty free TRQ. For other important agricultural products (besides dairy and beef sectors): significant quotas (duty-free or with reduced duty) have been agreed,also ensuring meaningful new market access.

Rules of Origin have been designed with thresholds on non-originating materials (i.e. the maximum percentage of imported ingredients) which ensure an appropriate balance between the interests of EU agricultural producers and those of the EU food industry and ensuring that tariff concessions can be fully used by EU exporters.

Industrial goods

Full liberalisation was agreed in all sectors beginning with chemicals, plastics, cosmetics and textiles, and clothing.For leather and shoes, the quota system that was significantly hampering EU exports will be abolished at EIF. Besides, the tariffs on shoes will be reduced from 30% to 21% at EIF and the remaining tariffs will then be eliminated over 10 years. Tariffs on key leather products such as handbags will be eliminated over 10 years, while traditionally very much protected products with very high tariffs, such as sports shoes and ski boots, will be liberalised over 10 years.

Forestry and Fisheries

Tariffs on all wood products will be fully eliminated with 7 years staging for the most important EU priorities. Other wood products will be liberalised immediately, while some less important lines at 10 years.

Quotas will no longer be applied and tariffs will all be eliminated. For blue fin tuna, EU’s most important export, tariffs will be eliminated over 5 years.

Japan and the EU agreed on a chapter covering cooperation in the field of Agriculture, Forestry, Fisheries, and Food. The objective of this chapter is to enable the EU and Japan to promote trade in agriculture, forestry, fisheries and food through exchange of technical information and best practices regarding sustainable agricultural policies and the use of technology and innovation, as well as to provide safe and high quality food products for consumers in Japan and the EU.

The cooperation chapter will include notably the promotion of trade and cooperation on regulatory issues linked to food industries, improvement of farm management, productivity and competitiveness, cooperation in production and technology, cooperation on agricultural quality policies, and rural development.

The organisation of the cooperation activity will be dealt with by a specialised committee on agriculture.

Rules of Origin (RoO)

The Chapter on Rules of Origin and Origin Procedures consists of General Provisions in three sections Section A: Rules of Origin, Section B: Origin Procedures and Section C: Miscellaneous as well as Annexes: including Introductory Notes, Product Specific Rules, Text of the Statement on origin,

Rules of Origin: The requirements for originating products include the key provisions of the absorption rule and the principle of territoriality. The provision on cumulation allows for both bilateral and full cumulation between the Parties.

Origin Procedures: The claim for preferential tariff treatment shall be based either on a statement on origin by the exporter/producer, or the importer’s knowledge. The verification of a claim for preferential tariff treatment starts with a request to the importer to provide information. Customs authorities may request administrative cooperation to obtain information in the exporting Party. Direct visits by the customs authorities of the importing party to an exporter/producer in the exporting party shall not be allowed for the verification.

In the case of suspected irregularities and fraud, the customs authorities of the parties shall provide each other mutual administrative assistance on the basis of the existing agreement between the EU and Japan.

The customs authorities of the importing party shall be entitled to deny preferential tariff treatment under precisely stipulated conditions.

The Product Specific Rules of Origin (PSR). All PSR were agreed on the basis of the condition that they would allow EU exporters to qualify for tariff reductions negotiated under the agreement.

Services

The Trade in services provisions contains a number of provisions that apply horizontally to all trade covered by the Chapter such as a provision to reaffirm the Parties’ right to regulate, definitions of concepts used throughout the Chapter, rules on a Specialised Committee for Trade in Services, Investment and E-Commerce, a review article and an article with general exceptions.

On the question of public services, the EU-Japan Free Trade Agreement, like all other EU free trade agreement, maintains the right of Member States’ authorities to keep public services public and it will not require governments to privatise or deregulate any public service at national or local level. Member States’ authorities retain the right to bring in to the public sector any privately provided services.

For cross-border trade in services, some sectors and issues are specifically excluded from the scope of the text: audio-visual services, maritime cabotage services, air services (other than 5 auxiliary air services), government procurement and subsidies.

The text on cross-border services also contains articles on Market Access, National Treatment, Most-Favoured-Nation Treatment and Denial of Benefits. For the scheduling of commitments, a negative listing is used (as in CETA). Parties list existing and future measures that do not conform to the obligations under Market Access, National Treatment and Most-Favoured-Nation Treatment in specific Annexes. The cross-border text does not include a specific article on local presence as parties agreed to treat local presence requirements under the Market Access article.

The Agreement includes provisions on the movement of natural persons for business purposes. They cover all traditional categories of mode 4 service providers (such as intra-corporate transferees, business visitors for investment purposes, contractual service suppliers, independent professionals) plus two additional profiles that the EU has committed in CETA, namely short-term business visitors and investors. In addition, the Agreement includes a Protocol with procedural commitments concerning the entry of service providers in the territory of the Parties.

This covers issues such as fees or processing times for entry applications. Finally, Japan and the EU commit to allow the entry of family dependents (spouses or children) of mode 4 service suppliers.

Regulation

There is also a regulatory chapter with several sectoral sections and some horizontal ones. The horizontal ones relate to domestic regulation, mutual recognition, and administration of measures.

The text on Domestic Regulation ensures that licensing and qualification requirements and procedures are publicly available, easily understandable, and reasonable so that they do not act as an unfair barrier to trade for EU or Japanese businesses. The text also covers measures relating to technical standards.

Like in CETA and other recent FTAs there is no necessity test included. All domestic regulation disciplines only apply to committed sectors and to the extent of the commitments made by the Parties.

There is a specific article on the administration of measures of general application and an article on Review Procedures of Administrative Decisions. Both articles are inspired by similar provisions in the GATS.

The article on mutual recognition sets out a two-tier track where, in a first stage, industry  from both sides works out joint recommendations for a mutual recognition agreement and then, in a second stage, the EU and Japan step in to assess these recommendations against a set of criteria, negotiate a final text and then formally adopt a Mutual Recognition Agreement. Similar framework provisions are included in most of the EU’s FTAs.

The text further contains a regulatory text on postal and courier service. The text includes definitions, a provision on universal service obligations (including rules to prevent anti-competitive practices), an article on border procedures, licences and on the independence of the regulator. These provisions will ensure a level playing field between EU suppliers of postal and courier services and their Japanese competitors, such as Japan Post.

Various Services Sectors

The section on telecommunication services covers, in general terms, all the provisions typically included by the EU in its trade agreements. The provisions can be broadly divided into three groups. Firstly, articles establishing a “level playing field”, which enable any service supplier of one Party to be able to access and use telecommunications services in the territory of the other Party, and which lay down the ground rules relative to the terms in which providers of telecommunications services from one Party are allowed to provide their services in the territory of the other Party.

Secondly, provisions on how the Parties deal with telecommunications services providers that have significant market power.

Thirdly, articles disciplining a set of other relevant aspects in the telecommunications sector, such as the assignment of scarce resources, rules on the establishment of universal service obligations, on number portability and on mobile roaming, provisions safeguarding the confidentiality of communications and traffic information of internet users, and the Parties’ relationship to relevant international organisations in the sector.

The Chapter on international maritime transport services contains obligations to maintain open and non-discriminatory access to international maritime services (transport and auxiliary services) as well as access to ports and port services. It also includes various definitions to better specify the scope of the commitments contained in the schedules.

The financial services section contains specific definitions, exceptions, and disciplines on new financial services, self-regulatory organisations, payment and clearing systems and transparency. It also includes specific rules on insurance services provided by postal entities. Many of these provisions are based on rules that have been developed in the framework of the WTO. They are necessary to address specificities of the financial services sector and complement market access and national treatment disciplines in the horizontal chapter.

The text further contains a dedicated part on regulatory cooperation for financial services and establishes a so-called Financial Regulatory Forum. The Forum will take over the role of the current regulatory dialogue between the financial service regulators of the EU and Japan. Via the Forum the EU and Japan will regularly exchange information and consult each other on forthcoming regulatory initiatives including the implementation of international standards in financial services. Both parties will also endeavour to rely on each other’s regulatory and supervisory framework where possible.

E-Commerce

The e-commerce text covers all trade done by electronic means. It reflects the interests that both European and Japanese companies and consumers have in digital trade, while fully safeguarding legitimate policy objectives.

The chapter contains articles on the non-imposition of customs duties on electronic transmissions source codes, domestic regulation, the principle of no prior authorisation, the conclusion of contracts by electronic means, electronic authentication and electronic signatures, consumer protection and unsolicited commercial electronic messages.

Both sides also agreed to maintain a dialogue on regulatory issues of electronic commerce to share  information and experience, including on related laws, regulations and their implementation, and best practices with respect to the issues such as consumer protection, cyber-security, combatting spam, the recognition of certificates of electronic signatures issued to the public, the challenges for small and medium enterprises in the use of electronic commerce, the facilitation of cross-border certification services, intellectual property and e-government.

The agreement in principle does not include any substantive provisions on flows of personal data. There is a review clause whereby both sides undertook to look again at the issue after three years.

Corporate governance

For the first time in EU agreements, the EU-Japan FTA will include provisions on corporate governance to be included in a specific chapter. These provisions are inspired by the OECD Code on corporate governance and reflect the EU’s and Japan’s best practices and rules in this area.

Corporate governance is an essential tool to attract and encourage sustainable investment by promoting well-functioning markets and sound financial systems based on transparency, efficiency, trust, and integrity.

The EU and Japan commit to adhering to key principles and objectives with regard to their corporate governance framework, notably: transparency and disclosure of information regarding publicly listed companies; accountability of the management towards shareholders; responsible decision-making based on an objective and independent standpoint; effective and fair exercise of shareholders’ rights; transparency and fairness in takeover transactions.

Procurement

In terms of rules, the text of the Chapter builds on the existing mutual obligations deriving from the WTO Government Procurement Agreement and adds a new set of disciplines. These comprise rules regarding the electronic publication of notices through a single point of access, the fair treatment of EU construction businesses under the Japanese construction business evaluation system (keishin), the recognition of test reports, the possibility of using environment standards as selection criteria, and additional standards for domestic review procedures.

In terms of new market access, the most important element is that Japan accepted to commit the procurement of so-called “core cities” (48 cities of around 300.000 inhabitants, representing some 15% of Japan’s population) under a non-discrimination regime and the EU agreed to reciprocate by like commitment at sub-central level. Both sides also commit hospitals and academic institutions that until now were exempt from their respective GPA commitments.

On railways, JP agreed to withdraw the “operational safety clause” and thus opens safety-relevant railways procurement for all railways procurement above a value of 400K SDR (special drawing rights 1 SDR is roughly 1 euro). For this commitment, a transition period of maximum one year after entry into force will apply. In turn, EU opens procurement of railways facilities in the sector of overland railways, and rolling stock in the area of urban railways for an amount corresponding to the estimated value of Japanese contracts “freed” by the removal of the operational safety clause.

Intellectual property Rights (IPR)

The IPR Chapter builds on the provisions of the WTO Agreement on Trade-Relate Aspects of Intellectual Property Rights (TRIPS) and is strongly based on the existing EU standards for IPR protection and enforcement.

  • It includes detailed provisions on copyright, providing for improved copyright protection. For the first time in a major agreement, the IPR Chapter provides rules on trade secrets, which are very similar to those in the EU. Other important results in the Chapter include:
  • minimum common rules for patent term extension (including duration: “maximum 5 years”) for pharmaceutical and plant protection product patents,
  • minimum common rules (including duration) for regulatory test data protection for pharmaceuticals (“no less than 6 years”) and
  • also regulatory test data protection for plant protection products (“at least 10 years”).

The Chapter also provides select targeted rules regarding trademarks (on preparatory acts deemed as infringement) and those concerning the protection of product appearance (in particular by unregistered design or under unfair competition rules).

On IPR enforcement the Chapter includes high standard civil enforcement rules, along with rules on border measures concerning not only imports but also exports and transit, covering a broad range of IPRs.

Geographical Indications

The agreement contains the following provisions:

  • High level of protection for EU GIs: TRIPS art 23 for more than 200 foodstuffs and wines and spirits EU GIs to be protected under the FTA.
  • Direct protection of GIs under the FTA and removal of all associated charges or taxes for any user registration.
  • Protection of GIs in a relationship with trademarks (TM): rejection of subsequent TMs in the other Party’s system, also in the case of GIs which have only been published, while coexistence with pre-existent TM is addressed.
  • Administrative enforcement of protection in addition to enforcement on request and civil remedies.
  • Phasing out of prior uses identified on the Japanese market within 5 years after entry into force of the Agreement for alcoholic beverages, and within 7 years for foodstuff GIs.
  • Possibility to add new GIs to list of GIs protected under the agreement.

Competition, Subsidies, State Owned Enterprises (SOEs)

The Competition Chapter establishes a number of important principles that ensure that both sides commit to maintaining comprehensive competition rules and the necessary authorities to implement these  laws in a transparent and non-discriminatory manner. The agreement also foresees continued cooperation between the competition agencies.

The Competition Chapter ensures that both sides commit to promoting competition to the benefit of all market participants and especially the consumers and private citizens.

In more details, the parties have agreed on the following rules:

  • both sides will commit to having competition laws which address anticompetitive practices (this list is adapted to the legal framework of each of the parties) in a non-discriminatory manner on all enterprises. Exceptions from the competition laws are allowed, provided that they are transparent and limited to public interest
  • both sides commit to maintaining competition authorities competent to enforce the competition laws
  • both sides have taken a commitment to respect the principles of procedural fairness and transparency of their procedures
  • provisions on cooperation foresee continued cooperation efforts between the competition agencies.

The provisions are outside the bilateral dispute settlement mechanism as an established practice in the field on competition law negotiations.

The negotiation outcome adds to the list of bilateral agreements where trading partners have committed to respect, safeguard and promote the process of competition. While competition rules do not contribute to market access as such, they for their part will help to safeguard a level playing field and ensure that competitive conditions on the market will make market access successful and boost investor confidence.

On Subsidies, the outcome extends also to services and adds to the existing multilateral rules on goods subsidies. Japan has agreed to give more information on subsidies provided to goods and services, at all levels of  government. Consultation provisions will allow the Parties to raise issues and ask additional information if they suspect that a specific subsidy could have a significantly negative effect on their trade or investment interests.

Both sides have also agreed to explore possible solutions if the concerns of the other side are confirmed. Finally, both sides have agreed to prohibit two types of subsidies that are considered to be specifically harmful to trade and investment:  unlimited guarantees; and subsidies for restructuring ailing enterprises without having prepared a credible restructuring plan.

It was also agreed that these prohibitions do not apply to sub-central levels of government. A threshold of 450,000 SDR (Special Drawing Rights) per beneficiary over a period of three consecutive years applies for the notification and consultations provisions to allow the  parties to concentrate on the potentially most distortive subsides. Finally, the rules on transparency also apply to subsidies in the field of agriculture and fisheries. The Audio-Visual services sector is excluded

On SOEs (State Owned Enterprises), the agreement will ensure that SOEs, enterprises granted special rights or privileges and designated monopolies are not allowed to discriminate between EU and Japanese goods, services and enterprises when buying and selling on commercial markets. They will also have to act as private enterprises on the market. Public services are fully safeguarded under the rules, corresponding to the objectives of both sides to ensure the continuing provision of high-level public services.

The SOE rules are meant to ensure that enterprises owned or controlled by governments do not benefit from undue favourable treatment on commercial markets. The rules, therefore, aim to ensure that there is a level playing field between public and private companies. This will contribute to fair competition in the market based on merit, efficient allocation of resources, and will have a favourable effect on investor confidence.

Trade Remedies

The agreement has confirmed the right of both parties to apply trade defence instruments according to the WTO rules. The agreement has also defined some additional rules ensuring transparency and right of defence during the trade remedy investigations.

Both parties have also agreed on a bilateral safeguard clause by which preferences can be temporarily suspended in order to allow a domestic industry to adjust to any significant and unexpected increase of imports resulting from the elimination or reduction of the customs duties.

Technical Barriers to Trade (TBT)

The TBT Chapter follows the lines of the model used in other  EU FTAs. The most salient feature is the naming of international standard-setting bodies – a major point of difference with Japan until now.

Because of this and in combination with the Non tariff measure (NTM) list solutions, this TBT Chapter effectively addresses the issues that in other agreements have needed NTM sectoral Annexes on electronics, on pharmaceuticals, on textiles, and even on chemicals. It also refers to the Codex Alimentarius which is important for the labelling issues regarding agricultural products and also include a reference to ICAO for aeronautical products. A special article addresses issues of marking.

With regard to conformity  assessment procedures, the supplier’s declaration of conformity is included together with the principle of risk-based assessment procedures proportional to the risks.

Customs and Trade Facilitation (CTF)

The objectives of the chapter are twofold: to facilitate trade and to promote customs cooperation on a bilateral and multilateral basis.

The chapter aims at the modernisation and simplification of rules, requirements, formalities, and procedures related to import, export and other regimes including transit, in order to ensure efficiency and proportionality. A reference to the recognition of the implementation of international rules and standards, such as WTO provisions and WCO instruments is included.

Cooperation on customs matters aims at increasing the efficiency of customs controls, at lessening the burden for traders and at increasing security and safety. The EU obtained the commitment that the provisions will apply to any agencies in charge of border controls or to any competent authorities as defined by the Parties.

Some justified limitations were agreed due to the nature and purpose of the measures or controls at stake. These limitations refer to SPS and TBT chapters in case of inconsistency with the CMTF chapter, as well as to some precautionary clauses regarding the environment, health, etc.

The chapter also ensures transparency of legislation and procedures, including setting up a mechanism of consultations between the administrations and the business community. Transparency of fees and charges is also part of the chapter while the general provisions on fees and charges are included in the Trade in Goods Chapter.

Other main elements included in the chapter:

  • provide for the immediate release of goods as soon as compliance has been ensured;
  • issue advance rulings on tariff classification or origin of a good;
  • procedures to guarantee the right of appeal or review against administrative actions of customs
  • or other authorities affecting import, export or transit;
  • application of risk management on the basis of selective criteria with the main focus on high risk
  • consignments thereby expediting release of low-risk consignments;
  • application of post-clearance audit;
  • enhance cooperation on the exchange of information and on trade facilitation partnership programmes.

Provisions on goods re-entered after repair or alteration, temporary admission of goods and on customs, valuation are in the Trade in Goods Chapter.

The chapter also establishes a specialised committee for all customs related issues in order to ensure coherence with the activity of the already existing Joint Customs Cooperation Committee (established under the EU-Japan Custom Cooperation and Mutual Administrative Agreement (CCMAAA)). The Chapter foresees joint meetings for these two committees.

In addition, the chapter refers to the Protocol on Mutual Administrative Assistance in Customs Matters (under the existing CCMAAA) that will allow exchanges of information ensuring a correct application of customs legislation and prevent customs violations.

Sanitary and Phytosanitary Measures (SPS)

The EU Japan SPS Chapter will improve predictability of trade for all agricultural products; not only for products already traded but also for new products. However, it will not lower safety standards or require parties to change their domestic policy choices on matters such as the use of hormones or genetically modified organisms (GMOs).

On Import conditions, import procedures and trade facilitation the EU and Japan have agreed to ensure that any import procedures including the approval and clearance process are simplified,expedited and completed without undue delays.

As regards import conditions for meat and meat products, the EU and Japan have agreed on procedures for listing of establishments eligible to export to the other party. Both parties have committed that costs for audits shall be borne by the importing party unless otherwise agreed.

The EU and Japan have agreed to apply zones or compartments established for disease-free areas in case of outbreaks for animal diseases in their trade. Both parties have committed to exchange views on ways to establish and maintain mutual recognition of health status.

As regards plant health, the EU Japan agreement recognises the concepts of pest free areas, pest free places of production and pest free production sites as well as areas of low pest prevalence areas and protected zones concepts, which they agree to apply to trade between them. The Parties shall also ensure that the procedures for establishing or maintaining phytosanitary import conditions are carried out without undue delays.

As regards food additives, the transparencies of the approval process and the requirements for the assessment of an application have become more transparent. Both Parties have also committed to publish the timelines for the approval of food additives.

Transparency and exchange of information

Japan and EU commit to ensure transparency on import conditions and control, inspection and approval procedures including details about mandatory administrative steps and expected timelines. This ensures that companies and authorities have better access to information that can affect trade and facilitate the application. By discussing issues and being informed of any changes of regulatory requirements intensively is a useful preventive tool to facilitate trade as the issue could be solved before it becomes a barrier.

Emergency measures

The SPS Chapter allows Parties to take emergency measures which are necessary for the protection of human, animal or plant life or health. In addition, the Parties are required to ensure that the emergency measures are not maintained without scientific evidence. The chapter aims to avoid that the emergency measure does not block trade unnecessarily. It should be applied for the shortest time as possible and lifted once it is no longer necessary.

Technical consultations and Specialised Committee on SPS measures

To help solve trade irritants the SPS Chapter establishes a mechanism under which the parties shall endeavour to avoid disruption of trade and reach a mutually acceptable solution.

In addition, the SPS Chapter establishes a specialised committee on SPS measures. The objective is to

enhance communication and co-operation and to serve as a forum to address solutions for trade irritants if the technical consultation has not provided a satisfactory solution.

Audits and Procedure for listing of establishments

The SPS Chapter promotes the auditing system for attaining and maintaining the confidence in the effective implementation of each other’s systems. The article on audits also clarifies the communication process (providing audit reports and the possibility of commenting on the report). The costs for audit should be borne by the importing Party unless otherwise agreed between the Parties.

The Parties have in addition agreed on ways to help encourage the facilitation of establishments receiving authorisation to export to the other party. This is consistent with the EU approach called “pre-listing”.

State to State Dispute Settlement Mechanism (DSM)

The objective of the Dispute Settlement Chapter (DS Chapter) is to ensure that rights and obligations under the Agreement are fully observed. It provides for an effective, efficient and transparent mechanism for avoiding and solving disputes between the Parties.

The DS Chapter is accompanied by the Rules of Procedure for the Panel which contains detailed rules on the panel proceedings, the Code of Conduct for the Panellists and the Mediation Mechanism.

The DS Chapter provides for:

  • An effective, efficient, swift and transparent mechanism for avoiding and settling disputes between the Parties in relation to violation complaints.
  • A pre-established list of panelist (roster) from which the panelists could be automatically appointed in case the Parties cannot reach an agreement on the composition of a panel. In consequence, no Party could obstruct the proceedings when a dispute arises.
  • Highly qualified, experienced and independent panelists. This is especially important as there is no appellate review stage.
  • Streamlined and clearly defined compliance and post-compliance stages of the proceedings.
  • A well-defined Mediation Mechanism which should in practice encourage the Parties to reach a mutually acceptable solution to a problem by using these less formalised
  • An elaborated Code of Conduct for the panellists in order to ensure their full independence and impartiality.

If neither the technical consultation nor the Specialised Committee resolves the trade irritant, Parties may use the agreement’s dispute settlement. The Parties have agreed which parts of the SPS Chapter would fall under the agreement’s dispute settlement mechanism. There remains, however, the possibility to raise the issue in the WTO Dispute, depending on the nature of the trade barrier.

 Trade and Sustainable Development

The chapter includes all of the key elements of the EU approach and is in line with the level of ambition of the chapters concluded in other recent EU FTAs. Notably, it provides for:

  • commitments to key international instruments on labour and environment:
    • effective implementation of the 4 groups of ILO core labour standards as covered by the 1998 ILO
  • Declaration on Fundamental principles and Rights at Work
    • effective implementation of ratified ILO Conventions
    • effective implementation of Multilateral Environmental Agreements – including the UN
  • Framework Convention on Climate Change and the Paris Agreement
  • continued and sustained progress towards ratification of non-ratified fundamental ILO Conventions;
  • the prohibition of relaxing domestic labour and environmental laws to attract trade and investment;
  • commitments to the conservation and sustainable management of natural resources, addressing biodiversity (including combating illegal wildlife trade), forestry (including fighting against illegal logging), and fisheries (including combating illegal, unreported and unregulated (IUU) fishing);
  • the promotion of Corporate Social Responsibility and other trade and investment practices supporting sustainable development;
  • a dedicated institutional set-up, including mechanisms for the involvement of civil society in the implementation of the chapter, both domestically (consultation of “domestic advisory groups”) and jointly (“joint dialogue with civil society”);
  • a tailored mechanism for the resolution of disputes, including governmental consultations and
  • recourse to an independent panel of experts.

SMEs

The objective of this chapter is to enable SMEs to benefit fully from the FTA and to encourage European and Japanese SMEs to trade and to invest more in each other’s markets.

The SME chapter commits each Party to transparency regarding access to its own market by sharing information. Access to such information can represent a trade barrier in itself, in particular for small companies. Each Party will, therefore, provide a specific website with information relevant to SMEs seeking to access its market. The SME Contact Points will manage the Parties’ interactions under the SME chapter. They will also address issues relevant to SMEs in numerous policy areas falling under the responsibility of other committees of the FTA. The SME chapter complements the provisions in the other FTA chapters which make doing business easier in both markets.