10/82 NONTARIFF TRADE BARRIERS - TRADE NEGOTIATIONS - BEHIND THE SCENE MANEUVERINGS OF KASUMIGASEKI BUREAUCRATS IN 1982 TRADE NEGOTIATIONS

TRADE LAW (SPECIAL FEATURE)

This is basically a summary of an article by the February 1, 1982 issue of NIKKEI BUSINESS covering the tactics by the elite bureacrats in preparing the 67 out of 99 concessions in the first round of market opening measures carried out in January 1982 and is not to be confused with the second round issued literally days before the Versaille Summit in June, 1982.

It starts with a meeting of top bureaucrats from the Ministry of Finance (MOF), the Ministry of International Trade and Industry (MITI), the Foreign Ministry (FM), the Ministry of Agriculture & Forestry (MAF) and the Economic Planning Agency (EPA) in the Tokyo Hilton Hotel on November 27,1981. The subject matter was the easing of trade frictions, only days after the French Foreign Minister had told a leading Japanese business man to the effect that the world would be beautiful if Japan and the USSR did not exist. The Western nations were increasingly blaming their unemploymnet on Japanese export offensives. Prime Minister Suzuki had just issued a directive that the ministries do something to relieve trade frictions before the Versaille Summit. Convincing concrete measures were required. However, two conditions had to be met: (1) there should be no major victims in Japan, and (2) they should be highly evaluated by the Americans and Europeans. These were essentially contradictory demands.

Showing the actual conditions in Japan, at almost exactly that time, a small freighter slipped into Osaka harbor and loaded some 20,000 tons of Korean made hot coil steel on the wharf. Then some young men appeared and covered it with sheets. Several hours later they loaded it on a barge and disappeared into the night. They took this route to avoid discovery by Nippon Steel and other major steel makers. The leading Japanese steel makers actually control the volume and price to steel imports from Korea and Japan. Nippon Steel's trading companies are particularly notorious for such controls. However, some importers are secretly importing the steel at the request of their customers for cheap steel. Until recently, such actions had been done in Tokyo, but truckers under the control of the steel makers had detected it and reduced shipments to the end users in retaliation. It has now been moved to Osaka. People familiar with steel industry relations in Japan are not surprised, but it is a classical nontariff barrier that foreigners criticize. Another case is the prohibition in Japan of the use of air spoilers which the Ministry of Transport has prohibited as dangerous in case of collisions. However, the real reason is that they are popular with Japanese motorcycle gangsters and the police pressured the ministry to ban them. Westerners point to this as a trade barrier as they say the devices conserve fuel and increase stability at high speeds.

The bureaucrats at the meeting were acutely aware political dangers of touching beef, orange and leather products due to the political strength of rural interests. At the same time, they were worried that the elimination of trade barriers would impose on their respective jurisdictional turfs. One of the prime criticisms of foreigners was the irrational administrative structure. This also happened to involve the administrative reform that Prime Minister Suzuki had staked his political career on achieving.

The next meeting was on December 3, 1981 in a Chinese restaurant in the Fukoku Seimei Bldg., in Saiwaicho in Tokyo and hosted by the Chairman of Mitsui Trading Co. (Mitsui Bussan). Top bureaucrats from 7 ministries and agencies were at the meeting

and the Mitsui Chairman, saying it was time to take some actions to open the markets due to rising overseas anger, cited the obstructionism of junior level bureaucrats in stopping imports. He cited examples such as some bureaucrat classifying an entire shipload of copper ore as manufactured goods when he detected a minimal amount of wire in the shipment, or the rejection of the import of some medicines by the Health and Welfare Ministry for an abbreviation in an address similar to writing "st." instead of "street" in full, or the stoppage of the import of a Mercedes Benz as it had a medicine case in it, as required by German law, that had medicines in it not approved in Japan. Although the blame was laid at the feet of overeager junior bureaucrats, it was noted that they were not likely to do this unless they had encouragement from higher up. Nevertheless, it was acknowledged that simplification of inspection procedures could be done relatively easily with few victims. However, such procedures are extremely complicated, covering not only customs duties, but safety and hygiene regulations, etc. The Ministry of Finance representative noted that it could simplify its procedures to some extent, but it had to be carefull not to impose on the jurisdiction and laws of other Ministries or it would likely have trouble with them when negotiating the next budget, so such simplifications were easier said than done.

The next major meeting was held in a Tokyo hotel on December 24th 1982 in a decidedly different atmosphere. The Foreign Ministry had just received an urgent message from the US Embassy. It warned that Japan must open its markets to the same extent as the US, or the US would adopt reciprocity measures against Japan. This was due to the ballooning trade deficit with Japan. At meetings held up to then, the mood had been rather optimistic. The feeling in general was that of the 51 items for which "import inspections procedures should be improved" as collected by the Manufactured Imports Policy Committee, if we take action on 6 or 7, that would be more than enough. Then the representatives of the 5 ministries and agencies decided to take more positive actions. In addition to the 51 items already mentioned, the Foreign Ministry had collected another 48 from overseas complaints.They divided them into 4 categories ranging from A, for which improvement could easily to be taken, to D, for which it was impossible to take action. The emphasis was soon shifted to the juricdiction of the Ministry of Health and Welfare. 40% of the items were in its jurisdiction. Most of these involved inspections based on the Pharmaceuticals Law, or the Foods and Sanitation Law. That Ministry was troubled by this emphasis however, as it had established 36 inspection institutes throughout the country and they were primary landing grounds for amakudari ("descent from heaven") retiring bureaucrats of the Ministry. They were also irritated that their ministry was not included in the group of 5 ministries deciding these policies although it was to be subject to so much attacks. They pointed out that MITI was the original source of most nontariff barriers and the MAF had 19 of the 99 items, 8 of them in the D rank, or almost 1/2 of the total 17 in the D class.

Thus by January 1982 the council of 5 ministries had raised to 67 the number of items in the A class, more than 10 times their original plan. They then started a massive public relations campaign trumpeting this opening of the market. However, it did not convince the foreigners. The vicepresident of Johnson & Johnson International (the American pharmaceuticals company) called it only a standard play in preparation for the summit and was not a resolution to the trade conflict. The bureaucrats had only counted the number of items and did not look at the effect on trade figures. The effect on trade figures of the trade measures appeared to be minimal. What the foreigners wanted was an end to requirements such as requiring Korean steel to be marked as such and that it be inspected bar by bar or the Ministry of Finance's decision that an American insurance company could not handle pension funds, while Japanese insurance companies were permitted to do so.

THE JAPAN LAWLETTER, October, 1982. By Roderick Seeman