Lessons from the Japan-China "Welsh onion war"

Journal of World Trade

Volumn 36, Issue 6, 2002, Pages 1019-1036

  Nakagawa, Junji ^a  

^a UNIVERSITY OF TOKYO   (Japan)

Author keywords

[No Author keywords available]

Indexed keywords

ALLIUM FISTULOSUM;

EID: 37049025699     PISSN: 10116702     EISSN: None     Source Type: Journal    
DOI: 10.54648/trad2003005     Document Type: Article

References (95)

1. Japan, Ministry of Foreign Affairs (MOFA), press conference, 21 December 2001. See .
2. Article 11.1(b) provides that "a Member shall not, seek, take or maintain any voluntary export restraints, orderly marketing arrangements or any other similar measures on the export or the import side".
3. Japan, MOFA, Annual Trends of Japan-China Trade at .
4. Japan External Trade Organization (JETRO), Japan's top 50 trading partners of the year 2000 at .
5. For example, the import of Welsh onion increased 25 times from 1996 to 2000. Its domestic sales price went down from ¥340/kg in 1998 to ¥222/kg in 2000. See, Japan, Ministry of Agriculture, Forestry and Fisheries (MAFF), Ministry of Finance (MOF), Ministry of Economy, Trade and Industry (METI, formerly called MITI until the end of 2000), Outlines of Major Indicators in Governmental Investigation on Safeguard, October 2001 at .
6. See Norio Komuro, Japan's Safeguard Law and Practice, 35 J.W.T. 5 (October 2001), 924.
7. Law 54 of 1910, as amended by Law 118 of 1994.
8. Article 9 of the Cabinet Order Relating to Emergency Duties, Cabinet Order No. 417, December 1994.
9. MOF, MITI and MAFF, press release on the Initiation of an Investigation Concerning Vegetables, etc., 19 December 2000 at < http://www.mof.go.jp/jouhou/kanzei/ka026.htm>.
10. Ibid.
11. In total, 16,804 questionnaires were sent, and the government received 13,618 answers by 22 March 2001. See MOF, Report of the Investigation for a Safeguard Concerning Vegetables, etc., 23 March 2001, at .
12. See note 9 above.
13. MOF, METI and MAFF, Announcement Concerning a Provisional Safeguard Measure Relating to the Three Products Including Welsh Onion, 10 April 2001, at .
14. See Article 9.8 of the Customs Tariff Law and Article 6 of the Agreement on Safeguards, both of which provide that the duration of a provisional safeguard measure shall not exceed 200 days.
15. Ibid.
16. See Article 1 of the Japan-China Trade Agreement (signed on 5 January 1974, and entered into force on 22 June 1974).
17. WTO Committee on Safeguards, Notification under Article 12.4 of the Agreement on Safeguards before Taking a Provisional Safeguards Measure Referred to in Article 6, G/SG/N/7/JPN/1, 25 April 2001.
18. Ibid, p. 3.
19. See MOF, Customs Clearance Statistics, each year, at .
20. MOFTEC announced a press release concerning Japan's safeguard measure concerning agricultural products, People's Daily, Japanese edition, 24 April 2001, and at .
21. China levies special customs duty on three Japanese products, People's Daily, Japanese edition, 19 June 2001, and at .
22. China, Japan begin negotiations on trade disputes, People's Daily, English edition, 3 July 2001, and at .
23. MOFA, Summary of the Meeting of 8 October 2001 between Prime Minister Koizumi and Prime Minister Zu, at .
24. MOFA, Summary of the Meeting of 21 October 2001 between Prime Minister Koizumi and President Jiang, at .
25. See note 1, above.
26. See Article 9.9 of the Customs Tariff Law, which stipulates that if, as a result of investigation, no definitive safeguard measure is taken, the government shall promptly reimburse customs duties paid under the provisional safeguard measure. It was reported that the total duty reimbursed would be between ¥200 and ¥300 million. See Nihon Keizai Shinbun, 23 December 2001.
27. China stops imposing punitive tariff on Japan-made products, People's Daily, English edition, 27 December 2001, and at .
28. MAFF, Vegetable Report, February 2002. Concerning the result of the first meeting of the Japan-China Agricultural Products Trade Council relating to three products including Welsh onion, at .
29. MAFF, Press Release concerning the result of the third meeting of Japan-China Agricultural Products Trade Council, 22 May 2002, and at .
30. In contrast to Article XIX.3(a), which permits discriminatory application of countermeasures against definitive safeguard measures, Article XIX.3(b) does not permit discriminatory application of countermeasures against provisional safeguard measures.
31. China, Japan at impasse on trade, China Daily, English edition, 20 December 2001, and at .
32. For a detailed explanation of the Japanese law on safeguard measures, see Komuro, as note 6 above, at 864-914.
33. Unlike the WTO Anti-dumping Agreement (Articles 5.1 and 5.6) and WTO Agreement on Subsidies and Countervailing Duties (Articles 11.1 and 11.6), which provide for the initiation of investigation both on petition from the domestic industry and ex officio, neither Article XIX of the GATT 1994 nor the Agreement on Safeguards contains specific provision as to the procedure of the initiation of investigation. In practice, some WTO Members admit initiation of investigation both on petition and ex officio (e.g., US, Korea, Brazil), some admit only on petition (e.g., Argentina, India), and others admit only ex officio (e.g., EC). Japan belongs to the third group.
34. The Agreement on Safeguards is silent on the term of investigation. However, Japan set a limit of one year to secure a consistency with the similar requirement for anti-dumping investigations. See Komuro, as note 6, above, at 886.
35. WTO Committee on Safeguards, Agreement on Safeguards on Initiation of an Investigation and the Reasons for It, Japan, G/SG/N/6/JPN/1, 5 January 2001.
36. See note 17, above.
37. See Articles 9.1 and 9.8 of the Customs Tariff Law and Articles 2.1 and 6 of the Agreement on Safeguards.
38. See MAFF/MOF/METI, as note 5, above.
39. On the data of increase in imports concerning Welsh onion, see note 18, above, and the accompanying text. On fresh shiitake mushroom, import volume increased from 24,394 tons in 1996 to 42,057 tons in 2000, and the domestic market share of imports increased from 24.5 percent in 1996 to 38.5 percent in 2000. On tatami-omote, import volume increased from 11,369,000 sheets in 1996 to 20,300,000 sheets in 2000, and the domestic market share of imports increased from 29.7 percent in 1996 to 59.4 percent in 2000. As note 17, above, at pp. 10, 12.
40. The valuation of all factors listed under the latter Article is mandatory. See Argentina-Safeguard Measures on Imports of Footwear (hereinafter "Argentina - Footwear"), Report of the Appellate Body, WT/DS121/AB/R, para. 136;
41. Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products (hereinafter "Korea - Dairy Products"), Report of the Panel, WT/DS98/R, para. 7.55.
42. For example, productivity of fresh shiitake mushroom and tatami-omote increased slightly from 1996 to 2000, and the capacity utilization ratio of Welsh onion remained almost the same during the investigation period. See MAFF/MOF/METI, as note 5, above.
43. Concerning the data on conditions (1), (2) and (3) relating to Welsh onion, see note 18, above, and the accompanying text. Concerning those relating to fresh shiitake mushroom and tatami-omote, see note 39, above.
44. Concerning the domestic sales, that of Welsh onion decreased from ¥104.8 billion in 1996 to ¥92.5 billion in 2000: that of fresh shiitake mushroom decreased from ¥81.1 billion in 1996 to ¥61.5 billion in 2000; that of tatami-omote decreased from ¥35.1 billion in 1996 to ¥13.5 billion in 2000. As note 17, above, at pp. 8, 10, 12.
45. Concerning the domestic production, that of Welsh onion remained almost at the same level; that of fresh shiitake mushroom decreased from 75,157 tons in 1996 to 67,224 tons in 2000; and that of tatami-omote decreased from 38,395,000 sheets in 1996 to 34,172,000 sheets in 2000. See ibid., at pp. 8, 10, 12.
46. Concerning the productivity, that of Welsh onion decreased from 5.27kg/h in 1996 to 4.93kg/h in 2000; those of fresh shiitake mushroom and tatami-omote increased slightly (1.62kg/h in 1996 to 1.70kg/h in 2000, and 0.70 sheet/h in 1996 to 0.74 sheet/h in 2000, respectively). See ibid., at pp. 8, 10, 13.
47. Concerning the capacity utilization, while the utilization ratio of Welsh onion remained almost the same (31.2 percent in 1996, 32.0 percent in 2000), those of fresh shiitake mushroom and tatami-omote decreased (94.7 percent in 1996 to 84.9 percent in 2000, and 98.5 percent in 1996 to 89.4 percent in 2000, respectively). See ibid., at pp. 9, 10, 13.
48. Concerning the profitability, that of Welsh onion decreased from ¥291,000/10a in 1996 to ¥158,000/10a in 2000; that of tatami-omote decreased from ¥232,000/10a in 1996 to ¥63,000/10a in 2000. See note 5, above, pp. 3, 13.
49. Net profit of fresh shiitake mushroom decreased from ¥16.72 billion in 1996 to ¥6.13 billion in 2000. See ibid., at p. 8.
50. Concerning employment, total working hours of Welsh onion remained almost the same (127,596,000 hours in 1996 and 126,525,000 hours in 1999), while those of fresh shiitake mushroom decreased from 46,303,000 hours in 1996 to 40,985,000 hours in 2000. See ibid., at pp. 3, 9. There are no data available for tatami-omote in this factor.
51. See Article 4.1(a) of the Agreement on Safeguards.
52. See Argentina - Footwear, Report of the Appellate Body, as note 40, above, para. 139.
53. As note 17, above, at p. 3.
54. Ibid., p. 4.
55. Ibid., pp. 4-5.
56. WTO, Committee on Safeguards, Replies to Questions Posed by the United States Regarding the Notification of Japan, G/SG/Q2/JPN/2, 14 June 2001, p. 3.
57. Ibid, pp. 4-5.
58. Ibid., p. 5.
59. See, e.g., the notification of Slovenia before taking a provisional safeguards measure concerning swine, dated 20 November 1998, where it referred to the data on the imports of swine from August to October 1998. G/SG/N/7/SVN/1, p. 2.
60. As note 17, above, at pp. 5-7.
61. See METI, Speech of Mr Hiranuma, Minister of Economy, Trade and Industry Concerning the Notification of Imposition of Special Tariffs on the Japanese Three Products by the Chinese Government, 21 June 2001, at .
62. See Korea - Dairy Products, Report of the Appellate Body, WT/DS98/ AB/R, para. 77.
63. Also see Yong-Shik Lee, Critical Issues in the Application of the WTO Rules on Safeguards - In the Light of the Recent Panel Reports and the Appellate Body Decisions, 34 J.W.T. 2 (April 2000), 131, at 132-137.
64. See Article XIX.3(b) of the GATT 1994. In contrast to Article XIX.3(a), which provides that countermeasures against definitive safeguard measures can be applied solely to the trade of the contracting party taking such measures, Article XIX.3(b) does not provide for such discriminatory application of countermeasures.
65. See Kenneth W. Dam, The GATT: Law and International Economic Organization (Chicago: University of Chicago Press, 1970), pp. 104-105.
66. Also see Komuro, as note 6, above, at 935.
67. See Article XIX.3(b) of the GATT 1994.
68. The amount of Japanese imports of the three agricultural products from China was ¥23.8 billion in 2000, while the amount of Japanese exports of the products covered by the countermeasure to China was ¥67.2 billion in 2000. See MOFA, Trade Statistics, Tables of country/item trade, at .
69. METI, Statement on the Major Facts Concerning the Safeguard Relating to Three Products Including Welsh Onion, 24 October 2001, and at .
70. Article 1 of the Japan-China Trade Agreement provides as follows: "Both parties shall grant each other most favored nation treatment with respect to customs duties, internal taxes and other charges of any kind imposed on or in connection with importation or exportation and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation."
71. See WTO Committee on Safeguards, Notification of Non-Application of Safeguard Measure to Developing Countries under Article 9.1, Footnote 2 of the Agreement on Safeguards, G/SG/N/11/JPN/1, 25 April 2001, pp. 7, 14-15.
72. See METI, as note 58, above.
73. Also, see Komuro, as note 6, above, at 935.
74. Japan's Discriminatory Curbs Oppose WTO Rules, People's Daily, English edition, 27 June 2001, and at .
75. According to the MAFF, however, imports of onion decreased by 9 percent, that of tomato decreased by 28 percent, and that of green pepper increased by 40 percent in January to March 2001. Based on these data, the MAFF announced that the conditions for taking a safeguard measure were not met for these three products. See statement of the Minister of Agriculture, Forestry and Fisheries Tsutomu Takebe at the Committee on Agriculture, Forestry and Fisheries, House of Representatives, 151st Session, No. 12, 17 May 2001, p. 15.
76. Article 9.8 of the Customs Tariff Law provides that "... the Government may, if ... it is deemed urgently necessary in the interest of the national economy, take any of the following measures ..." (emphasis added).
77. See Article 5 of the WTO Anti-dumping Agreement.
78. See note 33, above.
79. Article 9.6 of the Customs Tariff Law provides that "The Government shall ... initiate, if it is found to be necessary, an investigation ..." (emphasis added). The necessity test for the initiation of investigation was provided for in the Law to secure a balance with the urgent necessity test for taking a safeguard measure. See Komuro, as note 6, above, at 883.
80. This means that a VER could be a possible settlement of the dispute before Chinese accession to the WTO. In fact, it is reported that Japan made a proposal to settle the dispute by a VER in the course of the negotiation. However, China declined it because it would constitute a grey area measure strictly prohibited by the rules of the WTO. See note 62, above.
81. See note 1, above.
82. Ibid.
83. Statement of Takeshi Noma, Senior Vice-Minister of Agriculture, Forestry and Fisheries at the Committee on Agriculture, Forestry and Fisheries, House of Councillors, 154th Session, No. 11, 30 May 2002, p. 18.
84. Ibid.
85. Statement of Yoshio Yatsu, Minister of Agriculture, Forestry and Fisheries at the Committee on Finance, House of Councillors, 151st Session, No. 11, 21 March 2001, p. 6.
86. METI, press release on Towel-related Textile Safeguard Investigation, 5 April 2002, and at .
87. MAFF, press release on the Establishment of an Information Collection/ Monitoring System Concerning Safeguards, April 2001, and at .
88. Included in the level 1 watch list were six agricultural, forestry and fisheries products including garlic and eggplant.
89. Included in the level 2 emergency watch list were nine products including Welsh onion, fresh shiitake mushroom, tatami-omote, tomato, green pepper and onion.
90. See note 74, above.
91. WT/MIN(01)/3, 10 November 2001.
92. Concerning the meaning of "market disruption", Article 16.4 of the Protocol provides that "Market disruption shall exist whenever imports of an article ... are increasing rapidly ... so as to be a significant cause of material injury ..." (emphasis added). See ibid.
93. Law No. 16 of 2002.
94. MOF/METI/MAFF/Ministry of Health, Labor and Welfare/Ministry of Land, Infrastructure and Transport, Guidelines Concerning the Application of Transitional Safeguard Measures toward China, April 2002, and at .
95. Minutes of the Committee on Agriculture, Forestry and Fisheries, House of Councillors, 154th Session, No. 11, 30 May 2002, p. 9.