range of areas the TFC has dealt with, and the contributions it has made to improved trade relations with Japan. The following review of accomplishments under the TFC during its two and a half years of operations was prepared by Norman D. Glick, TFC Staff Director, Office of International Economic Relations, International Trade Administration. The Trade Facilitation Committee (TFC) was established by former Commerce Secretary Kreps and the Japanese Minister of International Trade and Industry as a cooperative effort between the two countries to increase Japanese imports of U.S. goods. The principal activities of the TFC include the identification and elimination of impediments to U.S. exports to Japan which result from Japanese trade practices and procedures; cooperation in export development activities; analysis and identification of export opportunities for U.S. firms in the Japanese market; and the development of related market information. The first two years of the TFC have seen a number of export development activities. In March 1978, 91-member Japanese Import Promotion Mission visited 17 cities in the United States. This mission was followed up in October 1978, with the 137-member U.S. Export Development Missions to Japan, led by Secretary of Commerce Kreps and Mark Shepherd, chairman of Texas Instruments, as Mission director. These missions were the largest single group ever sponsored by the Department of Commerce, and included high-level government officials and business executives from five industry groups-advanced scientific equipment, general industrial machinery, automotive parts, food processing and packaging equipment, and modern management equipment. The long-term success of these missions was quite favorable, especially in terms of the continuing business relationships they fostered. (The U.S. Development Missions were featured in a special issue of Business America, Nov. 20, 1978.) The launching of "Boatique America" in Tokyo in October 1979 marks the most recent export development activity in Japan by the Commerce Department. "Boatique America" was a floating department store which carried high-quality Americanmade consumer goods for sale directly to Japanese consumers. It visited 13 Japanese ports, displaying the goods of 146 exhibitors. Sales reached about $3 million, and more than 400,000 people visited the ship. "Boatique America" was highly successful in its goal of exposing large numbers of Japanese consumers to American goods. A series of articles in this magazine, including the lead article in the Oct. 22, 1979 issue, tracked "Boatique America” as it toured Japanese ports. A number of studies concerning exporting to Japan have been published by both the U.S. and Japan. The Japan External Trade Organization (JETRO-see preceding page) has published a series entitled "Access to Japan's Import Market" which covers such diverse areas as ceramics, coffee, carpeting, precious stones, and wine. A 1979 update to this series covers such subjects as pleasure boats, agricultural machinery, medical electronic equipment, and packaging machinery. JETRO also has issued publications entitled "Japan's Import System 1978 and Japan's Tariff System and Customs." On the U.S. side, the TFC was closely involved in the Commerce Department's publication of the volume "U.S. Opportunities to Japan." This survey of a number of industry sectors in Japan examines the characteristics of each sector and the marketing factors found in each. The TFC has been extremely active in attempting to resolve cases concerning impediments to market access in Japan raised by U.S. companies and trade associations. The TFC has received information concerning market access problems from more than 90 U.S. firms and industry groups. As of the end of March 1980, 60 of these were considered to be potential TFC cases and were forwarded to the U.S. Embassy in Tokyo. Following investigation, 21 of these cases have been transmitted by the Embassy to the Japanese side of the TFC for action, while in 19 more cases the Embassy is either in the process of obtaining additional information, or preliminary discussions are being held with the appropriate Japanese Government agency Of the 21 cases forwarded to the Japanese side of the TFC, 15 have been favorably resolved, 5 are still under consideration, and one was withdrawn as unresolved. The cases dealt with by the TFC since its inception have covered a broad range of products whose access to the Japanese market has been impeded by Japanese practices or procedures. These include such products as medical equipment, telecommunications equipment, electrical applicances, tobacco products, shock absorbers, fertilizer, pleasure craft, and a number of others. The TFC considers cases involving the products of a single company, or those of entire industry groups, where Japanese practices such as product standards approvals, administrative guidance, and government procurement practices adversely affect sales by U.S. firms. While continuing to solicit cases from individual U.S. companies, emphasis is being placed on the development of cases concerning prob lems faced by an entire U.S. industry. A number of such "generic" cases have been submitted to the Japanese side of the TFC or are being processed by the U.S. Government. Cases on behalf of fertilizer manufacturers and producers of modified food starches have been favorably resolved through the TFC. The broad range of cases dealt with by the TFC is illustrated in the following brief outline: ADMINISTRATIVE GUIDANCE The TFC has dealt with several cases involving the use of "administrative guidance," that is, official pressure on Japanese buyers to procure parts and components from domestic sources rather than from abroad. One such case concerned the fertilizer diammonium phospate, whose import was being restricted by administrative guidance. The TFC was able to have this guidance withdrawn, and Japanese buyers are now free to import diammonium phosphate on the basis of their own commercial evaluation. CUSTOMS CLEARANCE The TFC has received several cases involving difficulties experienced by American companies in clearing their goods through Japanese customs. Problems related to customs clearance have involved requirements for excessive documentation, clearance of commercial samples, reclassification of a product that resulted in a much higher duty rate than that for which the product was initially assessed, and difficulties in obtaining refund of duty for goods imported into Japan on consignment or for those unsold goods that are returned to their supplier. STANDARDS AND TESTING PROCEDURES One case resolved by the TFC concerned certification of hydrofoil vessels. The Japanese required the U.S. manufacturer to bring each completed vessel to Japan for inspection, a costly procedure since crew, engineers, and subcontractors' representatives had to accompany the vessels. As a result of TFC involvement, the Japanese Ministry of Transport agreed to consult with U.S. ship certification agencies and to inspect both vessels under construction and the production of various critical components by subcontractors. The inspection trip paved the way for simplified and accelerated certification. These vessels have a substantial potential market in intercoastal transportation in the Japanese archipelago. PRODUCT APPROVAL PROCEDURES Another case resolved by the TFC involved the nonacceptance by Japan's Ministry of Health and Welfare of certain modified food starches as permissible food additives. Their non-acceptance created obstacles to the exportation of various processed foods to Japan. After intervention by the TFC, these modified starches were reclassified to permit their import into Japan. Much of the work of the TFC is carried out through liaison among concerned U.S. and Japanese Government agencies and Embassy officers stationed in Toyko and Washington. These activities are reinforced by the work of policy officials of both governments in sessions of the TFC's Senior Review Committee, co-chaired by Abraham Katz, Assistant Secretary of Commerce for International Economic Policy. The Committee meets several times a year to assess progress in the resolution of TFC cases and joint trade development activities. The vital importance attached by the U.S. Government to the TFC has been emphasized in important bilateral policy consultations. The effective functioning of the TFC was a key point in a Joint Statement issued by Ambassador Robert Strauss and Japanese External Economic Affairs Minister Nobuhiko Ushiba in January 1978. The TFC also was featured in discussions with Prime Minister Ohira in May 1979 and in U.S.-Japan subcabinet discussions in October 1978. Congressional interest in the successful resolution of TFC cases is highlighted by close monitoring of TFC activities by the Japan Task Force of the House Ways and Means Committee's Subcommittee on Trade. The TFC has played an active role as a forum for resolving the problems encountered by U.S. firms attempting to do business in Japan. As it continues in its third year, it looks forward to continuing its successful efforts on behalf of U.S. business in Japan. TENTATIVE EXPORT PROMOTION EVENT SCHEDULE FOR JAPAN-FISCAL YEAR 1980-81 July 14-18, 1980-Electronic components exhibilition, USTC, Tokyo, Japan. Sept. 8-12, 1980-Equipment for the chemical industry exhibition, USTC, Tokyo, Japan. FISCAL YEAR 1981 Oct. 27-31, 1980-Lasers and electro-optics equipment exhibition, USTC, Tokyo, Japan. November 1980-Telecommunications equipment trade mission (Japan/Korea/ Hong Kong). November 1980-Franchising trade mission (Japan). Feb. 16-20, 1981-Biomedical equipment locally-procured multifirm BSP (Japan). March 1981-"Boatique America" (consumer goods) specialized mission (Japan). April 6-11, 1981-Process control equipment locally-procured exhibition USTC, Tokyo, Japan. May 18-22, 1981-Laboratory instruments exhibition, USTC, Tokyo, Japan. June 15-19, 1981-Electronic industries production and test equipment (EIPT); locally-procured exhibition USTC, Tokyo, Japan. June 1981-"Boatique America" (consumer goods) specialized mission (Japan). September 1981-"Boatique America" (consumer goods) specialized mission (Japan). Sept. 28-Oct. 2, 1981-Building materials and equipment locally-procured offsite fair (Japan). FISCAL YEAR 1982 OVERSEAS EVENT PROGRAM (JAPAN) October 1981-Jemima, measuring instruments offsite trade fair, Tokyo. November 1981-Packaging equipment video-catalog show, Tokyo, Osaka, Sapporo (Hong Kong, Korea). November 1981-Printing and graphic arts Tokyo TC exhibition. December 1981-Health care equipment trade mission, Fukuoka, Sapporo (Hong Kong, Seoul). December 1981-Offshore development equipment trade mission, Tokyo and two more stops if it can be arranged. January 1982-Design engineering catalog show, Tokyo, Osaka (Seoul). January 1982–Paints and coatings trade mission, Tokyo, Osaka, Fukuoka, Sap poro. January 1982-Energy: Alternate sources, conservation equipment, recycling, Tokyo TC exhibition. February 1982-Office automation, Tokyo TC exhibition. March 1982-Hotel and restaurant equipment trade mission, Tokyo (Hong Kong, one more stop). March 1982-Professional TV, broadcasting and audio equipment catalog show, Tokyo (Hong Kong). March 1982-Beds and bath linens trade mission, Tokyo, Osaka, Fukuoka, Sapporo. April 1982-Plastics production equipment video-catalog show, Tokyo, Osaka (Hong Kong, Korea). April 1982-Petrochemical equipment trade mission, Tokyo (Korea two stops). April 1982-Telecommunications equipment, Tokyo TC exhibition. May 1982-Analytical instruments Tokyo TC exhibition. May 1982-Do-it-yourself catalog show, Tokyo, Osaka, Fukuoka, Sapporo. June 1982-Electronic components Tokyo TC exhibition! June 1982-Textiles trade mission, Tokyo, Osaka (Hong Kong). July 1982-Remote sensing and photogrammetry trade mission, Japan two stops, one more needed. September 1982-Toys catalog show, Tokyo, Osaka, Fukuoka, Sapporo. September 1982-Food processing video-catalog show, Tokyo, Osaka, Fukuoka, Sapporo. The above-listed tentative events have been reviewed by the RMM, Japan/Korea/ Hong Kong and found to be acceptable. No additional events have been suggested. JOINT U.S.-JAPAN TRADE FACILITATION COMMITTEE CURRENT STATUS, SEPTEMBER 1980 TFC ACCOMPLISHMENTS The Joint U.S.-Japan Trade Facilitation Committee, established in 1977 by thenSecretary of Commerce Kreps and her Japanese counterpart in the Ministry of International Trade and Industry (MITI), is designed to provide a special forum in which American exporters can seek resolution of problems they encounter with Japanese trade practices and procedures. To date, the TFC has favorably resolved 15 formally-presented cases-and is near resolution of several others-opening access to the Japanese market for such diverse products as shock absorbers, fertilizer, modified food starches, and other products in demand in Japan. A number of other cases have been informally resolved without requiring formal submission to the Japanese side of the TFC. The TFC also has been the catalyst for the resolution or highlighting of a signficiant number of additional market access problems under TFC auspices: The Buy-Japan policy of Nippon Telegraph and Telephone Public Corporation (NTT) was spotlighted in the TFC and became the subject of intensive negotiations aiming at the inclusion of NTT's purchases under the multilateral Government Procurement Code. The restrictions of the Japan Tobacco and Salt Public Corporation (JTS) on the importation of tobacco products were raised in the TFC and were later challenged in the GATT. In addition, both the USG and the U.S. tobacco industry are continuing to consult with the GOJ and JTS in an effort to reach a negotiated solution to these problems. Japanese requirements for testing and approving U.S. electrical applicances and pleasure boats were made considerably less burdensome as a result of bilateral consultants held under TFC auspices. Many problems associated with Japan's complex and time consuming inspection and registration procedures for imported passenger cars and trucks were resolved. Followup negotiations on the several remaining unresolved problems are continuing. Negotiations on standards-related problems in the areas of agriculture chemicals, processed foods, and cosmetics were held in Tokyo in late July 1980. Identification of problems in these sectors resulted from TFC work in these areas. Agreement was reached on the major issues involved in the agricultural chemicals talks, while working groups are being set up to continue negotiations in the other two areas. The Trade Study Group (TSG), an informal Tokyo-based group of U.S. and Japanese Government and business people acting under the aegis of the TFC, is currently identifying and investigating problems in a number of industry sectors, such as pharmaceuticals and medical equipment, which may become the topic for government-to-government talks at some future point. So far this year there has been a fall-off in the number of market access complaints by U.S. firms. However, the American Embassy in Tokyo has reported that some American companies having difficulty in resolving problems raised with Japanese officials have effectively used the potential of raising the issue in the TFC to overcome bureaucratic delays. These problems thus are being resolved as a result of the TFC presence without actually having to be brought to the TFC. In addition, a number of large-scale generic cases covering the problems of an entire industry sector have been developed from past individual TFC cases. Consequently, the problems of individual companies are sometimes subsumed under the framwork of these generic cases. Finally, the TFC continues to render assistance to a number of companies who approach the Committee with problems or questions not necessarily involving specific market access complaints. This may include such things as clarification of Japanese import regulations and procedures. Such assistance by the TFC is not reflected in its scoreboard of case activity. FUTURE ROLE The Commerce TFC Staff hopes to devote greater attention to broader issues affecting U.S. exports to Japan which are necessarily the result of explicit Japanese restrictions or regulations. Such issues might include buyer/supplier relationships, customs clearance difficulties, and Japan's distribution system. The TFC will continue its case work on market access impediments not covered by the MTN Codes. We plan to seek agreement that the TFC be used to assist in investigating and documenting potential violations of the MTN codes prior to resorting, if necessary, to the formal dispute settlement procedures of the Codes. The Department of Commerce plans also to enchance the TFC's trade development function. Steps are being taken to have the TFC provide the institutional framework for bilateral monitoring of the Japanese auto parts missions to the United States. New Projects for bringing American sellers into contact with Japanese buyers will be considered for TFC sponsorship. Mr. VANIK. Mr. Albrecht. STATEMENT OF ANTHONY C. ALBRECHT, DEPUTY ASSISTANT Mr. ALBRECHT. I support Mr. Hormats' statement. STATEMENT OF JAMES H. STARKEY, DEPUTY UNDER SECRE- Mr. STARKEY. Mr. Chairman, I also will support Ambassador Hormats' statement. As you may be aware, Japan is our No. 1 market for agricultural commodities. In 1979 they took $5.3 billion worth of commodities from the United States. Ninety percent of our trade goes in relatively unfettered. With the other 10 percent there are some well-known problems. We made good progress in the multilateral trade negotiations in obtaining concessions in areas such as citrus, beef, and wines. Although that trade is expanding we intend to continue to press the Japanese for further liberalization. I certainly am optimistic that through future negotiations with the support of this committee's resolution, we will be successful in expanding our agricultural exports to Japan and I thank you, Mr. Chairman. Mr. VANIK. We can proceed now to some questions. I would like to ask this question relating to the estimate or the calculation of the trade deficit. What is it predicted to be for 1980? Mr. HORMATS. We have put together a number of figures based on an annualization of the first 6 months. On the basis of these, and, as you know, economists are not infallible on projections, we anticipate that our deficit with Japan in 1980 will be something on the order of $9.6 billion. Mr. VANIK. $9.6 billion? Mr. HORMATS. Yes. Let me put it in some context. In 1977 it was $8 billion, and in 1978, $11.6 billion. In 1979, it was $8.7 billion. In 1980, we are projecting roughly $9.6 billion. Mr. GIBBONS. Mr. Chairman, will you yield for a point of clarification? Mr. VANIK. Yes, I will be happy to yield. Mr. GIBBONS. Is that just merchandise deficit? Mr. HORMATS. This is trade deficit. Mr. GIBBONS. This is a merchandise trade deficit? Mr. HORMATS. Yes. It is also important to point out that the current account deficit that we are projecting is somewhat less. In 1977, we had a $10.9 billion surplus on current account with Japan. In 1978, it was $16.5 billion. În 1979, it was minus $7.5 billion. Mr. GIBBONS. That includes services? Mr. HORMATS. Yes, and also remittances of earnings from American corporations, banks, and insurance companies. Mr. FRENZEL. It also includes investments from Japan? |