By Susan Krause
Washington File Staff Writer

Washington - Japan is implementing regulatory reforms that have contributed to renewed economic growth at home and strengthened business ties with the United States, but additional steps are needed, says U.S. Trade Representative (USTR) Susan Schwab.

Schwab issued a statement June 29 to accompany the release of the fifth annual Report to the Leaders on the U.S.-Japan Regulatory Reform and Competition Policy Initiative, launched in June 2001 by President Bush and Japanese Prime Minister Junichiro Koizumi as part of the U.S.-Japan Economic Partnership for Growth.

"Under the stewardship of Prime Minister Koizumi, Japan has made important progress in reforming its regulatory environment," she said.  "These reforms have achieved real results, and I urge Japan to continue on this path of reform in light of the benefits it has brought to Japan's economy."

But pressing issues remain, according to Schwab.

"In particular, the fact that we have not yet seen an actual resumption of exports of U.S. beef to Japan … remains a real concern," she said.

Japan agreed to end a two-year ban on U.S. beef in December 2005 following extended negotiations, but restored its embargo a month later after receiving a shipment of veal that did not meet agreed standards.  Before the trade dispute arose in 2003, Japan had been the largest export market for U.S. beef.

The two countries reached agreement June 21 on an inspection program that is expected to facilitate resumption of trade.  (See related article.)

REGULATORY REFORM INITIATIVE COVERS BROAD RANGE OF ISSUES

The U.S.-Japan Regulatory Reform and Competition Policy Initiative (Regulatory Reform Initiative, or RRI) was established as a bilateral forum to promote economic growth through regulatory reform.

Each year, the two countries exchange recommendations on ways to improve market opportunities and ease burdensome regulatory restrictions on business.  Those recommendations are discussed in a series of working and high-level meetings during the course of the year, and a joint annual report for the countries' leaders is prepared to review the results.

The RRI covers a broad range of sectoral and cross-sectoral issues, including intellectual property protection, privatization of public entities, information technology, competition policy, investment controls, telecommunications, consular issues and pharmaceuticals and medical devices.

The 2006 report to the leaders covers Japan's efforts to improve market access, increase transparency and expedite regulatory decisions, lower trade barriers and strengthen the competitive environment, according to USTR.

The report gives special emphasis to joint efforts to control counterfeiting and piracy of intellectual property.

In addition, the 76-page report reviews an initiative currently under way in Japan to reform and privatize Japan Post, which is involved in banking, insurance, express delivery, and other services.

"It remains vital that the process by which new Japan Post products are reviewed and approved is fully transparent and that criteria providing for a level playing field are met before approvals are made," Schwab said.

FOREIGN DIRECT INVESTMENT IN JAPAN INCREASING

The U.S. Department of State, in cooperation with Japan's Ministry of Economy, Trade, and Industry, released a separate report June 29 that was prepared under another initiative of the U.S.-Japan Economic Partnership for Growth.

The 2006 U.S.-Japan Investment Initiative Report commends Koizumi for encouraging foreign direct investment (FDI) in Japan.

"Foreign direct investment is essential for the vitalization of the Japanese economy," the report's executive summary says.  "As of the end of 2005, foreign direct investment in Japan totaled 11.9 trillion yen [$100.9 billion].  This represents an increase of 80 percent when compared to the value at the end of 2001."

In a statement released June 29, the State Department welcomed the Japanese government's commitment "to take concrete steps to reduce barriers to foreign direct investment in Japan."

Under the Investment Initiative, the department said, Japan has revised its Corporate Code.  Revisions that take effect in May 2007 will increase the flexibility of mergers and acquisitions for foreign companies in Japan.

The report also calls for easing restrictions on investment in educational and medical services, according to the department's statement.

The Investment Initiative was created to encourage an exchange of views on ways to improve the investment environment and remove obstacles to investment in the two countries.

"Both governments agree that public attitudes toward FDI are important and they have conducted outreach in Japan and the United States to provide information on the investment climate," the State Department said.

For additional information on U.S. policy, see East Asia and the Pacific and Trade and Economics.

The statement from USTR Susan Schwab, the text of the fifth annual Report to the Leaders on the U.S.-Japan Regulatory Reform and Competition Policy Initiative (PDF, 76 pages), and a fact sheet giving an overview of the report (PDF, 11 pages) can be found at the Web site of the Office of the U.S. Trade Representative.

The text of the 2006 U.S.-Japan Investment Initiative Report and the statement from the State Department spokesman's office can be found at the State Department Web site.