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| 6th Report of Market Access Ombudsman Council (March 16, 2000) |
1. Complainant: New Zealand Embassy
2. Ministry concerned: Ministry of Agriculture, Forestry and Fisheries
3. Complaint:
With the exception of the Designated Dairy Products for General Use (DDPGU) quota, all other dairy products for domestic use are underfilled. In the case of the DDPGU quota (covering e.g. Skim Powder and other solids), the Government of Japan or its agent (the Agriculture and Livestock Industries Corporation (ALIC) charges a 'mark up' before resale of the imported products which it purchases. The administration by ALIC of the quota impairs the ability of New Zealand to derive full benefit from that quota, in particular because the exporter is not able to establish direct relations with Japanese customers.
We therefor request that the Japanese government:
(1) make the administration of the other dairy products tariff quotas more transparent to help in allowing the market access opportunity to be completely filled;
(2) unilaterally liberalise its existing trade regime to allow New Zealand exporters to establish direct relations with Japanese customers including under the DDPGU quota.
4. Corresponding Policy of the Ministries concerned:
(1) Boundary measures carried out by Japan, including the tariff quota system for dairy products, are based on the UR Agreement.
(2) Regarding implementation to establish transparency of the tariff quota system and improve quota usage rate:
1) The necessary information on setting tariff quotas on dairy products for specific use, for example standards for setting quotas, applicants' qualifications, and so on, is provided in tariff quota announcements, publicity by the Ministry of International Trade and Industry, the Internet and so on. In addition, the ministry has spent considerable time explaining to New Zealand how the tariff quota system is applied, at semiannually held bilateral meetings to exchange information on dairy product supply and demand, and believes that transparency is not an issue.
2) Regarding measures for improving the quota usage rate, the ministry follows a policy of reducing quota volume the following fiscal year, in the case of importers with a low usage rate, and of increasing the quota for importers with a high usage rate or for newcomers. Since FY1997, a system has been introduced which allows applicants to make a second application for any quota remaining within the fiscal year.
3) The reason why a number of tariff quotas remain unused is that quotas higher than demand were set for certain products as a result of negotiations to begin with. Where dairy products for specific uses are concerned, domestic demand volume is down in the case of dairy products for use in school lunches and for infant formula because the number of schoolchildren and infants has been declining, and in the case of dairy products used as animal feed, because of a drop in the number of heads of livestock.
(3) Regarding the unilateral demand for import liberalization also including DDPGU:
1) Regarding dairy products imported through the state trade enterprise, the Agriculture and Livestock Industries Corporation (ALIC) that is an approved under the WTO Agreement. ALIC is carrying out the commitment of the WTO Agreement in a sincere manner and is importing dairy products for which there is market demand.
2) The "markup" which ALIC charges upon those dairy products is also allowed under the WTO Agreement.
(Further developments)
Regarding the reply, the complainant argued that (1) the unused portion of the tariff quota is expanding at a rate more than the rate of decline in the number of schoolchildren; (2) reallocation of unused quotas is insufficient; (3) the reason for the poor quota usage rate is the poor usage rate of basket quotas (for reference: quotas for the other dairy products); (4) region-limited quotas are impeding imports; (5) end-user's quotas are impeding imports; and (6) the fact that the names of importers allocated quotas are not made public impedes imports.
The ministry intends to continue discussion of these issues in bilateral talks scheduled for April 2000, but replied to the complainant's assertions as follows:
(1) The ministry will explain the reason for the low quota usage rate for skimmed milk powder for school lunch after more careful analysis.
(2) When there is quota remaining after being allocated at the beginning of the fiscal year, a system allowing application for additional quotas has been in force since FY1997 and is functioning adequately. Administratively terms, it is not possible to allocate the unused portion of quotas that have already been allocated.
(3) Regarding basket quotas (quotas for other dairy products), in FY1998 the usage rate for ice cream users was poor, and based on performance figures, the quota will be alloacted the following fiscal year so that the unused quota is reduced.
(4) Demand for products which are covered by the region-specific quota exists only in Okinawa at this time.
(5) All users are covered by the user quotas for the ingredients concerned.
(6) The names of parties allocated quotas cannot be made public, under GATT Article 13 concerning protection of the privacy of parties allotted quotas.
5. Remarks
Both countries agreed to continue discussing this issue at bilateral meetings to exchange information on dairy product supply and demand.
After analyzing the reasons for the low quota usage rate for skimmed defatted milk powder in school lunch, the ministry determined that this was due, in addition to a drop in the number of schoolchildren, to increased use of rice for school lunch and a corresponding decrease in demand for bread, resulting in a declining quota usage rate for skimmed milk powder which is used as an ingredient in bread, and conveyed this reply to the complainant.