Last year, the U.S. and Japan signed a trade agreement that lowers tariffs on a small number of goods. Ever since it was signed, people have been wondering how this agreement is consistent with GATT Article XXIV, which in paragraph 8(b) says that "substantially all the trade" between FTA parties must be liberalized in order to qualify as an FTA under this provision. There was speculation that the U.S.-Japan agreement would be characterized as an "interim agreement" under paragraph 5, but I had not heard that stated clearly by the parties.
Now I see that a few WTO Members asked Japan about this during its recent Trade Policy Review. For example, Israel asked:
Israel would like to understand if Japan considers the Japan-United States Trade Agreement as an FTA? If yes, could Japan explain how does it conform with Article 24 of GATT? If not, will the concessions included in the Agreement be given on an MFN basis?
And the EU asked:
On 7 October 2019, Japan signed a trade agreement with the United States. According to statistical data at our disposal, this agreement falls significantly short of providing for a liberalisation of substantially all trade between Japan and the US. How does Japan assess the WTO compliance of the Japan-US agreement in the light of Article XXIV of the GATT?
China asked:
Please elaborate on the proportion of products covered by the Japan-United States Trade Agreement in the trade (in terms of volume and tariff lines) of each side. Does this Agreement cover "substantially all the trade" between both sides as prescribed by the Article XXIV of the General Agreement on Tariffs and Trade (GATT)? Please explain the conformity of the Japan-United States Trade Agreement with the Article XXIV of the GATT.
...
If the Japan-United States Trade Agreement is an "interim agreement", please elaborate on the plan and schedule for the final free trade agreement between Japan and the United States.
Canada asked:
In the absence of outcomes from the second round of negotiations, is it Japan's view that the Japan-United States Trade Agreement is in compliance with WTO GATT Article XIV obligations?
New Zealand asked:
What is Japan's plan and timetable for completing a comprehensive trade agreement with the United States, as required by GATT Article XXIV?
These were all very good questions! As far as I can tell from some searching of the document for key terms (rather than reading every word of the 286 page document), Japan's basic answer to all of them was as follows:
Paragraph 1 of Article 5 of the Japan-US Trade Agreement provides: "Further to the existing commitments by each Party under the WTO Agreement, unless otherwise provided for in this Agreement, each Party shall improve market access in accordance with Annex I or Annex II." By the implementation of this provision, the tariff elimination covering substantially all the trade between the two countries will be achieved. On that basis, Japan is of the view that the Japan-US Trade Agreement is consistent with Article XXIV of GATT.
It's true that paragraph 1 of Article 5 of the agreement does say that. However, that still leaves a lot of uncertainty about this agreement. Is the position of the U.S. and Japan that the agreement is an "interim agreement" under Article XXIV, paragraph 5? It seems like Japan is saying this implicitly, but for some reason not saying it explicitly.
Like so many other things these days, I feel like this is an issue were people are waiting on the U.S. presidential election to get a sense of where all this might be going.
