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Japan-EU EPA talks: Japan proposes compromise in the area of railways

  • 2015-12-10 15:00:00
  • , Tokyo Shimbun
  • Translation

(Tokyo Shimbun: December 10, 2015 – p. 3)

 

 On Dec. 9, several sources close to the Japan-EU EPA negotiations informed Tokyo Shimbun that Japan has presented a concession plan to enhance European companies’ access to the Japanese railway market. Under the plan, Japan would agree to make it mandatory for Tokyo Metro, municipal railways operated by cities designated by government ordinance, Hokkaido Railway Company [JR Hokkaido], Shikoku Railway Company [JR Shikoku], and Kyushu Railway Company [JR Kyushu] to open bidding internationally without exception for the purchase of goods and construction services in contracts of a financial value equal to or above certain thresholds.

 

 Under the Japan-related annexes to the World Trade Organization (WTO) agreement, which stipulates rules for procurement by government organizations and the like, these railway companies are exempted from the requirement of competitive bidding for materials procurement and projects related to the operational safety of transportation. The EU is critical of this, calling it a barrier to European entry to Japan’s railway sector. Japan has proposed to remove the exemptions to advance the EPA negotiations, which have floundered.

 

 The [WTO] agreement prohibits discrimination against foreign contractors in market access for materials purchases and construction services, and exceptions are given in the notes in the annexes to the agreement. Japan told the EU that it planned to remove the notes in exchange for Europe’s opening its rail markets to Japanese rail companies. According to sources, conditions were set to alleviate the impact of the removal of the exemptions, including creating a grace period before the elimination.

 

 The notes used to also be applied to JR East, JR Central, and JR West, but they were delisted from the agreement in October last year. The three companies are fully privatized and have pledged to improve the transparency of their bidding information. At present they endeavor not to discriminate between domestic and international bidders, but it is not mandatory for them to have international bidding.

 

 These three companies are said to make up more than half of Japan’s railway procurement market, so it is thought that the proposed removal of the notes will have a limited impact. Those familiar with the negotiations warn, however, that “there is a chance that it will turn into a price war” if market access opportunities for European companies are expanded.

 

 Japan and the EU were hoping to strike a broad deal on a bilateral EPA by the end of this year. But they have abandoned that goal as they were unable to resolve differences on market opening for agricultural products and automobiles. To be able to reach “an agreement early in the new year,” as Prime Minister Shinzo Abe has said, Japan [has offered a] compromise in the railway sector, a key area for the EU.

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