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Japan—Trade in Semi-Conductors

Published online by Cambridge University Press:  27 February 2017

Amelia Porges
Amelia Porges*
Affiliation:
Office of the U.S. Trade Representative
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Extract

In this dispute settlement action in the General Agreement on Tariffs and Trade (GATT), the complainant European Communities (EC) challenged the 1986 Japan-U.S. Arrangement on Semiconductor Trade (Arrangement). The panel of three experts found that (1) export regulations that prevent or quantitatively restrict exports below a minimum price level are inconsistent with GATT Article XI; (2) a complex of Japanese government measures including non-legally binding administrative guidance to prevent semiconductor exports below cost were such export restrictions and, hence, inconsistent with GATT Article XI; (3) the GATT’s provisions on dumping in Article VI neither justify nor forbid such restraints by exporting countries; and (4) the evidence did not show that Japanese actions to improve market access for foreign semiconductors had discriminated in favor of U.S. products.

Keywords

International tradeexport restraint agreementsJapan-United Statesthird-country dumping
Type
International Decisions
Information
American Journal of International Law , Volume 83 , Issue 2 , April 1989 , pp. 388 - 394
Copyright
Copyright © American Society of International Law 1989

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References

1 Arrangement Concerning Trade in Semiconductor Products, Sept. 2, 1986, Japan-U.S., reprinted in 25 ILM 1409 (1986).

2 See T. Howell et al., The Microelectronics Race (1988).

3 An EPROM is an erasable programmable read-only-memory semiconductor device. DRAM stands for dynamic random access memory, a commodity semiconductor device that is a basic building block of many electronic products, including microcomputers. The 64K DRAM, which holds 64,000 bytes, has been succeeded by the 256K DRAM since 1986, and the 1-megabyte chip since 1987.

4 See Presidential Determination under Section 301 of the Trade Act of 1974, 51 Fed. Reg. 27,811 (1986), reprinted in 25 ILM 1408 (1986) (together with presidential statement of July 31, 1986). The suspension agreements for EPROMs (51 Fed. Reg. 28,253 (1986)) and 256K+ DRAMs (51 Fed. Reg. 28,397 (1986)) were entered into between the Department of Commerce and individual Japanese respondent companies. They provide for suspension of antidumping duties in return for agreement to raise prices to a level at or above “fair market values” determined by the Department; they also require the ongoing reporting of costs and prices to the Department. The deadline for conclusion of the antidumping investigation on 64K DRAMs expired before the semiconductor settlement. See antidumping order, 51 Fed. Reg. 21,781 (1986).

5 The Arrangement's text provides that both Governments recognize the need to prevent dumping, and requires Japan to “monitor, as appropriate, costs and export prices on the products exported by Japanese semiconductor firms from Japan.”

6 All the monitored categories of semiconductors were already subject to Japanese export controls under COCOM, implemented under the Foreign Exchange and Foreign Trade Control Law (Law No. 228 of 1949, as revised) and the Export Trade Control Order (Cabinet Order No. 378 of 1949, as revised).

7 Report of the Panel at 9, para. 27 [hereinafter Report].

8 Presidential Determination under Section 301 of the Trade Act of 1974, 52 Fed. Reg. 13,419 (1987); Proclamation No. 5631, Apr. 17, 1987, id. at 13,412.

9 The merchant market refers to transactions between unrelated parties. Almost all Japanese semiconductor makers (and some large U.S. makers) are vertically integrated electronics companies whose internal transfer prices may differ from merchant market prices.

10 Commission of the European Communities, Statement by Commissioners De Clercq and Narjes on U.S./Japan Agreement on Semi Conductors, Information Release No. IP(86)385 (Aug. 1, 1986); E.C. Challenges U.S.-Japanese Semiconductor Accord (statement by De Clercq and Narjes), EC Delegation Release No. 31/86 (Oct. 8, 1986), reprinted in 25 ILM 1621 (1986).

11 No. L/6129 (panel request defining the complaint) (Feb. 19, 1987).

12 General Agreement on Tariffs and Trade, Oct. 30, 1947, 61 Stat. (5), (6), TIAS No. 1700, 55 UNTS 188 (GATT). This treatment followed the precedent set in the 1985 U.S. challenge in the GATT to EC tariff preferences for citrus (multiple defendants), and it followed two 1987 cases with multiple plaintiffs (the EC and Canada against the United States on customs user fees; the EC, Canada and Mexico against U.S. Superfund Oil excise tax differential). The semiconductor panel also received submissions from the interested third parties Australia, Brazil, Canada, Hong Kong and Singapore. The panel did not make findings on issues raised solely by the United States or interested third parties, Report at 36, para. 98; but it fully summarized their views, id. at 25–36, paras. 72–95.

13 Article XI forbids GATT contracting parties to institute or maintain prohibitions or restrictions other than duties, taxes or other charges, “whether made effective through quotas, import or export licenses or other measures,” on imports, exports or sales for export.

14 Report at 37, para. 105. The panel here restated, reaffirmed and followed the majority view in the 1978 panel decision that found the EC's minimum price scheme on tomato concentrates inconsistent with Article XI. GATT, Basic Instruments and Selected Documents, 25th Supp. 99 (1977–78).

15 Report at 38, para. 107 (summarizing one of the findings in Japan—Restrictions on Imports of Certain Agricultural Products (No. L/6253), panel report (Nov. 18, 1987), discussed in 27 ILM 1596 note (1988)). The Japanese Government had argued in the agricultural case that administrative guidance qualified as a “governmental measure” to manage supply under Article XI(2)(c).

16 Report at 39, para. 109.

17 Id. at 41, para. 117.

18 Id. at 42, para. 118.

19 Id. at 42–43, paras. 120–21.

20 Id. at 43–44, paras. 124–27. The panel declined to make a finding on whether the third-country monitoring measures violated the nondiscrimination provisions of Article I or Article XVII(1)(c), or the publication requirements of Article X, since the real issue was violation of Article XI. It found that the market access measures were outside the scope of Article X altogether. The EC had also argued “non-violation” nullification and impairment under Article XXIII(1)(b) and (c); the panel rejected this argument, as the monitoring mechanism had been found to violate Article XI(1) and the EC's evidence on the market access issue did not indicate actual discrimination.

21 GATT Adopts Dispute Panel Report Condemning U.S.-Japan Agreement on Semiconductor Trade, Im'l Trade Rep. (BNA) 691 (May 11, 1988).

22 A ban on quantitative restrictions was central to the earliest proposals for the postwar trading regime. See generally J. Jackson, World Trade and the Law of GATT 309–11 (1969). These proposals, in turn, descended from efforts in the 1920s to eliminate the qualitative trade controls instituted during the First World War. See Kelly, Antecedents of Present Commercial Policy 1922–1934, in Studies in U.S. Commercial Policy 54 (W. B. Kelly ed. 1963).

23 See, e.g., Canada—Measures Affecting Exports of Unprocessed Herring and Salmon (No. L/6268), panel decision (Nov. 20, 1987), discussed in 27 ILM 1539 note (1988).

24 Haley, Administrative Guidance versus Formal Regulation: Resolving the Paradox of Industrial Policy, in Law and Trade Issues of the Japanese Economy 107 (G. Saxonhouse & K. Yamamura eds. 1986).

25 Administrative guidance has been much discussed in the English-language literature on Japanese law, beginning with Narita, Administrative Guidance, 2 Law in Japan 45 (1968); see also Yamanouchi, Administrative Guidance and the Rule of Law, 7 Law in Japan 22 (1974); and 15 and 19 id. passim; and other sources listed in the bibliography following Haley, supra note 24, at 125. On administrative guidance in action, see F. Upham, Law and Social Change in Postwar Japan 176–84 (1987); Smith, The Japanese Foreign Exchange and Foreign Trade Control Law and Administrative Guidance: The Labyrinth and the Castle, 16 L. & Pol'y Int'l Bus. 417 (1984); and C. Johnson, MITI and the Japanese Miracle 265–74, 296–301 (1982).

26 F. Upham, supra note 25, at 170–76.

27 U.S. Dep't of Justice, Antitrust Enforcement Guidelines for International Operations, Antitrust & Trade Reg. Rep. (BN A) No. 1391, at S-46 (Nov. 17, 1988). “For reasons of comity, however, the Department likely would not challenge a voluntary export restraint that clearly arose from the decision and official action of [the exporting country] in response to specific trade concerns officially expressed by the U.S. Government.” Id.

28 For notices of initiation, see 30 OJ. Eur. Comm. (No. C. 101) 10 (1987) (EPROMs); and id. (No. C 181) 3 (DRAMs). Preliminary dumping determinations, or some other resolution to these cases, are expected in spring 1989. The EC Commission recently moved to tighten its rules of origin for semiconductors; rule changes, once implemented, will affect the scope of any antidumping determinations. See Change in Semiconductor Origin Definition Could Signal Revisions for Other Products, Int'l Trade Rep. (BNA) 72 (Jan. 18, 1989).

29 52 Fed Reg. 22,693 (1987).

30 Id. at 43,146.