Regulations have a vital role in guaranteeing public health and environmental standards, as well as ensuring that goods and services meet appropriate standards.  However, regulations which are excessively complicated, untransparent or badly designed, may fail to meet these aims.  They may also have the unintended effect of constraining economic growth and preventing consumers from having access to state of the art products.  Regulatory reform can therefore make an important contribution to consumer welfare and economic growth.

The EU-Japan Regulatory Reform Dialogue (RRD) was launched in 1994 and formalized in 1995.  Since then, it has been endorsed by summit leaders on both sides as an important tool underpinning the mutually beneficial economic relationship.  Through the RRD, the EU and Japan have been actively participating in each other’s regulatory reform efforts.  They cooperate on a continuous basis, exchanging lists of proposals for regulatory reform annually and reviewing these proposals in a series of high-level and expert meetings.  On the EU side, the European Commission cooperates closely with and receives valuable input from industry and Member States’ authorities.

I.     Origins and mandate of the Regulatory Reform Dialogue

Political basis

The Regulatory Reform Dialogue can be considered as related to the overall objectives of the 1991 Joint Declaration [1]. It took until 1994/95, however, until the RRD was launched in response to the emerging Japanese deregulation policy.

Link with Japanese deregulation policy

While the Joint Declaration did not commit the parties to any specific regulatory reform obligations, it nevertheless set the stage for the launch of substantial regulatory cooperation once Japan put in place related domestic policy orientations.

In 1993, the Hosokawa administration adopted deregulation of the Japanese economy as a major goal of its economic policy in the form of a package including a list of 94 regulations to be eased in four main areas: increasing business opportunities, enhancing competition, promoting imports and reducing paperwork.

In March 1994, a working group in the Administrative Reform Promotion Headquarters was charged with considering deregulation in the four areas of housing and land, information and communications, distribution, and the further opening of Japan’s markets.

The EU welcomed this initiative. In May 1994, on the occasion of a meeting with President Delors, PM Hata accepted the initiative of holding expert meetings on deregulation matters. The first meetings took place in Tokyo in May and June 1994 and covered the following areas: distribution, competition policy, sanitary and Phytosanitary questions, financial services, public procurement, customs, transport, industrial sector and telecommunications. The EU did however express its wish to go beyond these ad hoc meetings with a view to establishing a longer term dialogue.

Japanese domestic policy was further refined by the adoption, in July 1994 under the new Murayama administration, of a policy in which an additional 279 items were listed for deregulation. The Deregulation Action Programme was to be implemented over five years, including measures supposed to positively respond to a significant number of the EU requests and to revise it by the end of each fiscal year on the basis of opinions received from interested parties both domestic and foreign. Following the continuing rise of the Yen, and as part of emergency measures to reverse this trend, Japan took the decision, in 1995, to cut the five year implementation period back to three years.

The 1995 EU-Japan Summit

During the fourth EU-Japan Summit held in Paris in June 1995, the European side welcomed the announcement of the Deregulation Action Program by the Government of Japan. Both sides decided to pursue a close dialogue and cooperation on the future development of deregulation and to monitor closely the implementation of the programme and its annual reviews.

Reciprocity of the Regulatory Reform Dialogue

In the 1995 Summit Statement, the European side confirmed its intention to further its own deregulation efforts. Both sides agreed to pursue a close dialogue and cooperation on the future development of the deregulation efforts on both sides. From the outset, there were accordingly two RRD meetings per year alternating in Tokyo and Brussels.

The current mandate

The Japanese Deregulation Action Program provided a reference to what later became the EU-Japan Dialogue for Regulatory Reform (RRD). The Dialogue institutionalized regulatory consultations and exchange of experience between technical experts on a continuous basis.

The 2001 Action Plan for EU-Japan Cooperation gave to the RRD a specific mandate which remains valid so far. Under the provision entitled “Strengthening the economic and trade partnership utilising the dynamism of globalization for the benefit of all”, the document mentions as a priority objective

“toreinforce existing efforts, in particular through our regulatory reform dialogue, to remove obstacles and barriers to trade and investment with the aim to develop an appropriate regulatory framework”.

Furthermore, in order to encourage the bilateral trade and investment partnership, initiatives to be launched immediately shall include:

“Reinforcing the regulatory reform dialogue in order to foster self-sustained growth by removing obstacles and barriers to trade and investment. This will be achieved notably by reinforcing dialogue at technical level between the relevant authorities, by making better use of consultations and expanding those as necessary. In the areas of specific importance for each side, taking into account their relative impact on bilateral trade and investment, both sides will regularly review changes in the regulatory framework and their implementation. Moreover, further cooperation will be pursued between the competent authorities in a variety of areas (including standards and conformity assessment) and sectors (telecommunications, environment, energy supply, commercial transport services and construction) in order to follow a consistent regulatory approach in the future”.

II.     Developments and current structure of the Regulatory Reform Dialogue

A broadening agenda

2009-2010     EU Proposals [240 KB] Addendum [135 KB]

2008-2009    EU Proposals [569 KB]     Japan's Proposals [526 KB]

2007-2008    EU Proposals [366 KB]     Japan's Proposals [441 KB]

2006-2007    EU Proposals [249 KB]      Japan's Proposals [443 KB]

Over the last decade or more, the agenda of the Regulatory Reform Dialogue gradually evolved as regulatory objectives in Japan and the EU were developing over time. However, the RRD continues mostly addressing concerns that result from regulatory measures taken, rather than becoming more future-oriented.

In particular, the scope of the RRD broadened out towards a growing number of investment-related questions in response to increasing business interest in mutual investment conditions in general. In this context and to a certain extent, topics raised by either side became more similar to each other (auditing standards, movement of people, regulatory questions regarding the stay and working conditions of business executives on each other side, etc.). Issues of Member States competency were added to the EU and the Japanese proposals accordingly (work and residence permits, drivers’ licenses, social security matters, travel and entry requirements for expatriates, etc.).

Achievements

For assessing the results obtained by the RRD it is necessary to understand that the RRD is not, in itself, a negotiating forum, but rather a review mechanism. The main purpose is to carry oversight of relevant regulatory issues which are being addressed in whatever EU-Japan cooperation mechanisms. This enables to state priorities, give a push to issues which could move forward faster, and better understand the internal factors of both sides which determine the process and possible speed of progress. The RRD conclusions should then serve to provide feed-back to those other channels where issues are dealt with in more details during the course of the year, such as the other dialogues listed above.

It should also be noted that solutions for regulatory matters are in most cases not achievable through bilateral agreements, but often involve domestic regulatory and legislative procedures involving parliamentary action. In this process, the views expressed in the RRD context should be taken into account and, where procedures call for transparency, be reflected in appropriate ways.

Against this background, the RRD can nonetheless claim merit with regard to a number of recent developments in Japan, including:

• European law firms can now establish integrated law practices and there is now the possibility for foreign companies to recruit Japanese lawyers
• The foodstuff packaging issue has been solved
• Recent developments will make the use of the “no-action” letters more convenient and efficient
• The reform of the triangular merger scheme has taken into account much of the EU’s comments as part of the May 2007 modifications and tax deferral will be possible from next fiscal year
• Firewalls prohibiting commercial banks from engaging in securities business will be relaxed in spring 2008
• Suspected counterfeit products can now be suspended at the border
• The Anti-Monopoly Act has been revised
• The on-going process for privatization of the Japanese Post will be kept on the agenda

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