RESTRICTED
WORLD TRADE WT/DS15/1
G/L/23
24August 1995
ORGANIZATION(95-2481)
Original: English
JAPAN -MEASURES AFFECTING THE PURCHASE OF
TELECOMMUNICATIONS EQUIPMENT
Request forConsultations bytheEuropean Communities
Thefollowing communication, dated 18August 1995, fromthePermanent Delegation ofthe
European Commission tothePermanent Mission ofJapan iscirculated inaccordance withArticle 4.4
oftheDSU.
_______________
Onbehalf oftheEuropean Community, Ihereby request consultations withJapan under Article
XXII:1 GATT 1994 andArticle 4ofthe"Understanding onRules andProcedures Governing the
Settlement ofDisputes" (hereinafter alsoreferred toasthe"Understanding") withrespect tothe
agreement, reached between theGovernments oftheUnited States ofAmerica andJapan on12March
1994, regarding telecommunications (hereinafter "theIDO-Monitoring Agreement"). Theagreement,
which takes theform ofanexchange ofletters, concerns inparticular themonitoring andoverseeing
bytheGovernment ofJapan ofthecompletion ofaletter ofintent (LOI) fromtheNippon IdouTsushin
Corporation (hereinafter "IDO") toNippon Motorola Ltd.andMotorola Inc.(hereinafter "Motorola"),
aswellasdeployment schedules attached thereto. Italsoincludes acommitment bytheGovernment
ofJapan toapprove arequest byIDOtoreallocate certain radio frequencies, andtogrant allnecessary
permits andlicenses toIDOinorder toenable ittofulfil itsobligations under theletter ofintent.
In1988theUSGovernmentcomplainedthattheNorthAmericanTACSsystemwasnotavailable
throughout theentire territory ofJapan and,asaresult, Motorola equipment could onlybesoldto
oneoperator (DDI). After having published asetofretaliatory measures, on28July1989anagreement
wasreached between theUSGovernment andtheGovernment ofJapan according towhich the
Government ofJapan designated IDOtoinstall asecond analogue network based ontheNorth American
standard usedbyMotorola. The1989 agreement alsoestablished theoperator-supplier relationship
between thetwocompanies.
Inthefollowing years theUSincreased pressure onIDOtoaccelerate investment intothis
networkleadingfinallytothe1994LOIwhichcommitsIDOtospeedupitsinvestmentintotheMotorola-
based analogue network, tobuyaspecified amount ofnetwork equipment fromMotorola anddevote
atleasttwo-thirds ofitstotaladvertising spending tothepromotion ofthisinfrastructure. Inaletter
toUnited States Trade Representative Kantor, theJapanese Ambassador Kuriyama declares thatthe
Government ofJapan willtake"allavailable measures" toensure thatIDO complies with its
commitments. Inhisresponse, United States Trade Representative Kantor declares thattheUSwill
nottakesanctions under the1988 Trade Act. Theconsultations anddiscussions between theECand
Japan, todate, haveconfirmed thisunderstanding ofthefacts.
./.WT/DS15/1
G/L/23
Page2
TheagreementexcludesEuropeansuppliersofanimportantpartoftheJapanesemobileanalogue
equipment market. TheCommunity isconcerned thatitmaybecome anexample forfuture US-Japan
agreements whether inthetelecommunications sector orinanyother sector where theJapanese
Government mayberequired toinfluence companies 'purchasing behaviour. From theCommunity 's
point ofview, thiswould cause aneconomic damage which would further increase thedamage caused
bytheexisting mobile telephone agreement. Itcould eventually discourage European companies to
make business inJapan.
TheEuropeanCommunityconsidersthattheIDO-MonitoringAgreementmayconstituteabreach
ofJapan'sobligations under theWTO, particularly those under Articles IandIIIandArticle XVII
GATT 1994, orthatitwould constitute ameasure applied byJapan which, evenifitwould notconflict
withtheprovisions oftheWTO, might nullify orimpair benefits accruing totheEuropean Community
thereunder.
BysigningtwointernationalagreementswiththeUSandbycommittingitselftotakeallavailable
measures toensure thatIDOfulfils itscommitments under theLOI,theJapanese Government apparently
hasmade arequirement tothemobile operator tobuyequipment from Motorola. Given thatIDO
operates inaregulated market, theGovernment ofJapan hasawide range of"available measures"
which could beusedtoensure compliance. These measures caninclude delaying approval ofproposed
tariff changes, withholding support forfinancial subsidies andwithdrawing thelicence tooperate a
mobile telecom network. Bymaking thethreat ofusing thesemeasures theJapanese Government would
haveprevented IDOfrom changing theLOIifithadlaterwished todosoasaresult ofunforeseen
market developments. Inaddition, theJapanese Government offered certain advantages toIDOin
return forthecompany 'swillingness toinstall theTACS-based system, astheallocation ofadditional
frequency andfinancial support (ashasbeenpointed outintheJapanese Government 'sposition paper
handed overtotheCommission on23February 1994).
IntheCommunity'sviewthesemeasureswouldaccordmorefavourabletreatmenttoUSproducts
thantoCommunity goods andtherefore would becontrary toArticle I(1)GATT 1994inconjunction
withArticle III(4)GATT 1994. Inaddition, theywould beincontradiction toArticle XVII (1c)GATT
1994 which requires contracting parties nottoprevent anyenterprise under itsjurisdiction tomake
purchases solely inaccordance withcommercial considerations.
Therefore,theEuropeanCommunityrequestsameetingwiththeappropriateJapaneseauthorities
todiscuss thematter withaviewtofinding amutually satisfactory solution inaccordance withArticle
4oftheUnderstanding.