WT/TPR/S/400 • Thailand
-8SUMMARY
1.
Since its previous Trade Policy Review in 2016, Thailand has maintained macro-financial
stability, supported by prudent fiscal and monetary policies. These policies have resulted in subdued
inflation, relatively low levels of public debt, a sizable current account surplus, substantial foreign
exchange reserves, and a sound financial system. Between 2015 and 2019, the economy grew at
an annual average rate of 3.4% in real terms, driven mainly by private consumption and, in some
years, by net exports, whereas the contribution of gross investment remained modest. On the supply
side, the services sector (including construction) remained the largest contributor to GDP, with its
share rising to 61% in 2019 (from 58% in 2015), while the shares of manufacturing and agriculture
declined. Nominal GDP per capita reached almost USD 8,000 in 2019, placing Thailand in the uppermiddle-income group of countries.
2.
After a period of solid growth, in 2019 the Thai economy entered a downturn, caused mainly
by the global economic slowdown and international trade tensions, which resulted in a contraction
in exports, private investment and consumption. The Government adopted accommodative fiscal
and monetary policies to support economic growth from the second half of 2019.
3.
During 2020, the difficulties facing the Thai economy have been exacerbated by the adverse
impact of the COVID-19 pandemic. The contraction of global trade has severely affected Thai
merchandise exports and disrupted global supply chains, including in the automobile sector, which
is one of Thailand's main industries. The tourism sector, a major contributor to GDP, has also
suffered a deep contraction due to international travel bans and Thailand's own inbound restrictions,
resulting in a virtual halt of foreign tourist arrivals, and a severe impact on businesses and jobs in
tourism-related activities. Private investment and consumption have further contracted, due to weak
demand, economic uncertainty, and weakening employment and income conditions. To mitigate the
economic effects of COVID-19, the central bank responded with monetary policy actions, such as
reducing the policy interest rate and addressing liquidity strains. In addition, the Government
launched a three-phase COVID-19 Relief Package, worth about 14% of GDP, primarily targeted at
the most vulnerable households and businesses, and consisting mainly of cash transfers, soft loans
and tax relief measures. In June 2020, the authorities projected that the economy would contract
by 8.1% in 2020, with the contraction affecting almost all GDP components. It has also been
estimated that some 8.4 million jobs are at risk in the manufacturing and services industries.
4.
Throughout the review period, Thailand posted a surplus in the current account, reflecting a
persistent savings-investment gap, and leading to a substantial accumulation of foreign exchange
reserves (USD 224.3 billion at end-2019). As a flip-side effect of this, the Thai baht (THB)
appreciated during the review period, putting pressure on competitiveness. However, amid
heightened volatility in global financial markets due to the COVID-19 crisis, the baht has depreciated
slightly in 2020. The adoption of accommodative fiscal policies to address the economic downturn
has been possible thanks to the Government's healthy fiscal position. In 2018, the Fiscal
Responsibility Act (FRA) was enacted to further strengthen fiscal discipline, medium-term planning,
and fiscal transparency. The FRA introduced new targets relating to debt level and budget allocation,
including for capital investment. Some of these targets have been revised to address the COVID-19
contingency.
5.
Thailand's two-way trade in goods and services represented 110% of GDP in 2019, reflecting
the country's outward-orientation and integration into global value chains. Thailand's international
trade flows show the growing importance of China and ASEAN as its main regional markets and
suppliers, although the United States, the European Union and Japan are still among its top trading
partners. Thai merchandise exports continue to be dominated by manufactured products (73% of
total exports), with computer parts and automotive products being the leading export items. Imports
are also concentrated in manufactured goods, followed by fuels and other mining products. Foreign
direct investment (FDI) trends also show Thailand's deep integration with ASEAN countries and other
economies in the region, while the significant increase in investment outflows indicates that Thailand
has become a net capital exporter.
6.
In addition to the immediate threats to its economic outlook, looking forward, Thailand faces
some important challenges. Domestic structural constraints, notably low levels of public and private
investment, added to the effect of natural disasters and socio-political tensions, have weighed on
Thailand's recent economic performance. Persistent inequality also remains a challenge, as income
and regional disparities have increased in recent years. Thailand will also need to complete fiscal
WT/TPR/S/400 • Thailand
-9reform to face the increasing spending requirements associated with a rapidly aging population, and
deal with structural problems in its labour market, including the existence of a large informal sector.
Another challenge is to achieve higher and sustained increases in total factor productivity, a key
indicator of international competitiveness. Thailand's prospects of sustained economic growth could
be further improved by increasing public and private investment, implementing policies to enhance
innovation, productivity and competitiveness, and pursuing the liberalization of trade and
investment, particularly in the services sector.
7.
Since Thailand's last Review, a new Constitution was promulgated in 2017, and general
elections were held in 2019. The new Government issued the National Strategy (2018-2037),
underpinned by its development policy, Thailand 4.0. The latter aims at transforming Thailand into
a value-added, innovative, and knowledge-based economy through, inter alia, promoting innovation
and the development of new technology-based industries, and enhancing Thailand's position as a
regional hub by upgrading its physical infrastructure.
8.
Thailand remains strongly committed to the multilateral trading system and is actively
engaged in WTO activities. At the same time, it has continued to pursue its economic integration
agenda within the ASEAN (where progress has been made towards the consolidation of the ASEAN
Economic Community), and with other economic partners through the conclusion of RTAs. Currently,
Thailand has 13 RTAs, 2 of which came into force during the period under review: the Thailand-Chile
Free Trade Agreement (2015) and the ASEAN-Hong Kong, China Free Trade Agreement (2019).
Overall, Thailand has maintained a good record of notifications to the WTO; however, notifications
on agricultural domestic support for the past few years remain outstanding. During the period under
review, Thailand was involved in two new dispute settlement cases in the WTO, one as a complainant
and the other as a respondent.
9.
There were no major changes to Thailand's foreign investment regime during the review
period. While some steps were taken to liberalize FDI in infrastructure development and in certain
services industries, restrictions on foreign participation remain in several sectors, such as media,
rice farming, fisheries, mining, transportation, financial services, telecommunications, transport, and
tourism.
10.
Since its last Review, Thailand has improved its customs regime and adopted a new Customs
Act (2017), which helped simplify customs procedures and improved transparency. In 2015, Thailand
ratified the WTO Trade Facilitation Agreement and has now implemented 97.1% of its commitments.
Under the e-Customs system, customs registration, declaration and document submission are
conducted electronically, and e-declarations now represent 100% of import declarations.
11.
Thailand's average MFN tariff rose from 13.4% in 2014 to 14.5% in 2020, mainly due to
nomenclature changes. Its tariff structure remains relatively complex: non-ad valorem duties
account for 8% of tariff lines, and tariff rates range from zero to 226% when ad valorem equivalents
are excluded, and 557.4% when they are included. Non-agricultural products face considerably lower
tariff rates than agricultural products. In the WTO, Thailand bound 76.3% of its tariff lines at the
HS eight-digit level; the gap between bound and applied rates is significant. Tariff quotas and import
surcharges remain in place. Import tariffs account for about 4% of total tax revenue.
12.
Import prohibitions and licensing requirements apply for reasons of economic stability, public
health, national security, public morals and national interest. Legislation on anti-dumping was
amended in 2019 to clarify certain provisions, including on anti-circumvention. Thailand has never
initiated any countervailing investigation, although it has had recourse to other trade remedies.
During the review period, it initiated 23 anti-dumping investigations, and imposed one safeguard
measure and extended two others.
13.
Export duties are levied on a few goods; although in most cases they are not applied in
practice, the persistence of relatively high statutory export taxes remains an element of uncertainty
for traders. Some products are prohibited from exportation and, during the COVID-19 pandemic,
export bans on bird eggs and surgical masks were adopted, with the ban on the latter still in place.
Thailand continues to operate several schemes to facilitate exports, such as bonded warehouses,
duty drawback, tax and duty compensation, customs free zones, and incentives under the Industrial
Estate Authority of Thailand. The Department of International Trade Promotion offers a wide range
of services to Thai entrepreneurs, particularly SMEs, to promote their exports of goods and services.
WT/TPR/S/400 • Thailand
- 10 The state-owned Export-Import Bank of Thailand provides export credit and export-credit insurance
at competitive market rates to enhance the participation of Thai businesses in international markets.
14.
Thailand maintains a myriad of tax and non-tax investment incentives schemes, with a rather
complex structure. These include the incentives provided by the Board of Investment, and those
offered to special economic zones, SMEs, and certain sectors such as farming, fishing, and renewable
energy. Among the main support measures introduced during the review period are: incentive
packages for promoted activities under the Eastern Economic Corridor (EEC) Act (May 2018); a tax
incentive scheme operated by the Revenue Department to promote Thailand as an international
business centre (October 2018); and the "Thailand plus" package to attract foreign businesses to
relocate to Thailand and to expedite large-scale investment (September 2019). As there is no specific
budget earmarked for investment promotion incentives, no information on revenue forgone due to
such schemes is available.
15.
The Industrial Products Standards Act B.E.2511 (1968) was amended in 2019; as a result,
mandatory standards are now enforced by ministerial regulations instead of royal decrees, and
penalties were increased for manufacturing, importing, and selling products under technical
regulations without the relevant certificates. The procedure to develop standards and technical
regulations remains unchanged. Since 2015, Thailand has developed 743 new standards, of which
32 are mandatory. The share of national standards that are identical or similar to international
standards is 37.4%. At the WTO TBT Committee, specific trade concerns have been raised regarding
Thailand's measures on certification and labelling requirements on spirits, alcoholic beverages, and
infant food. There has been no major change to Thailand's SPS regime since 2015. Members have
raised concerns in the SPS Committee regarding measures maintained by Thailand on certain meat,
animals and animal products, some fruits, and food containing pesticide residues.
16.
Thailand notified to the WTO its three state-trading enterprises for the period 2014-16,
concerning agricultural products, pure alcohol, and cigarettes. State-owned enterprises (SOEs)
continue to have a significant presence in many sectors of the economy (e.g. financial services,
energy, telecommunications, transport, industry, commerce, agriculture, natural resources, and
public utilities), and some are among the top receivers of public funds. In 2019, the State-Owned
Enterprise Development Act and the Public Private Partnership Act came into force with a view to
reforming and improving the performance of SOEs.
17.
The Public Procurement and Supplies Administration Act was adopted in 2017, aimed at
preventing corruption and anti-competitive behavior. The Act brought SOEs under its coverage, and
requires that due consideration be given to the performance aspect in addition to the price of a
tender; it also aims to enhance transparency via the use of e-procurement. The price preference
programme for domestic suppliers was eliminated; however, preferences are still given to certain
domestic suppliers via the use of the specific procurement method. Thailand has not undertaken
market access commitments on government procurement in its RTAs. It is an observer to the WTO
Committee on Government Procurement but has no intention to join the Plurilateral Agreement on
Government Procurement in the near future.
18.
Thailand adopted a new Trade Competition Act in 2017. The Act covers, for the first time,
SOEs, public organizations and other state agencies; however, central, provincial and local
governments and sectors subject to specific laws (e.g. telecommunications and energy) remain
excluded. The competition authority's independence was strengthened and its powers increased,
including the power to issue administrative penalties for violations. However, the legal framework
for price regulation remains unchanged, and many goods and services are subject to price monitoring
or control (e.g. food, farm inputs, medical supplies, and delivery services for online shopping).
19.
As a net intellectual property importing country with an expanding deficit in IP licensing fees,
Thailand has implemented reforms to its IP system, aimed at boosting performance in the areas of
science, technology and innovation. During the review period, the Trademark Act was amended to
provide for the registration of sound marks, and the Copyright Act and the Computer Crime Act were
amended to better address online IP infringement. Considerable efforts have also been made
towards streamlining trademark and patent examination processes. During the review period,
Thailand joined the Madrid Protocol and the Marrakesh Treaty, and began the implementation of the
ASEAN IPR Action Plan 2016-25. Despite these efforts, there remain concerns regarding certain
enforcement issues, such as the use of unlicensed software, and cable and satellite signal theft.
WT/TPR/S/400 • Thailand
- 11 20.
Thailand is a net exporter of agricultural commodities, and a major global producer of several
crops. Agriculture receives more trade protection than the rest of the economy: the average tariffs
on agricultural products (32.7%) is much higher than on non-agricultural products (11.8%); tariff
quotas remain in place for 128 tariff lines (although the fill rates are very low for a number of them);
and some products are subject to import surcharges, import and export licensing, and export taxes.
Domestically, the Government applies price monitoring, and provides investment incentives and
subsidies; Thailand's latest notification to the WTO on domestic support covered 2014-16. Foreigners
are not permitted to buy land for agriculture, but they may lease it; they are prohibited from
engaging in certain activities, such as rice farming, plantation or crop growing, and livestock farming.
They must obtain approval to engage in sugar production, rice milling and flour production from rice
and other crops. Thailand is also a net fish exporter, and has adopted measures to tackle illegal,
unreported, and unregulated (IUU) fishing. The Fisheries Act 2015 was amended in 2017 to allow
for stricter penalties for illegal fishing. Support has been provided for fishermen and fishing vessel
owners affected by the measures to combat IUU fishing. Foreigners are prohibited from engaging in
fisheries of aquatic animals in Thai waters and specific economic zones, but they may work as crew
of a fishing vessel provided they are registered in Thailand as foreign workers.
21.
Thailand imports energy products to meet its consumption needs. The Petroleum Act was
amended in 2017, adding two concession regimes: production-sharing contracts and service
contracts. The Oil Fuel Fund Act, which came into force in 2019, aims to stabilize fuel prices in the
event of a fuel crisis. The Fund is financed from levies on the consumption of petroleum products
except jet fuel. The prices of energy products remain under monitoring and/or control. Thailand
notified to the WTO its support measures to the energy sector, including incentives for renewable
energy. The manufacturing sector has been facing challenges, including currency appreciation and
the global economic slowdown. In line with Thailand 4.0, which promotes growth through innovation,
several incentives schemes are provided to facilitate industrial restructuring.
22.
The financial sector remained sound and stable during the review period, despite challenging
external and internal conditions. The authorities continued to improve the regulatory and supervisory
frameworks to enhance financial stability. Measures were also taken to modernize the sector (such
as the adoption of regulations to enable the use of digital technologies and support a more inclusive
FinTech system) and to allow greater foreign participation in financial institutions.
23.
The telecommunications infrastructure was significantly enhanced during the review period. A
national broadband network now covers all villages across the country, providing "open access" to
any duly licensed operators. The regulatory regime was modernized since the last concession
agreements expired in 2018. The licensing procedure for telecommunication service providers was
streamlined: Internet services are no longer regulated with separate licences. Foreign equity in
telecom operators is capped at 49% of total capital. There is no requirement for data localization.
24.
The regulatory regime for air transport was also modernized since the last Review. Most of
Thailand's air services agreements cover up to the fourth freedom of traffic rights, with varying
restrictions on destination, designation and capacity. During the review period, low-cost carriers in
Thailand grew rapidly, in terms of both fleet size and transport capacity. Facing the COVID-19
pandemic, air passenger numbers dropped by almost 100% on a year-on-year basis. Road transport,
especially of freight, is competitive among private operators. Rail transport plays a relatively small
role compared with other modes of transport, but Thailand has now begun the construction of its
high-speed rail projects. Restrictions on foreign capital participation remain in place for all modes of
transport; Thai citizens or enterprises must hold at least 51% of total equity and have a controlling
power over management.
25.
Tourism plays an important role in the economy. Hotels and restaurants alone accounted for
5.9% of GDP and 7.6% of employment in 2019. Tourism is also the country's main foreign exchange
earner; in 2019, travel services generated USD 60.5 billion, or 73.8% of total services exports. Like
air transport, the tourism sector has been adversely impacted by the COVID-19 travel restrictions.
The Government has provided various assistance measures, including loans to support MSMEs'
liquidity and grants to boost domestic tourism demand. The regulatory regime for the sector was
updated with the aim of ensuring service quality and enhancing competitiveness. A 49% cap on
foreign ownership remains in place for hotels, travel agencies and travel operators. There is no
foreign capital restriction on restaurants and catering services, nor a specific regulatory regime for
the operation of virtual travel agencies.
WT/TPR/S/415 • China
- 10 SUMMARY
1.
Since China's previous Trade Policy Review in 2018, the country's economy has been a major
driver of global growth. Real GDP growth rates fell from just under 7.0% in 2016-18 to 6.0% in
2019 and 2.3% in 2020. Growth is projected to reach 6.0% again in 2021, as economic activities
are expected to normalize. China's GDP per capita was USD 11,710 in 2020, up from USD 9,976 in
2018. The long-term structural changes in China's economy, away from agriculture and industry
towards services, continued during the review period. Services now make up some 55% of GDP.
Remarkable progress on poverty alleviation has been achieved over the past decades, resulting from
high GDP growth rates and market-oriented reforms.
2.
The outbreak of the COVID‑19 pandemic in early 2020 had a major impact on output and
employment. At the beginning of 2020, China's economy contracted by 6.8%. Virtually all sectors
were severely hit by the pandemic, with the notable exceptions of financial services and information
technology. Starting in mid-2020, the economy began to recover, mainly driven by public investment
and international trade. Swift fiscal and monetary policy reactions helped mitigate the economic
impact of the COVID‑19 pandemic, but as a result of the Government's stabilizing measures, financial
stability risks may have increased.
3.
Price stability remains the main goal of monetary policy. Inflation rates remained low during
the review period, fluctuating between -0.5% and 3.8%. China has a managed floating exchange
rate regime. The exchange rate of the Chinese yuan (CNY) is determined with reference to a basket
of currencies with a publicly known composition; the CNY's central parity is determined daily as a
"fix". Officially reported foreign exchange reserves held steady during the review period, at around
USD 3.1 trillion. Regulations on capital movements remain in place on inflows and outflows. China's
bilateral lending to the rest of the world, notably to African countries, has increased over the past
years. The CNY is fully convertible for current account transactions and partially convertible for some
capital account transactions. China continued its efforts to further internationalize the CNY. As at
mid-2020, about 2% of global payments were conducted through the CNY.
4.
China's current account surplus contracted between 2016 and 2018, but grew again in 2019,
to USD 102.9 billion. Available information for 2020 indicates a widening of the surplus, to
USD 273.9 billion (1.9% of GDP), while for 2021, the authorities predict a narrowing of the current
account surplus. The financial account (excluding reserve assets) posted a strong deficit in 2015, a
surplus between 2016 and 2019, and a deficit in 2020. Direct investment was in surplus in all recent
years except for 2016. The portfolio investment account was in deficit until 2016 and has posted a
surplus since 2017. China's merchandise trade surplus declined between 2016 and 2018, which was
a major driver of its narrowing current account surplus. In 2019 and 2020, the trade surplus grew
again. China's balance of trade in services has traditionally posted a deficit, which grew between
2015 and 2018, but fell in 2019 and 2020.
5.
China's merchandise exports increased every year during the review period, to attain a peak
of nearly USD 2.6 trillion in 2020. Exports fell in the first half of 2020 due to the COVID‑19 pandemic,
but grew strongly afterwards due to China being the first manufacturing power to resume operations
after the first wave of global shutdowns, and its role as leading supplier of protective health
equipment and electronics related to working from home. At over 44%, machinery and electrical
equipment continue to represent a very large and rising share in China's merchandise exports. The
United States and the European Union remain China's main destinations for merchandise exports.
Asia remains the most important region for China's merchandise exports, with a share of over 44%
in 2020. Within Asia, Japan and the Republic of Korea are the most important trading partners.
Africa and the Middle East received between 4% and 5% of China's exports, while the share for
Latin America fluctuated around 6%.
6.
China's merchandise imports increased sharply between 2016 and 2018, but fell in 2019 and
2020. At about 35%, machinery and electrical equipment make up an important and stable share of
China's imports, followed by mineral products (some 25%). The European Union remains the most
important supplier of goods, while the share of the United States in China's imports fell, from nearly
9% in 2015 to 6.6% in 2020. The share of imports originating in Asia fluctuated at around 47%
between 2016 and 2019, but increased to over 49% in 2020. Africa, Australia, and the Middle East
account for about 4%, 5%, and 7% of China's merchandise imports, respectively.
WT/TPR/S/415 • China
- 11 7.
China's services exports grew from USD 217 billion in 2015 to USD 244 billion in 2019, but
fell to USD 235 billion in 2020. They are mostly composed of various business services,
transportation, and travel. Services imports grew from USD 436 billion in 2015 to USD 506 billion in
2019, but fell to USD 380 billion in 2020. Travel is traditionally by far the most important individual
category.
8.
Annual foreign direct investment (FDI) inflows into China continued to grow between 2016
and 2019, although at a much slower pace than in previous periods. Outward FDI, after lagging
behind for many years, overtook inward FDI in 2015. It peaked in 2016 and has fallen sharply every
year since. Manufacturing remains by far the largest sector of FDI inflows into China. The most
important sectors for China's FDI abroad are leasing and business services, and manufacturing.
Investment under the Belt and Road Initiative accounts for some 13% of China's recent outward
FDI; it is mostly concentrated in Central and South East Asia, with a focus on infrastructure projects.
9.
During the review period, China continued to aim at expanding international trade and
investments, as outlined in Five-Year Plans and various Administrative Measures. Efforts to address
climate change issues were also noticeable within China's trade policy framework. The main ongoing
actions in this regard included industrial restructuring, energy structure optimization, energy
conservation and efficiency, and the establishment of a carbon emissions trading market.
10.
In pursuit of its trade policy objectives, China accords a leading role to the multilateral trading
system and regional trade agreements (RTAs) in which it participates. China is an active Member of
the WTO; it is an observer to the Committee on Government Procurement, and has been negotiating
its accession to the Plurilateral Agreement on Government Procurement since 2007. China is also an
observer to the Plurilateral Agreement on Trade in Civil Aircraft, and a participant in the Information
Technology Agreement. It also participates in Joint Statement Initiatives on e-Commerce;
investment facilitation for development; micro, small, and medium-sized enterprises; and domestic
regulation in services. Between 2018 and mid-April 2021, China was involved in 10 trade disputes
as a complainant and 11 as a respondent. During the review period, China signed new RTAs with
Mauritius, Cambodia, and 14 other countries within the framework of the Regional Comprehensive
Economic Partnership (RCEP) Agreement. By the end of February 2021, China had signed 19 RTAs
with 26 countries and territories. China submitted various notifications to the WTO during the review
period. Nevertheless, some notifications, including those on state trading enterprises and domestic
support, remain outstanding.
11.
A new Foreign Investment Law was adopted, with the aim of, inter alia, improving China's
business environment for foreign investors and ensuring that they participate in market competition
on an equal basis. The legislation stipulates that investors are protected against expropriation,
restrictions on cross-border remittances, IPR infringement, and forced transfer of technology.
12.
Various negative lists and the Catalogue of Encouraged Industries for Foreign Investment,
which are revised periodically, remain the main instruments used to guide FDI in China. The 2020
version of the Special Administrative Measures on Access to Foreign Investment (National Negative
List) further reduced the number of restrictive measures from 63 in 2017 to 33 in 2020. FDI in the
Pilot Free Trade Zones (PFTZs) is guided by another negative list (PFTZ Negative List). In 2020,
three PFTZs were established, bringing the total to 21. FDI is not allowed in prohibited industries
that are included in either the PFTZ Negative List or the National Negative List; for those in a
restricted industry, investors must comply with the required administrative measures. Projects in
the encouraged category are eligible for preferential treatment. In 2018, China issued the Market
Access Negative List, which lists industries that are prohibited or subject to licensing for investment
and operation within China by market participants of any kind, including state-owned, private,
domestic, or foreign-invested enterprises. Certain FDI projects may be subject to national security
reviews if they are deemed to have an influence on national security. Examination and approval are
required for foreign-invested projects involving fixed asset investment and projects involving
"serious" overcapacity.
13.
Various tax incentives are available to foreign-invested enterprises (FIEs) to promote sectors
deemed beneficial to the development of China's economy. Furthermore, several relief measures
were recently taken or announced for foreign investors, as a response to the COVID‑19 pandemic.
WT/TPR/S/415 • China
- 12 14.
China has taken various trade-facilitating measures with respect to import registration,
documentation, and inspection requirements, as well as in response to the COVID-19 pandemic. Its
national single window for international trade was extended and, reportedly, the overall customs
clearance time for imports nationwide was reduced.
15.
China's simple average applied most-favoured nation (MFN) rate decreased from 9.3% in 2017
to 7.1% in 2021, with tariff-rate reductions in nearly all product categories. The percentage of tariff
lines bearing rates higher than 15% (international tariff peaks) was 4.5% in 2021, significantly lower
than the 13.9% in 2017. Applied MFN tariffs ranged from 0%-65%; the highest tariffs of 65% apply
to 20 agricultural tariff lines. China applies lower tariffs under its preferential trade agreements
(PTAs) and RTAs. The share of duty-free tariff lines in China's RTAs ranges between 0.04% (RTAs
with Hong Kong, China and Macao, China) and 6.6% (Separate Customs Territory of Taiwan, Penghu,
Kinmen and Matsu (Chinese Taipei)). Duty-free lines accounted for 12.6% of all lines. China also
grants preferential tariff treatment to imports from least developed countries (LDCs) that have
established diplomatic relations with China and completed the exchange of diplomatic notes. By
February 2021, China had implemented zero tariffs on 97% of tariff lines for these 41 LDCs.
16.
Other charges affecting imports are the value added tax (VAT), the consumption tax, the
Automobile Purchase Tax, and (until recently) port construction fees. During the review period, some
VAT rates were reduced. Port construction fees levied on imported and exported goods were
permanently abolished in January 2021.
17.
Some changes were made in the import regime on prohibition and licensing. Since
1 January 2021, imports of all solid waste products have been prohibited, and the previous regime
for allowing imports of certain wastes under licensing conditions has been terminated. Certain
recycling materials for brass, iron-steel materials, copper, and cast aluminium alloys may be
imported if they meet the required standards. Automatic import licensing requirements, in place for
monitoring purposes have been removed on certain items and non-automatic import licensing
requirements were removed for some used mechanical and electrical products.
18.
Changes in legislation concerning anti-dumping measures during the review period included
the adoption of the Ministry of Commerce's (MOFCOM) Rules on Interim Review of Dumping and
Dumping Margins (Interim Review Rules) in April 2018 and the entering into force of the Rules on
Questionnaires in Anti-Dumping Investigations and the Rules for Hearing of Anti-Dumping and
Anti-Subsidy Investigations in May 2018. Other than these, the laws and regulations governing
anti-dumping, countervailing, and safeguard measures in China remained largely unchanged during
the review period. Between January 2018 and December 2020, China initiated 34 anti-dumping
investigations and 8 countervailing investigations; it did not initiate any new safeguard
investigations. As at end-December 2020, China was enforcing 113 anti-dumping definitive
measures affecting imports from 16 countries or territories and 6 countervailing measures. Chemical
products continue to account for most anti-dumping measures in force at end-December 2020,
followed by products made of resin, plastic, and rubber.
19.
Regarding the export regime, in the wake of the COVID-19 pandemic, the authorities took
steps to further streamline customs procedures, including inspections and quarantine, and reduce
port charges for exporters of medical devices. To ensure the quality of exported medical devices,
reinforced quality control measures were also put in place for enterprises involved in the export of
COVID‑19-related test kits and other medical devices.
20.
China charges export taxes on certain products. As at January 2021, 102 tariff lines (at the
8-digit level) were subject to statutory export duties, while 75 tariff lines carried interim duties.
Prohibitions and restrictions are also in place on a variety of export items. Restricted exports may
be subject to quotas or licences. During the review period, 23 new items were added to the list of
technologies subject to export restrictions, while 4 items that were subject to export prohibition and
5 items that were subject to export restriction were removed.
21.
During the review period, a new Export Control Law was adopted; it provides for the
establishment of a single framework for restricting exports of controlled items, i.e. dual-use items
(with both civilian and military applications); military products; nuclear products; and goods,
technologies, and services that are related to the maintenance of national security and interests and
the implementation of international obligations such as nuclear non-proliferation.
WT/TPR/S/415 • China
- 13 22.
The authorities indicate that China did not maintain or introduce any export subsidies on
agricultural products during the review period. All exporters are generally entitled to VAT rebates.
To promote exports, the Trade Development Bureau of MOFCOM organizes exhibitions in emerging
markets and provides export-oriented training activities. It also maintains the websites of China
Trade Promotion and provides, through various service platforms, background information about
foreign markets.
23.
China continued to provide incentives and financial support to different sectors and industries
during the review period. In June 2019, China notified its support programmes for the
period 2017-18. The notification contains information on 79 central-level and 420 subcentral-level
programmes, many of which, however, had expired by the time of the notification. No information
was provided by the authorities on how many of the programmes were still active as at April 2021.
The notifications submitted to the WTO and the replies provided by China to questions asked by
other Members did not enable the Secretariat to have a clear overall picture of China's support
programmes. In particular, the notifications do not contain information on expenditure levels in
certain critical sectors, such as aluminium, electric vehicles, glass, shipbuilding, semiconductors, or
steel. Information on subsidies going beyond the 2019 notification was not made available to the
Secretariat. In addition to the notified programmes, numerous other initiatives are reported to be in
place to support different industries and attract foreign investment. So-called "government guidance
funds" use public resources to make equity investments in industries that the Government considers
important, while numerous policy-related funds finance direct investments to support a particular
policy initiative. Many of these funds seem to be endowed with sums over CNY 100 billion. According
to the authorities, the incentives provided by these funds do not constitute subsidies and are not
required to be notified under the Agreement on Subsidies and Countervailing Measures
(SCM Agreement).
24.
Since its previous Review, China introduced or revised various laws and regulations related to
standards and other technical requirements. On 1 January 2018, the revised Standardization Law
entered into force and included new provisions such as those on association standards. According to
the authorities, at end-2020, among the national standards that correspond to the relevant
international standards, 92.4% of mandatory standards (technical regulations) and 91.4% of
voluntary standards were adoptions or adaptations of international standards, compared with 74.3%
and 85.9% at end-2017. Between January 2018 and mid-April 2021, China submitted 344 technical
barriers to trade (TBT) notifications. During this period, in the TBT Committee, 25 specific trade
concerns were raised by Members regarding TBT measures maintained or planned by China.
25.
During the review period, there was a substantial reorganization of the agencies responsible
for sanitary and phytosanitary (SPS)-related issues. The main change to the legal framework for
SPS-related issues was the entry into force of the Implementing Regulations of the 2015 Food Safety
Law 2019. During the review period, 13 specific trade concerns were raised in the SPS Committee
on SPS measures maintained by China, of which 8 were raised for the first time. Between
1 January 2018 and mid-April 2021, China submitted 165 notifications to the SPS Committee.
26.
In 2018, the State Administration for Market Regulation (SAMR) was established as the
national administrative body for regulating market-related issues, including competition. The
previous functions and personnel of the National Development and Reform Commission (NDRC), the
State Administration for Industry and Commerce (SAIC), and MOFCOM in their respective fields of
competition policy merged into the SAMR. A new Anti-Monopoly Bureau and a new Price Supervision
and Anti-Unfair Competition Bureau were established as the competition agencies within the SAMR.
The State Council also established an Anti-Monopoly Committee to organize, coordinate, and guide
the anti-monopoly work across the country. In 2019, the Anti-Unfair Competition Law was revised
to strengthen the protection of trade secrets. There were no changes to the legislation concerning
price controls during the review period.
27.
China's state trading enterprises have the exclusive right to import or export the following
products: wheat, maize, sugar, tobacco, rice, cotton, crude and processed oil, refined coal, chemical
fertilizers, tungsten and tungstate products, antimony, and silver. State ownership remains very
important in China's economy, even in non-strategic, commercially oriented sectors, with
state-owned enterprises (SOEs) still having large market shares. No privatization took place during
the review period; reform of SOEs proceeded almost exclusively in the context of mixed ownership
reform.
WT/TPR/S/415 • China
- 14 28.
There have been no major changes to China's legislative and regulatory regime concerning
government procurement since the previous Review, while modifications to relevant laws are
currently under consideration. The total value of government procurement in China was
CNY 3.3 trillion in 2019 (the latest year for which data were made available), accounting for 3.3%
of GDP; important infrastructure projects implemented by SOEs are not covered by the Government
Procurement Law. The majority of procurement takes place at the sub-Central Government level.
29.
During 2018 and 2019, China undertook wide-ranging reforms that included its intellectual
property (IP) regime; the infrastructure of IP courts; and amendments to the Trademark Law, the
Patent Law, and the Anti-Unfair Competition Law, which govern trade secrets. As part of these
reforms, in 2018, the State Intellectual Property Office became the China National Intellectual
Property Administration under the SAMR. The IP enforcement regime continued to evolve in response
to the challenges posed by the shift from brick-and-mortar stores to virtual marketplaces and the
implementation of international agreements. For example, copyright surveillance of large-scale
video, music, and literature websites, as well as online storage service providers, was strengthened.
30.
While the overall value of production of agriculture and animal husbandry increased steadily
over the review period, China continues to be a net importer of agricultural products. China is
pursuing a rural revitalization strategy. Rural reform initiatives have included amending the Law on
the Contracting of Rural Land to legally upgrade the institutional arrangements on the land
management right on rural contracted land, and steps have been taken to extend a similar approach
to rural homesteads. As part of the Government's restructuring in 2018, the Ministry of Agriculture
(MOA) was renamed the Ministry of Agriculture and Rural Affairs (MARA), and its responsibilities
were expanded, a National Food and Strategic Reserves Administration was created, and the State
Administration of Grain was dissolved. In 2021, the average MFN applied tariff on agricultural
products was 12.7% (14.8% in 2017). China continues to make use of tariff-rate quotas on wheat,
corn, rice, sugar, wool, wool tops, and cotton, which are administered through import licences; fill
rates have fluctuated and were under 50% for wheat, rice, and wool tops in 2019. Little up-to-date
information was available on current government support to the agriculture sector, given that
China's most recent domestic support notification to the WTO covers the period up to 2016, and its
SCM notification to 2018. China continues to implement a minimum purchase price policy for rice
and wheat, with certain price reductions reported in recent years. Likewise, China continues to
maintain reserves of maize, rice, soya beans, and wheat, as well as a subsidized agricultural
insurance scheme providing coverage for natural disasters.
31.
China is one of the world's largest fish-producing countries, particularly in aquaculture, and is
a net importer of fish. The simple average MFN tariff on fish and fishery products (WTO definition)
was 6.8% in 2021, with tariffs ranging from 0%-15%. Since 2018, China has revised its fishing
licence rules. No updated data were available on fisheries subsidies from 2019, and on fuel subsidies
to the fisheries sector over the whole review period. However, the authorities indicate that the
Government will shortly issue a new policy to terminate fuel and boat construction subsidies, with
the last of these pay-outs being made at end-2020. Reportedly, the Government has taken measures
to monitor and control fishing vessels, enhance its international compliance capability, and prevent
illegal, unreported, and unregulated fishing activities, and it is taking first steps to introduce a total
allowable catch system.
32.
During the review period, some liberalization steps were taken in the mining sector to allow
increased foreign participation; foreign investment prohibitions and restrictions on the exploration
and development of a number of mining products were removed. Foreign investment in the
exploration, exploitation, and processing of rare earths, radioactive minerals, and tungsten is
prohibited. The average MFN applied tariff on mining products was 1.7% in 2021, unchanged
since 2017.
33.
China continues to reduce its proportion of coal consumption, in line with objectives set for
green and low-carbon energy development in the 13th Five-Year Plan for Energy Development. Other
measures regarding the promotion of clean energy included the authorities' efforts to fully
operationalize China's carbon emission trading framework, set renewable electricity consumption
quotas as a share of total power consumption in each province, and implement a new environmental
tax policy. The energy sector was further opened to foreign investments during the review period,
through several liberalization measures, such as the removal of the restrictions on the exploration
and development of oil and natural gas (except for oil shale, oil sands, and shale gas).
WT/TPR/S/415 • China
- 15 34.
The Made in China 2025 (or China Manufacturing 2025) initiative (launched in 2015) and the
Internet Plus initiative (launched in 2015) remain China's main initiatives to promote its
manufacturing sector. The authorities undertook a series of market-opening measures, such as
lifting of restrictions on the shareholding ratio of foreign investment in commercial vehicle
manufacturing, with a view to promoting the sector's competitiveness. Furthermore, some
manufacturing activities were added to the list of encouraged industries, mainly certain items for
integrated circuits, chip packaging equipment, cloud computing devices, key components of
industrial robots, new energy vehicles, and intelligent vehicles. The average MFN applied tariff on
manufactured products was 7% in 2021 (9.7% in 2017).
35.
During the review period, China continued to liberalize its financial sector to allow increased
foreign participation. A new supervision framework was established to address new types of financial
risks, such as shadow banking. Foreign shareholding ratio limits were lifted for commercial banks,
life insurers and insurance asset management companies, securities companies, futures companies,
and fund management companies. Furthermore, foreign investors were allowed to participate in
various segments of China's financial sector, including bond rating and private pension fund
management.
36.
In the telecommunications sector, China granted 5G licences to its three major telecom
operators and a broadcasting company. At the same time, the authorities put in place strategic plans
for an integrated development of 5G and industrial Internet. Several regulations, administrative
measures, and technical specifications were adopted or published for public comment, with a view
to fully implementing the 2017 Cybersecurity Law. The E-commerce Law was passed during the
review period to regulate business activities of selling goods and/or providing services through
information networks such as the Internet.
37.
The State continues to have major presence in maritime and air transport. Developments in
the maritime transport sector since 2018 have included continued measures to encourage qualified
Chinese-funded international "Flag of Convenience" ships to return to China and a lifting of
restrictions on foreign investment in international shipping and international shipping agency
services in China. As is the case for other economies, the COVID-19 pandemic has had a big impact
on the air transport sector, with international and domestic passenger flights dropping dramatically
from February 2020; only the domestic passenger flight segment has recovered. China has taken
various measures to support the air and maritime sectors in the wake of the COVID-19 outbreak.
WT/TPR/S/410 • Viet Nam
-8SUMMARY
1.
Over the past 30 years, Viet Nam sustained high GDP growth rates, which transformed the
country into a lower-middle-income emerging economy; the poverty rate declined sharply from
above 70% in the early 1990s to below 6% in 2019. The economy grew at an average rate of 6.6%
per annum between 2014 and 2018 and reached a 10-year high of 7.1% in 2018. In 2019, real GDP
grew by 7%, with GDP per capita reaching over USD 2,700. Preliminary data showed that GDP
growth in 2020 slowed down to 2.5%, reflecting the impact of the COVID-19 pandemic.
2.
Viet Nam pursues export-oriented trade policies and recognizes international economic
integration as a key driver for its institutional improvement, economic growth, and development. In
the Strategy on Exports and Imports for 2011-20, Vision to 2030, Viet Nam set trade-related targets
such as a double-digit annual growth rate of exports, a slower growth rate of imports than of exports,
and a gradual reduction of the trade deficit, until reaching a surplus in the next decade.
3.
The country's economic expansion in recent years was underpinned by robust domestic
demand and manufacturing exports. Since its last Review in 2013, Viet Nam further integrated into
the world economy, with its ratio of trade to GDP increasing from 165% in 2013 to 210% in 2019.
Reflecting strong economic fundamentals, the real effective exchange rate of the Vietnamese dong
appreciated by 4% on average each year. In August 2015, the floating band of exchange rates
increased to 3%, from 1% previously.
4.
During the review period, merchandise trade grew at a double-digit rate annually, in real
terms. This reflected its active participation in global value chains (GVCs), emerging as a samsung
manufacturing centre for apparel and consumer electronics, particularly smart phones. In 2019,
about 85% of imported electronic products were intermediate goods, slightly half of which were
supplied by the Republic of Korea and China; 44% of exports of electronic products were final
consumer goods, half of which were shipped to the United States, the United Arab Emirates, and
Austria. Viet Nam maintained a surplus in trade in goods and services, as well as in remittances.
Viet Nam là công xưởng hàng điện tử cho thế giới
5.
Foreign direct investment (FDI) plays a key role in Viet Nam's economic transformation,
representing 20% of GDP and generating 5 million jobs in 2019. FDI is also the main driving force
of the country's productivity improvement. More than 17,000 foreign investment projects with total
registered capital of USD 143.1 billion were approved during the review period; processing and
manufacturing accounted for around 62% of the total foreign capital invested in the country.
6.
Given its deep integration into the global economy, Viet Nam suffered from the COVID-19
pandemic due to weakened demand and reduced trade. However, preliminary evidence indicates
that Viet Nam's merchandise trade based on GVCs in 2020, particularly in the consumer electronics
and garment sectors, appeared not to be losing momentum, compared with those sectors'
performance in 2019, partly reflecting the Government's proactive measures.
Fiscal consolidation is a policy aimed at reducing government deficits and debt accumulation.
7.
Since January 2016, Viet Nam has implemented fiscal consolidation, strictly limiting the
issuance of government guarantees and stabilizing the state budget deficit; this policy enabled
Viet Nam to lower government and public debts in relation to GDP, creating some fiscal space to
deal with short- or long-term structural challenges, such as the ones that have arisen from the
COVID-19 pandemic, contingent liabilities of both state-owned enterprises (SOEs) and banking
sector, and climate change. Facing the COVID-19 pandemic, Viet Nam introduced a series of fiscal
measures and incentives to replace lost income and boost growth, including a fiscal support package
equivalent to 3.6% of GDP, fee cuts, tax payment deferrals and deductions, and financial incentives
for employers and employees. Consequently, the general government deficit and the public-debtto-GDP ratio in 2020 are expected to increase to around 5% and 57%, respectively.
8.
Viet Nam considers that its WTO membership plays a central role in its international
integration strategy. Viet Nam submitted its instruments of acceptance for the WTO Agreement on
Trade Facilitation in December 2015, and for the amendment of the TRIPS Agreement in January
2017. It participates in the Information Technology Agreement (ITA), but not in the Agreement's
expansion (ITA 2). During the review period, Viet Nam submitted more than 350 notifications to
various WTO committees, and 5 complaints to the WTO dispute settlement body.
WT/TPR/S/410 • Viet Nam
-99.
As at January 2021, Viet Nam was a signatory to 15 regional trade agreements (RTAs), 6 of
which were signed during the review period, including the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic
Partnership.
10.
Viet Nam's investment regime was substantially updated by revising both the Enterprise Law
and the Investment Law in July 2015. The legislation aims to attract FDI by equalizing business
conditions for SOEs, foreign-invested enterprises, and the domestic private sector. The number of
restricted activities was reduced, compared with that in the previous framework. The general cap of
49% for foreign acquisition of public companies operating in unconditional sectors was abolished in
2015; however, foreign participation in some sectors remains capped at levels between 30% and
51%. Moreover, the number of eligible fields for the implementation of public-private partnership
(PPP) projects was increased in 2018. On 1 January 2021, a revised Enterprise Law, a revised
Investment Law, and a new Law on Investment in the Form on Public-Private Partnership entered
into force. Viet Nam signed five bilateral investment agreements during the review period.
11.
Viet Nam continued to reform its policies and measures on customs procedures based on its
Customs Development Strategy to 2020. In line with this Strategy, it adopted or revised relevant
legislation, including the Customs Law and the Law on Export Tax and Import Tax. Customs units at
all levels implement risk management. Customs uses an automatic customs clearance and national
giống với các nước phát triển
single-window mechanism.
12.
All tariffs are bound, and mostly in the 0%-40% range. The simple average applied MFN rate
for all goods was 11.9% in 2020, up from 10.4% in 2013, mainly due to the change from the HS12
to the HS17 nomenclature and the splitting of several tariff lines. Only second-hand motor vehicles
are subject to applied non-ad valorem rates. The highest tariffs include 135% for five tariff lines
concerning cigarettes. In 2020, the average bound rate was 14.7%. The simple average applied MFN
tariff was 18.1% for agricultural products (WTO definition) and 10.9% for non-agricultural products.
The difference between bound and applied MFN rates leaves some scope for flexibility in Viet Nam's
tariff policy. Tariff rate quotas regulate imports of eggs, sugar cane, tobacco, and salt.
The bound tariff is the maximum MFN tariff level for a given commodity line
13.
Excise tax is levied on certain goods and services, including cigarettes, alcoholic beverages,
motor vehicles, motorcycles, and gasoline. No distinction is made between domestically produced
and imported goods. Excise tax is levied on the import-duty-inclusive price for imports on a c.i.f.
basis. The environmental protection tax continues to be applied on petroleum products, coal,
hydrogen-chlorofluorocarbon liquids, plastic bags, and various pesticides and herbicides; this list has
remained unchanged since Viet Nam's previous Review. Value-added tax, which is levied at a general
rate of 10%, constitutes almost one third of the Government's total tax revenue, while import and
export duties account for about one tenth. An excise, or excise tax, is any duty on manufactured goods that is levied at the
moment of manufacture rather than at sale
14.
Viet Nam prohibits the importation of, inter alia, certain chemicals, weapons, right-hand drive
vehicles, and certain used consumer goods; this list has not changed since 2013. Import restrictions
may also be applied to comply with international treaties and conventions to which Viet Nam is a
party. Goods subject to import restrictions administered by various ministries entail import licensing
requirements. The licensing requirement is also employed to administer importation of goods subject
to tariff quotas. Exports and imports can also be temporarily suspended in exceptional
circumstances, such as war, natural disasters, epidemics, or environmental incidents; products
causing serious effects on health and the environment; and balance of payment reasons.
15.
The Law on Foreign Trade Management is the main legislation governing anti-dumping,
countervailing, and safeguard measures. Viet Nam notified laws and regulations pertaining to antidumping, countervailing, and safeguard measures to the WTO in 2018 and 2020; it also responded
to detailed questions on its anti-dumping regime in 2019. Between 2013 and 2019, Viet Nam had
five anti-dumping measures in place and four cases under investigation; it also had four safeguard
measures in place. The main products covered by these measures include steel, aluminium, and
fertilizer.
16.
Viet Nam levies export taxes on certain products, such as fish, minerals, coal, rubber, and raw
hides and skins. The export tax rates changed frequently during the review period. The country also
levies royalties (severance tax) on natural resources, such as basic metals and minerals, timber,
water, crude oil, and natural gas used in domestic production or exported. Viet Nam enforces a
WT/TPR/S/410 • Viet Nam
- 10 number of export prohibitions, restrictions, and licensing in accordance with the Law on Foreign
Trade Management and relevant regulations.
17.
As at June 2019, Viet Nam had four export processing zones. Preferential export and import
taxes apply to companies, both domestic and foreign, located in the zones.
18.
Viet Nam provides investment incentives, mainly through tax reductions, for projects in
geographical areas with difficult socio-economic conditions or in industrial zones. Specific supports,
such as access to credit, lower taxes and land rents, and exemption of import duties, are also
accorded to some selected activities and sectors, such as fishery products, small- and medium-sized
enterprises, supporting industries, or renewable energy. Investors participating in significant PPP
projects may benefit from additional incentives, such as guarantees on land use and foreign currency
availability. Following the onset of COVID-19 pandemic, Viet Nam introduced a series of measures
and incentives, alleviating the impact on enterprises; these measures included an extension of time
limits for tax payments, a reduction of corporate income taxes, and temporary discounts in electricity
bills.
19.
The overall regulatory framework for standards and technical regulations remained largely
unchanged. According to the authorities, 60% of Vietnamese standards were harmonized with
international, regional, or foreign standards in 2020, up from 40% in 2013. Goods classified as
"capable of causing unsafety", whether imported or domestically produced, are subject to conformity
assessment as set forth in the relevant technical regulations. Requirements concerning conformity
assessment must be fulfilled before the product is circulated in the market. A new decree pertaining
to labelling requirements entered into force in April 2017. During the review period, Viet Nam
submitted 152 notifications, covering a large variety of products, to the WTO TBT Committee, and
four specific trade concerns (STCs), concerning alcoholic beverages, inspection on imported vehicles,
cybersecurity regulations, and electronic products, were raised in the Committee.
20.
The Government implemented a national food safety strategy for 2011-20 with the aim of
controlling food safety over the entire food supply chain by 2020. Food-inspection laboratories and
facilities were operational in provinces by 2020, and according to the Strategy, all food production,
processing, and trading establishments are expected to meet food safety conditions by 2030. In line
with this objective, Viet Nam modernized its regime concerning sanitary and phytosanitary
requirements. The relevant legislation covers issues such as food safety for imported food,
quarantine requirements, fertilizer and pesticide management, and maximum residue levels of
pesticides on food. These regulatory changes were notified to the WTO through 84 notifications to
the SPS Committee. Since 2013, eight STCs have been raised at the SPS Committee, and two of
them have been reported as resolved or partially resolved in 2017.
21.
Viet Nam modernized its institutional framework for competition. With the enactment of the
Law on Competition and its implementation decrees, the National Competition Commission (NCC)
was created as the enforcement authority. The creation of the NCC was expected to address some
issues of regulatory deficiencies that were identified with the previous regime. The NCC is responsible
for investigating and adjudicating anti-competitive acts, monitoring economic concentration, and
settling complaints about its decisions. Since July 2019, 20 claims have been filed with the NCC, of
which 11 were related to unfair trade practices, and 9 to anti-competitive agreements and abuse of
a dominant market position; the NCC has also completed 60 economic concentration reviews.
22.
Viet Nam maintains price controls on certain goods and services. According to the authorities,
price controls are primarily achieved in an indirect manner. The Ministry of Finance at the national
level and the Department of Finance at the provincial level are the competent authorities for
implementing price management. The authorities note that price stabilization is currently applied
only to refined petroleum products. It is estimated that continuing price liberalization would add
about 2 percentage points to the Consumer Price Index.
23.
Viet Nam notified to the WTO its state trading enterprises concerning cigarettes, cigars,
newspapers, journals, and periodicals. Viet Nam also submitted replies to questions posed in the
Working Party on State Trading Enterprises. As at 31 December 2018, SOEs employed 1.13 million
workers, accounting for 7.6% of the employees of the corporate sector. The number of 100% SOEs
fell from 1,309 at the end of 2011 to 487 at the end of 2019. Concerning the governance and
management of SOEs in Viet Nam, a number of laws and regulations were issued during the review
WT/TPR/S/410 • Viet Nam
- 11 period, including the 2014 Enterprise Law and the 2014 Law on Management and Use of State Capital
Invested in Production and Business Activities.
24.
The government procurement regime was revised to expand the scope of application,
covering: (i) development investment projects and procurements of which at least 30% of the
project value is financed through the state budget; and (ii) investment projects by SOEs.
Government procurement may be conducted through domestic bidding or international bidding. In
the case of domestic bidding, only domestic tenderers are allowed to participate in a tender. In
general, foreign suppliers must have a partnership with domestic contractors or be sub-contractors
of domestic contractors when participating in an international bid, unless domestic contractors do
not have full capacity to participate in a bidding. Preference for 25% of domestic value is maintained
in the procurement system, regardless of whether it is a domestic or international bidding. Viet Nam
is not a signatory to the Agreement on Government Procurement (GPA). In two recently signed
RTAs, i.e. the CPTPP and the European Union-Viet Nam Free Trade Agreement, Viet Nam made its
first commitments to open its government procurement to foreign suppliers bidding directly from
abroad. The government procurement chapters of both Agreements are based, to a large extent, on
the legal text and market access schedule structure of the GPA.
25.
With regard to intellectual property rights (IPRs), the Law on Intellectual Property was
amended in June 2019. The amendment aims to implement commitments under the CPTPP. On
1 July 2018, the Law on Technology Transfer was revised. The revised Law requires disclosure of
technology secrets under certain circumstances, such as on the ground of national security, national
defence, social welfare, and other interests of the State and society. Viet Nam has a regime of
international exhaustion; therefore, parallel imports are not considered to infringe on IPRs.
Counterfeiting and piracy remain the major IPR infringements. IPR enforcement is primarily
practised through the imposition of administrative penalties; civil and criminal remedies are rarely
or ineffectively used. To address the issue of IPR enforcement, Viet Nam established a National
Steering Committee against Smuggling, Counterfeiting and Trade Fraud in March 2014.
26.
In 2019, agriculture, forestry, and fisheries contributed 15.5% to GDP (down from 20.0% in
2013) and 34.5% to employment (down from 46.7% in 2013). The main agricultural products
include rice, coffee, and rubber. In 2019, Viet Nam had a deficit in agricultural trade. Both imports
and exports of agricultural products increased between 2013 and 2018; in 2019, they both declined.
The main exports included coconuts, rice, and coffee; the main imports included cotton and maize.
The main agricultural policy development was the adoption of various laws, such as the Laws on
Irrigation, Animal Health, Animal Husbandry, and Crop Production, and relevant regulations.
27.
Fisheries represented 2.3% of merchandise exports in 2019 (down from 3.8% in 2013). In
2018, the fishery catch amounted to 3,590 tonnes, an increase of 6% compared with 2017. Viet Nam
had a trade surplus in fisheries products. The fisheries policy is included in the Master Plan on
Fisheries Development through 2020, Vision to 2030, which sets objectives for turning fisheries into
a highly competitive, large community production sector. The Fisheries Development Policies provide
support measures to the sector, such as credits for new vessels, subsidized accident insurance, and
tax exemptions between 2015 and 2018.
28.
The Government set targets for efficiency and conservation of energy until 2030 and promoted
the development of renewable energy; however, adverse climate conditions in the country increased
its reliance on coal, oil, and gas for energy production. Viet Nam became a net importer of coal in
2019; with the operation of a second oil refinery in 2018, Viet Nam reduced its exports of crude oil
as well as its imports of refined oil. The regulatory framework of the energy sector remained largely
unchanged, except for a revision in royalty rates in 2015. The Government promoted the
restructuring and equitization of subsidiaries of main SOEs in the sector, and the ownership role of
the State in large conglomerates was transferred to the recently established Commission for the
Management of State Capital in Enterprises. Viet Nam runs a Price Stabilization Fund for different
petroleum products.
29.
Some segments of the electricity market shifted towards increased competition between
service providers; three state-owned generation corporations underwent equitization and two other
corporation are expected to complete similar procedures in coming years. The wholesale market for
electricity started operations in 2019, and a fully operational retail electricity market is planned for
2024. The State continues to hold a monopoly in transmission, management of the national
electricity system, and construction and operation of "large" electricity plants. The Government
WT/TPR/S/410 • Viet Nam
- 12 regulates retail electricity prices that vary between consumer groups, time of consumption, and
voltage levels.
30.
Viet Nam seeks to continue developing its manufacturing sector, and its national strategy
prioritizes some selected subsectors. During the review period, manufacturing exports more than
doubled and foreign-invested enterprises accounted for nearly 70% of total merchandise exports in
2019. Some subsectors witnessed a notable performance in recent years, while the overall impact
of policies in other subsectors is still to be seen. For example, domestic production and exports of
footwear and garments substantially increased during the review period, and Viet Nam aims to
attract foreign investment for the development of its pharmaceutical industry through regulatory
changes. Lower labour costs and a supply of relatively skilled workers are drivers behind the recent
increase of inward FDI in manufacturing. Investment incentives and tariff protection are other policy
tools used for the development of some industries.
31.
Services are the main sector in the economy. In 2019, the share of services in GDP was
46.2%, up from 43.1% in 2013. Most services are oriented to serve the domestic market. Viet Nam
committed to some further liberalization of its services sector in recent bilateral and regional trade
agreements.
32.
The banking sector is dominated by state-owned commercial banks; the State reduced its
participation in some of them. The review period was marked by consolidation among commercial
banks, in most of cases, to support weak banks. The State Bank of Viet Nam also intervened in
commercial banks through compulsory acquisitions. Compliance with Basel II requirements,
reduction of cross-ownership, and handling of non-performing loans were the main objectives
decided by the Government for the banking system; some progress in achieving these objectives
was observed. Other financial services (insurance and securities) are expected to continue to grow
rapidly, as their coverage and use expand among the population.
33.
The telecommunications market is expected to expand in coming years, reflecting the
development of IT-related activities. Mobile communication is the main, as well as the fastestgrowing, segment and the commercialization of 5G started in December 2020. Three SOEs dominate
the market, while the State plans to reduce its participation in two of them through equitization. The
policy framework regulating the sector has remained largely unchanged since the last Review.
Interconnection rates are controlled by the Government, while operators are free to determine retail
tariffs for other services. Viet Nam operates a public fund for the development and provision of public
utility telecommunications services.
ppp - public - private partnership
34.
The overall integration of infrastructure projects in the transport sector remains a challenge
for resolving some multi-modal bottlenecks and for supporting the country's transformation. PPPs
are considered as a key source of funding for transport development in coming years. Foreign firms
dominate the overseas cargo shipping market, and no domestic support measure is applied by the
Government; only ships flying the national flag are entitled to inland sea transport. Maritime cargo
is concentrated around a few seaports, and some ports operate near or at their capacity. Since 2017,
private investment in ports is allowed. The authorities applied reductions in fees to promote the use
of new infrastructure. Viet Nam Airlines, the national flag carrier largely controlled by the State,
remains a key player for air transport and related services. The first airport developed under a PPP
project became operational in 2018; caps on foreign capital apply in air transport services.
Renovated and new airport infrastructure attracted foreign carriers to the international passenger
transport market. The liberalization through the ASEAN Open Skies policy in January 2015 and
granting reductions in service fees on new routes or for carriers entering the market are expected
to further increase competition in the air transport market. As for land transport, funding
mobilization and budget allocation are limited compared with the demand for road infrastructure.
The Government aims to densify road infrastructure, notably expressways, and to upgrade existing
routes through PPPs. The development of railway infrastructure is lagging, despite the update of its
legal framework in 2017. Foreign investment is not present in this segment.
35.
The number of supermarkets, shopping centres, and convenience stores is on the rise, and
competition has pushed retailers to consolidate in the past five years. Economic needs tests for retail
outlets are under the responsibility of provincial authorities. Since 2015, wholly foreign-owned
companies have been allowed in almost all distribution services; however, trading rights and
distribution rights are separately granted. Viet Nam reduced the list of forbidden products by foreigninvested distributors.
WT/TPR/S/395 • European Union
-9SUMMARY
1.
This 14th Trade Policy Review report of the European Union (EU) covers developments in
EU trade policy during the period March 2017-September 2019. "EU" in this connection means the
EU-28.
2.
Real GDP growth in the EU was relatively strong in 2017-18, but slowed somewhat in the
second half of 2018 due to several factors, including weakness in the manufacturing sector,
escalating trade tensions, and the prospect of the United Kingdom's withdrawal from the EU. Annual
GDP growth is expected to decline from 2.0% in 2018 to 1.4% in 2019 and to increase to 1.6% in
2020. Significant progress has been made in recent years regarding the reduction of unemployment
and poverty, the correction of macroeconomic imbalances, and the improvement of the fiscal
positions of EU member States. While discussions on an EU digital services tax regime were
suspended, several EU member States introduced such a tax at the national level. The relatively
positive recent growth performance of the EU economy provides an opportunity to focus on certain
long-term challenges that need to be addressed to support stronger and more inclusive growth by
improving productivity and boosting investment. In this regard, recent policy initiatives aim to better
exploit the potential of the EU's single market, which remains fragmented, especially in services,
energy and the digital economy.
3.
Extra-EU trade in goods and services as a share of EU-GDP was nearly 35% in 2018. The
share of the EU in world trade in goods and services was 16.7% in 2017-18 and has been on a
declining trend during the last two decades. The EU remains the most important trading partner for
some 80 economies. While EU merchandise trade with third countries continued to grow, the
merchandise trade balance recorded a deficit in 2018 mainly due to the large deficit in fuel products.
The United States, China and Switzerland continued to be the main destinations of EU merchandise
exports. The EU was a net exporter of services, and its surplus in services trade increased during
the review period. The United States and China are the EU's main partners in services trade.
4.
The scope of the EU's exclusive competence to conclude international trade agreements was
clarified by an opinion of the Court of Justice of the EU (CJEU). In light of this opinion, the exclusive
EU competence to conclude international trade agreements is now understood to cover the following
matters: trade in goods; trade in services, including all transport services other than air transport;
trade-related aspects of intellectual property; public procurement; market access and investment
protection in relation to foreign direct investment (FDI); and the termination of member State
bilateral investment agreements for the parts concerning exclusive competence.
5.
In March 2017, the United Kingdom notified its intention to withdraw from the EU under
Article 50 of the Treaty on European Union on 31 March 2019. While negotiations under Article 50
have resulted in an agreement on the terms of the withdrawal, this agreement had not yet been
ratified at the time of the circulation of this report. On 29 October 2019, the European Council, in
agreement with the United Kingdom, decided on an additional extension of the period provided for
in Article 50(3), until 31 January 2020.
6.
The EU pursues "a balanced and progressive trade policy to harness globalisation", premised
on the idea that global trade is a key contributor to a competitive and prosperous EU but needs to
be proactively shaped and managed to ensure that it is fair, projects values and remains firmly
anchored in a rules-based system. The first main objective of this policy is to conclude new trade
partnerships to build progressive rules for global trade and to use trade policy to promote universal
values regarding environmental, social and labour protection and fundamental rights, and preserve
the right to regulate in the public interest. Aside from the negotiation and conclusion of bilateral
trade agreements, a noteworthy development relating to this first objective is that gender issues
have begun to figure more prominently in EU trade policy. In addition, an Action Plan was adopted
to improve the implementation and effectiveness of provisions on sustainable development in the
EU's free trade agreements (FTAs).
7.
A second main objective of the balanced and progressive trade policy is to protect EU interests
and ensure fairness through a robust trade and investment policy. This was reflected in, inter alia,
reforms of the EU's trade remedies' instruments, discussion and proposals on the need to combat
unfair subsidy practices, discrimination and lack of reciprocity in government procurement, and the
adoption of a new mechanism for the screening of FDI from third countries. A third main objective
WT/TPR/S/395 • European Union
- 10 is to deliver effective agreements through a transparent and inclusive negotiation process. In this
regard, the EU institutions took steps to enhance transparency in the negotiation of trade
agreements, such as by publishing texts of (draft) negotiating directives. The EU also adopted a new
approach to the architecture of bilateral trade agreements. This approach envisages the negotiation
of two separate agreements: an FTA which will cover matters within the exclusive competence of
the EU and which will be concluded only by the EU, and an Investment Protection Agreement which
will include both matters in which the EU has exclusive competence and matters in which the EU and
its member States share competences and which will be concluded by the EU and the member
States.
8.
In light of recent challenges facing the multilateral trading system, the EU emphasized the
importance of preserving an open, rules-based multilateral trading system, with the WTO at its core,
and the need for comprehensive reform of the WTO. The EU made numerous notifications during
the review period in areas such as agriculture, trade remedies, technical regulations, regional trade
agreements and preferential rules of origin. It was a complainant in five new dispute settlement
cases and a respondent in one new case.
9.
As at 30 September 2019, the EU had 41 FTAs in force with 72 countries. The largest
FTA partners, based on data on trade in goods, were Switzerland, Turkey and Norway. During the
review period, the FTA with Canada was applied provisionally; the FTA with Japan entered into force;
FTAs and Investment Protection Agreements with Singapore and Viet Nam were completed;
FTA negotiations were concluded at a political level with Mexico and with Mercosur; negotiations
were launched on the modernization of the existing agreement with Chile; and negotiations on
comprehensive FTAs were launched with Australia and New Zealand. Aside from the economic
opportunities, the EU considers that these FTAs have strategic benefits in an international trading
environment that has become more uncertain and unstable.
10.
The EU adopted a Joint Statement with the United States in July 2018 in which they agreed,
inter alia, to work towards the elimination of tariffs, non-tariff barriers, and subsidies on non-auto
industrial goods, and towards the reduction of barriers to trade in services, chemicals,
pharmaceuticals, medical products and soybeans.
11.
The EU Generalized Scheme of Preferences (GSP) provides a general GSP arrangement and
two special arrangements. As at 30 September 2019, there were 15 beneficiaries of the EU's general
GSP arrangement, 8 beneficiaries of the EU's GSP + arrangement, and 48 beneficiaries of the
EU's Everything But Arms arrangement. A mid-term review of the GSP scheme concluded in 2018
that there was no need to amend the GSP Regulation before its expiry on 31 December 2023 but
that measures should be taken to improve transparency and inclusiveness in GSP monitoring, both
in the EU and in the beneficiary countries, and to promote greater awareness of GSP in beneficiary
countries.
12.
New EU legislation on the screening of FDI into the EU from third countries was adopted in
2019, against the background of growing concerns regarding the impact on the strategic interests
of the EU or its member States of certain types of FDI, especially in cases involving state-owned
enterprises and strategic sectors. It provides for a framework for the screening by member States
of FDI into the EU on the grounds of security or public order, and establishes a mechanism for
cooperation between member States, and between member States and the Commission, regarding
FDI from third countries likely to affect security or public order. It does not create a centralized
mechanism at EU level for the screening of FDI.
13.
The EU's Union Customs Code (UCC) for customs procedures at the border was implemented
in 2016, although the application of several elements remain ongoing pending the full functioning of
several electronic systems, some of which have faced delays. The EU's single window initiative
continues to be gradually implemented. New provisions for low-value consignments are expected to
be introduced in 2021.
14.
The EU's applied tariff structure did not change significantly since the last Review, and the
rates remain nearly identical. The simple average MFN tariff rate remains at 6.3%. MFN applied rates
are generally identical, or close, to the WTO bound rates. The agricultural sector continues to stand
out in the tariff analysis due to significantly higher rates (14.2% on average), the wide tariff range,
and the significant use of non-ad valorem rates and tariff quotas. For non-agricultural products, the
WT/TPR/S/395 • European Union
- 11 fish and fishery products (11.8% simple average) and clothing (11.6%) sectors stand out as the
ones with the highest tariff protection among an overall low average of 4.2%.
15.
The EU maintains different categories of tariff rate quotas (TRQs) for both agricultural and
non-agricultural products. As at 1 January 2019, there were 712 preferential TRQs in place pursuant
to FTAs with 26 trading partners, mainly with respect to agricultural products, and 257 conventional
TRQs, including WTO TRQs, and about 120 tariff lines for TRQs providing autonomous access. The
EU adopted regulations on the apportionment of WTO TRQs quotas between the EU and the
United Kingdom, in anticipation of the latter's eventual withdrawal from the EU. In this regard,
negotiations under Article XXVIII of the GATT 1994 were initiated.
16.
The EU continues to have several preferential regimes, both reciprocal and unilateral, which
offer preferential duties upon importation into the EU. Based on the 2019 preferential duty rates,
most partners or recipients receive duty-free access on a large percentage of their exports to the
EU. Like the situation with MFN tariffs, access was greater on non-agricultural goods than on
agricultural goods. In general, the percentage of duty-free lines increased since the last Review, due
to the staged implementation of some agreements and new improved agreements with certain
partners. At the same time, the simple average tariff rate slightly decreased for many agreements
for the same reason. The share of imports under preferential tariff regimes in total EU imports is
relatively low, with unilateral preferential regimes accounting for 3.8% of total imports in 2018, and
preferential FTAs accounting for 13%.
17.
There were several important legislative developments with respect to the EU's value-added
tax (VAT) regime. For example, one set of amendments to the VAT Directive of 2006, which aims to
simplify VAT for e-commerce transactions, entails the removal of the VAT threshold of EUR 22, which
means that all commercial goods entering the EU will be subject to VAT from 1 January 2021. The
amendments also introduce two alternative VAT collection mechanisms.
18.
The EU continues to apply several prohibitions, restrictions and licensing requirements on
imports which have increased in number over the review period. New or expanded prohibitions or
restrictions on imports that took effect during the review period concerned measures on mercury,
invasive alien species, certain persistent organic pollutants and cultural goods, for example.
A directive on the single use of plastics adopted in 2019 must be transposed by member States by
July 2021. A regulation on conflict minerals, adopted in 2017, requires importers of tin, tungsten,
tantalum and gold to comply with certain supply chain due diligence requirements as of
1 January 2021.
19.
The EU basic anti-dumping and anti-subsidy regulations were amended by two new
regulations. The first, adopted in 2017, allows for the use of alternative methods of determining
normal value where there are state-induced distortions in the exporting country. The amendments
made by the second regulation, adopted in 2018 as part of a comprehensive modernization of
EU trade remedy legislation, are more numerous and diverse and concern both procedural aspects,
such as the duration of provisional measures, and substantive aspects, such as the calculation of an
injury margin. The EU continues to be a significant user of trade remedies, although the number of
new anti-dumping and anti-subsidy initiations steadily declined between 2016 and 2018. The steel
surveillance measure continued to be in place, followed by the introduction of the steel safeguard
measure replacing this measure for certain steel categories in 2018-19. A similar surveillance
measure on aluminium was put in place in 2018, citing the vulnerable position of the EU industry.
20.
The EU does not impose taxes, charges or levies on exports. It maintains prohibitions or
restrictions on the export of about 11 categories of products, many of which are applied pursuant to
international agreements, such as CITES and the Montreal Protocol. The scope of export restrictions
on mercury was expanded, regulations on certain goods which could be used for capital punishment,
torture or other cruel, inhuman or degrading treatment or punishment were replaced and codified
into a new regulation, and more stringent measures were put in place for raw ivory. A ban on exports
of certain plastic waste to non-EU countries will apply from 2021. The EU continues to regulate the
export of certain products, pursuant to its export control legislation on dual-use goods. The
EU export control regulation was amended twice during the review period, mainly to update the
annexes to reflect certain changes to the international agreements on which it is based. Based on a
proposal made by the Commission in 2016, a legislative process is under way to upgrade the
EU's export control regime.
WT/TPR/S/395 • European Union
- 12 21.
Export or trade promotion activities are generally within the realms of the EU member States.
In addition, most member States also have some form of officially supported export financing,
credits, insurance or guarantees. The EU has several provisions on export credit, insurance and
guarantee instruments but does not have any all-encompassing legislation, except on short-term
official export credits. EU rules on capital requirements were amended during the review period to
provide that EU financial institutions subject to these rules are no longer required to include export
credits in their leverage ratios.
22.
The EU provides incentives in the form of subsidies and state aid, granted both out of the
EU budget and by member States. At the EU level, the two largest areas of expenditure during the
2017-18 period were agriculture, and structural operations, mainly through the European Structural
and Investment Funds (ESIF). The ESIF amount to EUR 644 billion during 2014-20, of which 71.6%
is EU financing (EUR 461 billion) and 28.4% is EU co-financing (EUR 183 billion). The ESIF comprise
six funds: the European Regional Development Fund (43.3% of the total ESIF budget); the European
Agricultural Fund for Rural Development (23.5%); the European Social Fund(18.7%); the Cohesion
Fund (11.6%); the European Maritime and Fisheries Fund(2.0%); and the Youth Employment
Initiative (1%). The European Commission is currently evaluating most of the state aid rules in order
to take stock of the results of the reforms implemented since 2012 pursuant to the State Aid
Modernization initiative. The total amount of state aid (excluding transport and agriculture) provided
by member States increased from EUR 91 billion in 2014 to almost EUR 111 billion in 2017, largely
due to an increase in aid for environmental protection (including energy saving).
23.
Some important changes were made during the review period to the basic legislative
framework regarding technical requirements, standards, conformity assessment and accreditation.
Firstly, a new regulation was adopted in 2019 which aims to improve the application of the principle
of the mutual recognition of goods. It provides, in particular, that member States that use existing
technical regulations to restrict market access for products lawfully marketed in another member
State must justify their position with technical and scientific evidence, and must grant the economic
operators affected an opportunity to provide comments. Secondly, another regulation adopted in
2019 aims to enhance cooperation between national market surveillance authorities by providing for
information-sharing mechanisms between them regarding illegal products and ongoing
investigations.
24.
Regarding sanitary and phytosanitary measures, a new regulation was adopted in 2017 on
official controls on products of animal origin intended for human consumption. It includes rules for
the performance of official controls and other control activities by the competent authorities of the
member States, sets out the requirements to be fulfilled for the entry into the EU of consignments
of animals and goods from third countries, and empowers the Commission to adopt delegated acts
concerning those requirements. The Animal Health Law of 2016 is to become applicable on
21 April 2021, and the Plant Health Law of 2016 on 14 December 2019, except for certain provisions
relating to a phytosanitary certificate for exports.
25.
In the area of competition policy, the main legislative development during the review period
was the adoption of a directive that strengthens the competences of national competition authorities
in the enforcement of EU competition law. The Commission commenced the review of the Vertical
Block Exemption Regulation, which will expire in May 2022. In relation to anti-competitive
agreements and abuse of dominant position, the Commission adopted several decisions concerning
large firms in the digital services market, and took action to ensure competition in gas supply
markets. It also adopted several important decisions in merger cases.
26.
One of the main developments in the area of government procurement was the adoption by
the Commission, in October 2017, of a public procurement strategy which aims at further improving
EU public procurement practices by working with public authorities and other stakeholders and which
includes three initiatives: (i) a mechanism for large infrastructure projects, to provide clarity and
guidance to public authorities on public procurement; (ii) a recommendation to professionalize public
buyers; and (iii) a consultation on guidance on public procurement of innovation. To harmonize
procedures and processes, the Commission introduced the European Single Procurement Document.
27.
Regarding intellectual property, several legislative measures were put in place during the
review period, notably with respect to copyrights and related rights: (i) the Directive on copyright
in the Digital Single Market; (ii) the Directive on television and radio programmes; (iii) the Regulation
on cross-border portability of online content services in the internal market; and (iv) the Directive
WT/TPR/S/395 • European Union
- 13 and Regulation to implement the Marrakesh Treaty, aimed at giving blind and visually impaired or
otherwise print-disabled people better access to printed materials. The unitary patent package has
not yet entered into force. In May 2019, the EU adopted amendments to its rules on supplementary
protection certificates for medicinal products. Various measures were taken during the review period
to implement substantive reforms to EU trademark legislation, based on a regulation modernizing
the EU legal framework for EU trademarks and a directive further harmonizing national trademark
laws, adopted in 2015. Given the importance of geographical indications (GI) for the EU's external
trade, the EU has sought to include a comprehensive section on GI protection for agricultural
products, in addition to wines and spirits, in the more recent generation of FTAs. Regarding
undisclosed information, nearly all EU member States adopted legislation to implement the Trade
Secrets Directive adopted in June 2016.
28.
In agriculture, the 2013 reforms of the Common Agricultural Policy (CAP) have been fully
applied since 2015, and the structure of the agricultural policies has remained the same: the
European Agriculture Guarantee Fund (EAGF) covers direct payments and market measures (Pillar I)
and the European Agricultural Fund for Rural Development (EAFRD) finances the EU contribution to
rural development programmes (Pillar II). The main legislative change during the review period was
the Omnibus Agricultural Provisions Regulation, adopted in December 2017, which made certain
technical amendments to the four Basic Acts of the CAP on direct payments, rural development,
common market organization, and horizontal regulation (financing, management and monitoring of
the CAP). Legislative proposals for the reform of the CAP beyond 2020 were submitted by the
Commission in 2018 and are currently under discussion. These include proposals relating to the
general and specific objectives to be pursued through support funded under the EAGF and the
EAFRD. No export subsidies were provided during the review period, and, as part of the broader
revised EU-28 Schedule certification exercise, the EU submitted the changes to its
WTO commitments to revise its export subsidy commitment levels pursuant to the Nairobi Ministerial
Conference Decision. There were no substantial changes during the review period regarding market
access for imports of agricultural products into the EU.
29.
Regarding fisheries, there were no significant changes during the review period in the
management of fisheries under the reformed Common Fisheries Policy (CFP), which has been in
effect since 2014. The Commission conducted a comprehensive assessment of the implementation
of the CFP, considering the CFP's objective of restoring and maintaining fish stocks at sustainable
levels by 2020. While tariff protection on an MFN basis is relatively high, the EU grants preferences
on a reciprocal or unilateral basis, to major fishery suppliers. The EU adopted a new regulation in
December 2017 on the sustainable management of external fishing fleets. Regarding international
cooperation, it signed ocean partnership agreements with China and Canada and, together with nine
other countries, signed an Agreement to Prevent Unregulated Commercial Fishing on the High Seas
in the Central Arctic Ocean. As at October 2019, the EU had 12 Sustainable Fisheries Partnerships
Agreements with partner countries, in addition to the Northern Agreements with Norway, Iceland
and the Faroe Islands.
30.
Key objectives of the EU's energy policy, as defined in the Energy Union Package adopted in
2015, are: improving security of energy supply; completing the internal energy market; boosting
energy efficiency; decarbonizing the economy and becoming the world leader in renewable energy;
and promoting research, innovation and competitiveness. New legislation adopted during the review
period relating to these objectives includes new rules on the security of gas supply and electricity
risk preparedness, a revision of the gas Directive, a regulation and a directive on the internal market
for electricity, amendments to the Energy Efficiency Directive, and a directive on the promotion of
the use of energy from renewable sources. The 2030 Climate and Energy Policy Framework, adopted
in 2014, has the following targets for 2030: reduce greenhouse gas emissions domestically by at
least 40% compared to 1990 levels; reach a share of at least 32% in renewable energy; and increase
energy efficiency by at least 32.5% at EU level. In 2018-19, the EU adopted a new comprehensive
legislative framework for energy and climate change policies.
31.
With respect to manufacturing, apart from developments relating to specific sectors
(automobiles, chemicals, and steel) a notable development during the review period was the growing
interest in the role of industrial policy. In September 2017, the EU formulated a renewed Industrial
Policy Strategy, "Investing in a smart, innovative and sustainable industry", which aims to integrate
all existing and new horizontal and sector-specific industrial policy initiatives into one comprehensive
strategy. The Strategy proposed measures relating to: cybersecurity; the free flow of non-personal
data; the circular economy; modernization of the intellectual property rights framework;
WT/TPR/S/395 • European Union
- 14 improvement of the functioning of public procurement markets; extension of the skills agenda to
new key industry sectors; sustainable finance; a balanced and progressive trade policy and a
EU framework for the screening of FDI; the secure, sustainable and affordable supply of critical raw
materials; clean, competitive and connected mobility; and the exploitation of key enabling
technologies. Many of the measures envisaged in this Strategy were adopted in 2018-19. In
March 2019, the European Council invited the Commission to present, by the end of 2019, a long
term-vision for the EU's industrial future.
32.
In financial services, regulatory developments during the review period fell into four
categories. Firstly, the EU took steps to reduce risk and enhance the resilience of the banking sector.
In May 2019, it adopted a banking reform package which amends core provisions of the Single
Rulebook, namely the Capital Requirements Regulation and Directive and the Bank Recovery
Resolution Directive, considering international standards. The EU also introduced new measures
regarding non-performing loans, which have been on a declining trend in recent years. Secondly,
the first two pillars of the Banking Union (the Single Supervisory Mechanism and the Single
Resolution Mechanism) are operational; the third pillar (the European Deposit Insurance Scheme),
has yet to be established. Thirdly, most of the legislative proposals submitted by the Commission
on core aspects of the Capital Markets Union, which aims to develop deeper and more integrated
capital markets across the EU, were adopted during the review period. Finally, the Commission
issued a communication, setting out its overall approach to equivalence in the area of financial
services, and adopted several equivalence decisions with respect to third countries.
33.
Regarding construction services, a sector being examined for the first time, the EU is the
world's largest trader of construction services (intra- and extra-EU trade), and took several steps in
recent years towards regulatory simplification and improving the internal market for the construction
sector. The main legislation applicable to this sector is the 2006 Services Directive. Several other
EU rules are also relevant to the construction sector, for example the 1996 Directive on the posting
of workers in the framework of the provision of services, which was amended in 2018. One recent
development is a proposed Directive and Regulation on a services e-card to enhance cooperation in
member States but it is currently on hold. The EU has taken GATS commitments for cross-border
services in the construction sector and also has made generally improved commitments in its FTAs.
According to information from the OECD on services' trade restrictiveness, EU member States were
ranked relatively open compared to OECD peers for construction services.
34.
During the review period, the EU adopted legislative measures under the first pillar of the
Digital Single Market (DSM) Strategy launched in 2015 that address different types of barriers to
the growth of cross-border e-commerce. These measures deal with: cross-border portability of online
content subscriptions; cooperation between national consumer protection agencies; VAT aspects of
e-commerce; unjustified geoblocking; cross-border parcel delivery services; copyright in the DSM;
copyright and related rights applicable to certain online transmissions of broadcasting organizations
and retransmissions of television and radio programmes; contracts for the supply of digital content
and services; and contracts for the sale of goods.
35.
The second pillar of the DSM Strategy resulted in a major reform of EU rules on
telecommunications infrastructure and services markets with the adoption, in December 2018, of a
new European Electronic Communications Code (recast) (EECC). The EECC, which member States
are required to transpose by 21 December 2020, amends the four Directives that constitute the
current EU telecoms regulatory framework and integrates them into a single legal instrument.
It expands the scope of application of EU telecoms regulation in various respects, in line with the
principle of technological neutrality and to keep pace with technological developments. It aims to
contribute to the creation of the additional capacity in high-speed broadband networks necessary to
achieve the strategic Internet connectivity objectives set by the Commission in 2016. The EECC also
contains provisions aimed at increasing the coordination and coherence of radio spectrum
management, significantly alters the scope of universal service obligations, strengthens consumer
protection rights, and reinforces the role of national regulatory authorities. The EECC was
accompanied by the adoption of new rules on the role of the Body of European Regulators for
Telecommunications.
36.
Other measures adopted under the second pillar of the DSM Strategy, include a non-binding
Commission Recommendation of 1 March 2018 on measures to effectively tackle illegal content
online and a Regulation, adopted in June 2019, on rules to improve the fairness and transparency
of online platforms. This Regulation aims to address potential friction arising from the growing
WT/TPR/S/395 • European Union
- 15 dependence of business users on providers of intermediation services. In June 2019, the
EU Cybersecurity Act entered into force. It reinforces the role of the EU Agency for Cybersecurity,
and establishes a European cybersecurity certification framework.
37.
In audiovisual services, the Audiovisual Media Services Directive was the subject of a
comprehensive set of amendments in 2018. The main changes reinforce the country of origin
principle, reinforce the existing rules on hate speech and prohibit provocations to commit terrorist
acts, introduce additional protections for children, extend certain rules for audiovisual media services
to video-sharing platforms, establish rules on the promotion of European content in respect of
on-demand audiovisual service providers, introduce more flexibility regarding restrictions on
television advertising, and require member States to establish national regulatory authorities or
bodies.
WT/TPR/S/397 • Japan
- 10 SUMMARY
1.
Since the previous Trade Policy Review in 2017, the Government continued to support growth
by easing financial conditions, reducing the fiscal deficit, and raising employment and female labour
force participation, thus ensuring Japan's longest economic expansion of the post-war era. Annual
GDP growth peaked at 1.9% in 2017, and its annual average rate stood at 1.1% (2016-18), a minor
slowdown compared to previous performance (averaging 1.2% over 2013-15). Monetary and fiscal
stimulus measures are being used to spur economic recovery. Japan has maintained its position as
the world's third largest and fifth most competitive economy (2018). According to latest available
data, income inequality and a poverty gap remained virtually unchanged. Inflation dropped
considerably below the Bank of Japan's target before picking up (1% in 2018), whereas the relatively
low unemployment rate continued to decline (2.4% in 2018).
2.
During the review period, trade-related structural reforms (e.g. in the areas of taxation,
competition policy, corporate governance, and labour market policies) were undertaken. Both multi
factor and labour productivity registered positive growth, and targets were set for the latter; SMEs'
productivity in manufacturing remains relatively low compared to large firms. Monetary policy,
involving, among others, Quantitative and Qualitative Monetary Easing (QQE) with negative interest
rate, continued to provide a monetary stimulus to growth and help building a stable financial
environment.
3.
Japan maintains a free-floating exchange rate regime; no foreign exchange intervention took
place during the review period. Heightened global uncertainty contributed to a slight appreciation in
the JPY/USD exchange rate. The current account registered a larger overall surplus, that peaked at
4.1% of GDP in 2017, inter alia, due to a rising primary income surplus deriving mainly from
investment income, and shrank in 2018 to 3.5% of GDP, reflecting smaller goods trade and income
balances; this ratio was estimated to remain virtually unchanged in 2019. Foreign exchange reserves
(excluding gold) increased steadily. Gross external debt also rose steadily over the review period
(81% of GDP in 2018). The fiscal deficit, often financed through supplementary budgets to the
annual budget, declined slightly (3.2% of GDP in 2017 and 2018) but the gross financial liabilities
of general government rose (224.2% of GDP in 2018). The authorities envisaged taking temporary
and special offsetting/mitigating fiscal measures in the initial budgets for FY 2019 and FY 2020 to
address concerns related to the increase in the consumption tax rate from 8% to 10% on 1 October
2019.
4.
The relative importance of international trade in Japan's economy, its degree of openness,
and its integration into the world economy and global value chains continued to be reflected by the
ratio of its trade (exports plus imports) in goods and services to GDP; despite a drop from its 2014
peak to a 2016 trough, this ratio increased to 36.7% in 2018. Notwithstanding some minor
fluctuations in trade shares, Japan's main trading partners remain China, the United States and the
European Union, whereas its main inbound/outbound foreign direct investment (FDI) partners were
virtually the same, i.e. the United States, the British Cayman Islands, the European Union and the
Republic of Korea. The FDI inbound stock continued to rise steadily and was largely held by European
Union investors. Government initiatives to attract FDI have been focused on providing matching and
advisory services. Over the review period, the main law governing FDI, the Foreign Exchange and
Foreign Trade Act, was amended for reasons of security protection, by: expanding the scope of prior
checking of unlisted stock transfers between foreign investors; and introducing a provision that
unregistered foreign investors may be subject to executive orders, including orders to sell their
holding stocks. Prior notification and approval requirements are in place for investments where there
could be significant adverse effects on the smooth management of the national economy or on the
grounds of public order, public safety or national security. FDI restrictions remain in place in the
telecommunications, broadcasting and radio sectors.
5.
Japan aims to develop "free, fair and high-level trade rules" domestically, with key trading
partners and in international fora (including the WTO), as well as to make progress in reinforcing
economic ties and cooperation with emerging economies. Its 2018 White Paper on International
Economy and Trade includes promoting exports and the use of Economic Partnership Agreements
(EPAs). Trade-related policy objectives are also contained in various other strategies also being
implemented, including: the evolving Abenomics programme; the 2016 Japan Revitalization
Strategy; the Future Investment Strategy; the New Economic Policy Package; and the 2019 Growth
Strategy. Over the review period, Japan was involved in three new dispute settlement cases as
complainant, and reserved its third-party rights in 34 cases. Japan maintained a strong record of
WT/TPR/S/397 • Japan
- 11 notifications to the WTO, although up-to-date notifications on domestic support in agriculture and
government procurement are outstanding. Since 2017, new regional trade agreements that have
entered into force for Japan are: the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP) and the EU-Japan EPA. Japan also signed the First Protocol to Amend the
Agreement on ASEAN-Japan Comprehensive Economic Partnership (AJCEP), which includes chapters
on trade in services and on investment, as well as a trade agreement with the United States. Changes
were made to the framework for graduation from Japan's GSP scheme, with a view to granting
preferences to the economies that need them most. Key initiatives to improve the business
environment include: introducing labour force reforms; improving corporate governance; and
lowering corporate tax. Regulatory reform pilot schemes continue to be undertaken through the
National Strategic Special Zone initiative.
6.
The general thrust of Japan's trade policy remained relatively unchanged during the period
under review. The tariff remains one of the main trade policy instruments and a minor source of tax
revenue (1.65% of total tax revenue in FY2019). The structure of the MFN applied tariff remains
complex, with a total of 272 tariff rates (same as in FY2016); there are 136 different ad valorem
rates, 75 different specific rates, 29 different alternate rates and 24 different compound rates, as
well as 8 different other types of duty. In FY2019, Japan's overall simple average applied MFN tariff
rate rose slightly to 6.3% (up from 6.1% in FY2016), mainly due to higher AVEs and, to a much
lesser extent, to a HS nomenclature change. The simple average tariff rate for agricultural products
(WTO definition) is 17.9% compared with 3.5% for non-agricultural products. Duty-free lines
represent 40.5% of all lines. 7.1% of Japan's tariff lines are non-ad valorem, and all the highest
tariffs have non-ad valorem rates. Japan bound 98.1% of tariff lines, and the overall gap between
the simple averages of MFN applied and bound rates remains minimal, at 0.05 percentage points,
thus conferring a high level of predictability. Under Japan's RTAs, preferential tariffs have
significantly increased market access for these trading partners by around doubling the number of
duty-free tariff lines.
7.
Since 2017, there have only been minor changes to Japan's customs procedures. These
include the introduction of: tougher penalties for failure to obtain the required import/export
permissions; a new principle on cargo reporting; and flexibility to authorized economic operators to
lodge their import/export declarations at any customs office, not just the one where their
imports/exports are stored.
8.
During the review period, changes to Japan's import licensing regime related to the removal
of import restrictions on whales and their preparations, due to Japan's withdrawal from the
International Whaling Commission, and the lifting of restrictions in line with the removal of United
Nations sanctions. Import quotas continue to be applied to various marine products, with the aim of
conserving exhaustible natural resources and enforcing government measures to restrict quantities
of the like domestic products; quota fill rates in 2017 ranged from 2.7% to 98.4%.
9.
Amendments to the legislation on anti-dumping and countervailing measures aimed to ease
the conditions for applicants requesting the imposition of these measures. Japan maintains seven
anti-dumping measures, relating to four products and applying to two trading partners. Definitive
duties were imposed for the first time during the review period on polyethylene terephthalate from
China and carbon steel butt-welding fittings from China and the Republic of Korea; they were
removed on electrolytic manganese dioxide from South Africa and Spain. Japan did not apply any
safeguard or countervailing measures during the review period, nor did it initiate any investigations
in these areas.
10.
Over the review period, there were various changes to Japan's export control regime with
respect to goods and destinations. Japan does not levy any export taxes, nor does it maintain any
export quotas or operate export subsidy programmes. The Nippon Export and Investment Insurance,
one of Japan's official export credit agencies, was transformed from an incorporated administrative
agency to a wholly government owned special stock company, in order to, inter alia, better reflect
in its business practices the Government's priority areas.
11.
Domestic support to production and trade remains in place. It is available to foreign and
domestic companies through tax incentives, grants and loan schemes. New programmes launched
over the review period were aimed at: promoting business investment by local SMEs, assisting the
business succession of SMEs, and spurring wage hikes and productivity. Activity-specific support
was provided by central or local governments.
WT/TPR/S/397 • Japan
- 12 12.
During the review period, various amendments were made to standards legislation, inter alia,
to expand the scope of Japanese Industrial Standards to encompass services, programmes and other
electronic records and business management systems, as well as to allow standards to be drafted
by accredited private-sector associations. The scope of Japanese Agricultural Standards was
enlarged to include production processes, handling methods (related to services) and testing
methods. Amendments to food labelling standards, inter alia, require the place of origin of the
product's heaviest ingredient to be labelled, and introduce stricter requirements for the use of "nonGM" labels.
13.
Concerning SPS, the Food Sanitation Act was amended in order to reflect changing dietary
patterns and the environment surrounding food in Japan, as well as to increase hygiene controls;
with respect to imports, control processes applied to the competent authorities in the country of
export have been strengthened. The Agricultural Chemicals Control Act was also amended, with a
view to improving pesticide safety and contribute to more efficient agriculture. Japan sets some
standards on food additives and maximum residue limits (MRLs) that are different from Codex
standards and MRLs; these are apparently based on scientific evidence. Over the review period,
Japan expanded the scope of animal quarantine for raw milk to also include milk products.
14.
State participation in certain activities persists. State trading entities engaging in leaf tobacco,
opium, rice, wheat, barley, and milk products remained in place. Major commercial state-owned
enterprises include those engaging in energy, financial services, telecommunications and some
transport-related activities. Market monopolies are retained in the domestic manufacturing of
tobacco and in the importation of leaf tobacco. During the review period, the basic rules on
government procurement remained virtually unchanged. Japan, a WTO Government Procurement
Agreement signatory, promotes Green procurement and the participation of SMEs in the market.
Despite no origin-based restrictions, foreign companies continue to retain a low share in the public
procurement market.
15.
Since the last Review, the legal framework governing competition policy was updated to, inter
alia, introduce procedural undertakings under the CPTPP. The number of cease-and-desist orders,
as well as the surcharge payment amounts, dropped. Price surveys remain in place on certain
pharmaceutical products based on a drug price standard. Action was taken to improve corporate
governance by amending the main regulatory framework in this area.
16.
Intellectual property (IP) remains of vital importance to the economy, and revenue from IP
rights grew exponentially in recent years. A new IP Strategy Vision was released in 2018 to offer a
medium- to long-term perspective on the evolution of society and the IP system. Recent
amendments to legislation were linked to this Strategy, and related to: patents, trademarks and
geographical indications; expansions in the scope and length of protection for designs; new data
protections; new copyright restrictions; and measures to facilitate IP right enforcement. An
Integrated Innovation Strategy was adopted in 2018 and an Integrated Innovation Strategy
Promotion Council was set up.
17.
The agricultural sector accounts for a small share of GDP (1.2% in 2017) and employment
(3.8% in the same year), and continues to be characterized by small farm holdings, most of which
are run as side-businesses. While agricultural output and exports were on a growing trend over the
review period, Japan continues to run a significant trade deficit in agricultural goods. Agricultural
policy goals, inter alia, include making agriculture a growth industry, with greater private-sector
participation, increasing exports, and reaching certain self-sufficiency targets. Support to the
agricultural sector (0.84% of GDP in 2018) remains relatively high, and was estimated to be over
double the OECD average. Tariffs vary considerably among agricultural products, with just below
one quarter duty-free and a maximum tariff (AVE, out of quota) of 499.7%. Japan applies 18 tariff
rate quotas, covering 101 tariff lines (HS six-digit level); fill rates ranged from 23.4% to 305.6%.
Over the review period, Japan applied either volume- or price-based special safeguards several times
to out-of-quota imports of a variety of products. Key developments over the review period were:
the abolition of direct payments for rice and rice production volume targets (although direct
payments to rice farmers remain in place for optimizing the use of paddy fields); the introduction of
a new revenue insurance programme applicable to almost all farm products; a review of the
Agricultural Mutual Aid system; the abolition of administered prices for beef and pig meat; increased
support for domestic beef and pork producers; and the introduction of a modified support system
for milk.
WT/TPR/S/397 • Japan
- 13 18.
During the review period, the fisheries production, fishing fleet, number of fishermen and fish
consumption all declined. Japan amended its Fisheries Act in 2018 to adopt the system of individual
quotas, transferrable under certain conditions, within a Total Allowable Catch system, and to open
the sector to private investors in addition to cooperatives by reforming the allocation of fishing rights.
For FY2019, the average MFN tariff applied on fish and fish products was 6.1%, and rates ranged
from zero to 15% (same in FY2016). Programmes to support fisheries totalled JPY 68.7 billion in
FY2017. Various measures against illegal, unreported and unregulated fishing were taken. In
December 2018, Japan withdrew from the International Convention for the Regulation of Whaling,
with effect from June 2019, in order to resume commercial whaling.
19.
The mining and quarrying sector continued to contribute a small share to GDP and
employment (0.1% in 2017). Mineral resource exploitation is undertaken under concession
agreements. Japan continues to import nearly 92% of its energy supplies and, as such, remains
vulnerable to global commodity price movements. A 2018 Strategic Energy Plan is aimed, inter alia,
at increasing the share of locally produced renewable energy (including nuclear) in the total energy
mix, from 12% in 2017 to 24% in 2030, restoring nuclear capacity, meeting national objectives for
the reduction of greenhouse gas emissions, developing electric and hydrogen vehicles, and
promoting energetically autonomous housing, and raising energy efficiency. During the review
period, Japan pursued the liberalization and reform of its electricity and gas sectors. For both sectors,
entry to the retail market was completely liberalized, and the next phase, i.e. the unbundling of
vertically integrated regional utility, is underway. Electricity retail prices remain regulated.
20.
Manufacturing (20.8% of GDP in 2018) accounts for the majority of merchandise exports, and
remains driven by the transport equipment, machinery (general purpose, production and businessoriented), food products, chemical, and basic metals activities. During the review period, certain
manufacturing policy developments, including artificial intelligence, robotics and related plans
interlinked with services activities, were undertaken. Since the previous review, the average MFN
applied tariff for manufactured products dropped, and TRQs continued to apply on 62 manufactured
items; peak rates (AVEs) affect footwear (219.4%) and silk (97.9%). A few more industrial items,
were subject to anti-dumping duties. Domestic support continued under several non-industryspecific schemes, involving tax and non-tax incentives; activity-specific incentives were available,
inter alia, to the bekko (tortoiseshell) and ivory crafts industries, the leather and leather goods
industries, the manufacture of traditional craft products, R&D for care robot equipment, sochu
manufacture, and fuel-cell vehicles and connected industries
21.
The share of services in GDP and total employment stood at 69.5% and 72.7%, respectively,
in 2017; in 2018, services represented 7.2% of total merchandise and services exports. During the
review period, the financial services regime remained basically unchanged. The Financial Services
Authority was reorganized to be less sanction-oriented and to encourage financial services
stakeholders to develop and consolidate their position in the market. Basel IV principles and antimoney laundering measures were progressively implemented. Japan is in the process of developing
a safe regulatory framework for e-payments and crypto currencies. High-speed trading of securities
was further regulated.
22.
During the period under review, changes to the telecommunications services regulatory
framework involved the protection of consumers and their ability to change operators without
excessive penalties and keep the same number. The prices of telecom services remain relatively
high by international standards. Modern networks and equipment, such as LTE, 5G and IoT, are
being actively deployed.
23.
The regime governing the postal, courier and express regimes remained stable during the
period. The Japan Post Holdings privatization process was relaunched in 2017, with the sale of 23.6%
of government shares, and a further sale is scheduled. The universal service encompasses the
totality of postal items and services. "General correspondence services" and "special correspondence
services" were liberalized in 2002, but no licences were awarded to private operators for general
correspondence services, and the 532 special correspondence services operators are all Japanese
despite a non-discriminatory regime. Some foreign express carriers operate in Japan and receive
national treatment except air cabotage rights.
24.
The air transport regime remains basically unchanged, except for the concession process of
airports which was accelerated. Japan signed several air services agreements, liberalizing additional
frequencies and capacities, during the review period. Regarding maritime transport, the ports
WT/TPR/S/397 • Japan
- 14 concession process was also accelerated, and support for the Japanese merchant fleet was prolonged
and extended. Japan imposes no restrictions on foreign carriers, except for access to the flag and
cabotage. The port sector remains open to foreign investment.
25.
During the review period, the regime of distribution services remained unchanged. There are
no economic needs tests for large stores, and several major foreign distributors are present in the
market. The share of e-commerce in the distribution of physical goods is progressing smoothly but
at a faster pace in the Business to Business than in the Business to Consumers segment.
26.
Network environmental services, such as distribution of water, sewage and waste disposal,
remain open to the private sector, including foreign operators and investors, via various PPP
formulas. However, no foreign operators are present in these segments. National treatment applies
across the board to all environmental services.
27.
The practice of legal services is not reserved for nationals but, with respect to the practice of
Japanese law, a Japanese qualification is required. Foreign firms can establish and employ Japanese
lawyers to practice Japanese law.
WT/TPR/S/382 • United States
- 11 SUMMARY
1. This is the 14th Trade Policy Review of the United States. Since the last Review in 2016, the
focus of U.S. trade policy has shifted to adopting policies that are intended to support its national
security and strengthen its economy. These priorities are reflected in the President's 2018 Trade
Policy Agenda, which also calls for negotiating better trade deals, enforcing U.S. trade laws and U.S.
rights under existing trade agreements, and reforming the multilateral trading system.
2. The U.S. economy is in its ninth consecutive year of expansion. In 2017, real GDP growth
averaged 2.2%, up from 1.6% in 2016. In the first quarter of 2018, real GDP rose at an annual rate
of 2.2%, before accelerating in the second quarter to 4.1%.
3. Fiscal policy turned pro-cyclical in 2018, with the enactment of the Tax Cuts and Jobs Act of
2017, the Bipartisan Budget Act of 2018 and the Consolidated Appropriations Act of 2018. Tax rates
were lowered for businesses and individuals: the top corporate tax rate was reduced from 35% to
21%, and the tax system was changed from global to territorial. Federal budget deficits are projected
to continue increasing, from 4.2% of GDP in 2018 to 5.1% in 2022.
4. The Federal Reserve tightened the monetary stance during the review period. A sustained
increase in economic activity, the continued strengthening of the labour market and firming inflation
have resulted in moderate rises in the federal funds rate since 2015. In the first half of 2018, the
rate was increased twice, bringing it to a range of 1.75-2.0%. Inflation, as measured by the
12-month percentage change in the personal consumption expenditures (PCE) index, has remained
at or around the 2% target throughout the review period.
5. The U.S. current account deficit has been increasing since 2013, and reached US$469.1 billion
in 2017 (2.4% of GDP), mirroring a widening of the gap between gross national savings and gross
investment. Exports of goods totalled US$1.55 trillion in 2017, while imports reached
US$2.35 trillion. The merchandise trade deficit reached US$807.5 billion (4.2% of GDP) in 2017. On
the other hand, the services and primary income balances showed important surpluses in 2017.
6. The United States is one of the world's largest exporters and it has a diversified export base. The
largest export category is machinery and mechanical appliances, accounting for nearly a quarter of
merchandise exports, followed by vehicles and chemicals; their share of total exports did not vary
substantially during the review period. The share of mineral products experienced a sharp decline
between 2014 and 2016, before rising again in 2017. This behaviour can be ascribed to the fall in
oil prices and their subsequent recovery in 2017. The United States is also one of the world's main
importers. U.S. imports are diversified: the largest categories are machinery and mechanical
appliances, vehicles, mineral products, and chemicals. Reflecting sustained GDP growth, the shares
of machinery and mechanical appliances, vehicles, and chemicals in total imports have risen. In
contrast, the share of mineral products has declined. The EU-28, China, Japan, Canada and Mexico
are the United States' main trading partners. The United States continues to be the world's main
recipient of foreign direct investment (FDI). The main FDI sources are: the EU-28 (59% of the FDI
stock in the United States in 2017), Japan (12%), Canada (11%), and Switzerland (8%).
7. The U.S. Congress has legislative and oversight authority over trade issues; Congress works
together with the Executive Branch, which negotiates and implements trade agreements. The main
executive agency responsible for trade policy formulation continues to be the Office of the
United States Trade Representative (USTR), which is part of the Executive Office of the President.
8. As mentioned above, the thrust of trade policy changed during the review period. The President's
2018 Trade Policy Agenda is driven to achieve "free, fair, and reciprocal" trade relations, considered
critical to the U.S. national security policy. It also focuses on renegotiating and revising trade deals.
In terms of reforming the multilateral trading system, the Agenda advocates for "sensible and fair
reforms to the WTO". It notes that the United States remains committed to working with all WTO
Members who share the United States' goal of fair and reciprocal trade deals.
9. The United States is an original Member of the WTO. It is a party to the Agreement on
Government Procurement (GPA), a participant in the expanded Information Technology Agreement
(ITA), and a signatory to the Agreement on Trade in Civil Aircraft. The United States deposited its
instrument of acceptance of the Trade Facilitation Agreement (TFA) to the WTO in January 2015.
WT/TPR/S/382 • United States
- 12 The United States submitted numerous notifications during the period under review, covering areas
such as agriculture, anti-dumping, subsidies and countervailing measures, SPS, TBT, and import
licensing, among others. During the review period, the United States was involved in 21 dispute
settlement cases as a respondent and 13 as a complainant.
10. The United States has 14 FTAs in force with 20 countries, as was the case at the time of the
previous Review. Most of them cover both goods and services, except the FTA with Israel
(goods only). The United States has notified all its FTAs to the WTO. At the time of completion of
this report, the United States was renegotiating NAFTA, with the aims of modernizing the Agreement,
and reducing the U.S. trade deficit with NAFTA partners. In August 2018, the United States and
Mexico reached an agreement in principle to amend NAFTA. In October, an agreement with Canada
was announced. The United States-Korea Free Trade Agreement (KORUS) has also been
renegotiated, and the revised Agreement was signed on 24 September 2018. The United States
withdrew from the proposed Trans-Pacific Partnership (TPP) in 2017. Negotiations with the European
Union on the proposed Trans-Atlantic Trade and Investment Partnership (T-TIP) agreement were
paused at the end of 2016. Currently, the United States has four main unilateral preference
programmes: the African Growth and Opportunity Act (AGOA), the GSP, the Caribbean Basin
Initiative (CBI)/Caribbean Basin Trade Partnership Act (CBTPA), and the Nepal Trade Preference
Program (NTPP).
11. The U.S. foreign investment regime remained unchanged during the review period. The
investment regime is generally open, with a few sector-specific limitations, and review procedures
on foreign investment in a few industries, including the airline and nuclear energy industries.
Additionally, the United States has a national security review process, applicable to foreign
investment that might affect national security interests. International investment agreements and
investment chapters in FTAs are used by the United States to foster foreign investment.
12. The Committee on Foreign Investment in the United States (CFIUS) continues to oversee the
national security implications of foreign investment. CFIUS reviews transactions based on voluntary
notifications filed by the parties, or on its own initiative if it believes the transaction is a covered
transaction and may raise national security concerns. Each transaction is reviewed on a case-bycase basis, based on individual facts and circumstances. If national security concerns are identified
during the review, CFIUS may impose conditions, or CFIUS and the transacting parties may negotiate
a mitigation agreement to resolve any national security concerns. If CFIUS determines that the
national security concerns cannot be resolved and the parties do not withdraw and abandon the
transaction, the Committee will recommend that the President prohibit the transaction.
13. Having formally accepted the WTO TFA in January 2015, the United States provided its
notification on transparency, the operation of its single window, measures on the use of customs
brokers, and the TFA contact point in June 2017. In February 2018, the U.S. Customs and Border
Protection (CBP) announced that its Automated Commercial Environment (ACE) had been
completed. Importers and exporters may use the electronic portal to declare goods, obtain permits,
and access transaction and trade data. Within CBP, ten Centers of Excellence have been established
to specialize in all aspects of customs processing in several areas.
14. The United States operates several programmes to facilitate trade, while also addressing
national security concerns as a joint public-private partnership. Among these programmes, the
Customs-Trade Partnership Against Terrorism (C-TPAT) encompasses the entire supply chain,
involving enhanced security measures and best practices, the Importer Self-Assessment Program
(ISA) builds on C-TPAT to achieve an even higher level of compliance, and the Free and Secure
Trade (FAST) Program speeds the clearance of low-risk shipments arriving from Canada or Mexico.
Maritime cargo destined for the United States is pre-screened at foreign ports under the Container
Security Initiative (CSI). CBP has security-based arrangements in force with 11 other customs
administrations, and has signed joint work plans towards mutual recognition with six countries.
15. The MFN tariff regime is generally characterized by stable and, for the most part, low or no
tariffs. At 4.8% overall, the simple average tariff remains virtually unchanged. Duty-free entry is
provided for 37.5% of all tariff lines, and a further 30.4% of the lines' items face import duty of 5%
or less. The highest tariffs, sometimes exceeding 100%, are applied on certain agricultural items
(e.g., tobacco and peanuts). Outside of agriculture, above-average applied rates are mainly found
in textiles, clothing and footwear.
WT/TPR/S/382 • United States
- 13 16. The United States continues to be an active user of anti-dumping (AD) duties. Between 2015
and 2017, the number of AD investigation initiations increased, totalling 133. There were 340 AD
orders in place as of end-July 2018, compared with 269 on 30 June 2016. The trading partners most
affected by the measures were China, Chinese Taipei, the European Union, India, Japan and the
Republic of Korea. The investigations initiated during the period were mainly concentrated in the
steel industry. Of the 109 countervailing duty (CVD) measures in place as of end-July 2018, some
50.5% were also applied on iron and steel products. There were 123 sunset review initiations of AD
orders during the period from 1 January 2016 to end-June 2018. During the same period, there were
eight revocations, while 104 orders were continued. There were 52 sunset review initiations of CVD
orders during the period from 1 January 2016 to end-April 2018. During the same period, 27 sunset
reviews of CVD orders were concluded; there were six revocations, while the remaining orders were
continued.
17. Between 2016 and 2018, two new safeguard investigations (on Crystalline Silicon Photovoltaic
Cells; and Large Residential Washers) were conducted by the United States under Sections 201-204
of the Trade Act of 1974. Both investigations were notified to the WTO. The USITC made affirmative
serious injury determinations in both cases, and the President applied a safeguard measure in each
one.
18. The Enforce and Protect Act of 2015 (EAPA), which entered into force in 2016 and aimed at
preventing evasion of contingency measures, created a new framework for CBP to investigate
allegations of evasion of AD/CVD orders. Between August 2016 and 1 July 2018, 19 investigations
stemming from allegations of evasion of duties were initiated. In all but one of these investigations,
interim measures were applied. As of July 2018, a final determination had been made for
12 investigations. Remedies generally involve suspending the liquidation for any entry after a certain
date, and requiring that the importer post a cash deposit prior to the entry's release.
19. During the review period, the United States reverted to conducting Section 232 investigations
to determine the effects of imports of any article on national security, and to recommend the
application of countermeasures, including an increase in tariffs, to the President. The Department of
Commerce has conducted 18 Section 232 investigations since 1980, of which 14 were concluded
before or in 2001. In 2018, four new investigations were initiated on: steel, aluminium, auto imports,
and uranium imports. Up to September 2018, import surcharges were announced on the first two
investigations. This announcement was followed by countermeasures by trading partners.
20. In August 2017, an investigation under Section 301 of the Trade Act of 1974 was initiated into
China's acts, policies, and practices related to technology transfer, intellectual property, and
innovation. On 15 June 2018, USTR issued a list of products covering 1,102 separate tariff lines,
valued at approximately US$50 billion, which would be subject to an additional ad valorem tariff of
25%. The measure entered into effect on 6 July for 818 lines, covering approximately US$34 billion
worth of imports from China; public comment was sought on the application of the duty on 284 tariff
lines, covering some US$16 billion worth of imports. China responded to the initial action by imposing
increased duties on goods imported from the United States. In response, USTR proposed to take
further action in the form of an additional 10% ad valorem duty on Chinese products covered in
6,031 tariff subheadings, with an annual trade value of approximately US$200 billion. Under the
new Section 306(c) of the 1974 Trade Act, the USTR may reinstate, upon written request from the
industry, a previously terminated Section 301 action in order to exercise a WTO authorization to
suspend trade concessions. One such case emerged in December 2016 concerning a 1999 beef
dispute with the European Union; as of mid-2018 no action had been taken.
21. The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers
nearly 30 programmes involving economic and trade sanctions. In general, the measures are
designed to counter terrorism, transnational criminal organizations, cyber-related crimes, drugs
trafficking, human rights abuses, corruption, trade in rough diamonds, and the proliferation of
weapons of mass destruction. Many of the measures target individuals or entities rather than
jurisdictions. Country-specific sanctions have been tightened against the Democratic People's
Republic of Korea, Iran and Cuba during the period under review, while programmes related to
Myanmar and Côte d'Ivoire were terminated in 2016.
22. The framework for export promotion and export finance has remained broadly unchanged during
the period under review. The United States has no overarching legal framework governing assistance
to sectors or industries at the federal or sub-federal level. Traditionally, federal assistance
WT/TPR/S/382 • United States
- 14 programmes have been in the form of grants, tax concessions, loan guarantees, and direct
payments; they are listed in the Catalog of Federal Domestic Assistance (CFDA), and are mostly
related to public health and safety, the environment, education, infrastructure, community
assistance, and research and development.
23. The basic legal framework for the preparation and adoption of standards and technical
regulations has not changed during the review period. Federal law specifically prohibits any
government agency from engaging in any standards-related activity that creates unnecessary
obstacles to the foreign commerce of the United States, and federal agencies are obliged to ensure
that imported goods are treated no less favourably than like domestic products in the application of
standards-related activities.
24. In the area of sanitary and phytosanitary measures, work has continued on certain trade-related
aspects of the implementation of the 2011 Food Safety Modernization Act, including risk-based
supplier identification, the certification of food-producing entities in foreign countries, and the launch
of the Voluntary Qualified Imports Program (VQIP), an expedited review and entry programme for
food. No applications for admittance into the VQIP were received before this year's deadline, as the
process to issue accreditations to third-party auditors was still ongoing.
25. U.S. federal antitrust laws are applied on domestic and foreign conduct that has a substantial
and intended effect in the United States. Government institutions, including those engaging in
commercial activity, are exempted from federal antitrust legislation unless a statute clearly provides
otherwise. Limited immunity also applies to specific aspects of agriculture, fisheries, shipping, and
insurance. During the review period, the U.S. authorities have devoted substantial resources to
prosecutions and sentencings in criminal antitrust proceedings; as a result, some US$400 million in
criminal fines and penalties were obtained by the U.S. Department of Justice, mainly with respect
to auto parts, real estate, and foreign currency exchange. The number of mergers reviewed
increased during the review period: in FY2017, 2,052 transactions were reviewed, representing a
12.0% increase from FY2016.
26. The United States is a party to the WTO GPA. The Protocol amending the GPA entered into force
for the United States in April 2014. No major institutional or legal changes with respect to
government procurement have taken place since the last Review in 2016. Procurement at the federal
level is decentralized, and is carried out through the procurement systems of the various executive
agencies. Procurement at the state level is also decentralized. U.S. government procurement policy
encourages the participation of small businesses, including veteran-owned, women-owned, and
disadvantaged small businesses. To this end, it carries out a policy of fixing set-asides when market
research concludes that small businesses are available and able to perform the work or provide the
products being procured by the Government. The Buy American Act (BAA) and the Trade Agreements
Act (TAA) remain the main laws regarding government procurement. The BAA requires the Federal
Government to purchase domestic goods, while the TAA provides authority for the President to waive
purchasing requirements, such as those contained in the BAA. These requirements are waived for
GPA participants, trading partners with which the United States has an FTA that covers procurement,
and beneficiaries of preferences.
27. The United States remains one of the main producers and exporters of goods and services that
embody intellectual property (IP). IP is present in some 60% of U.S. goods exports, and IP-intensive
industries account for over one third of U.S. GDP. No major changes with respect to IP legislation
have taken place since the last Review in 2016. The protection and enforcement of IP rights (IPRs)
has remained a top trade policy priority for the U.S. Administration, as IP is considered critical for
economic growth. The objectives are to reduce counterfeit and infringing goods in domestic and
international supply chains and identify unjustified impediments to effective enforcement action
against the financing, production, trafficking, or sale of counterfeit or infringing goods.
28. Among IPR enforcement tools, USTR conducts annual reviews of the state of IPR protection and
enforcement in U.S. trading partners around the world under "Special 301" provisions. As a result
of these reviews, USTR identifies trading partners found to deny adequate and effective IPR
protection, or deny fair and equitable market access to U.S. persons that rely upon IPR protection.
In its 2018 Special 301 report, released on 30 April 2018, 36 trading partners were identified as
failing to provide adequate and effective IPR protection. Under Section 337 of the Tariff Act of 1930,
investigations into allegations of infringement of certain statutory IPRs and other forms of unfair
competition in import trade are conducted. Between early January 2016 and late May 2018, 137
WT/TPR/S/382 • United States
- 15 Section 337 investigations were initiated. Most of them dealt with patent infringement; the
remainder dealt with copyright, trade secrets and trademarks or with several IPRs combined.
Investigations covered products from 37 trading partners and from the United States.
29. Support to agriculture is primarily authorized by "farm bills", i.e. multi-year omnibus legislation
covering a wide array of agricultural and food programmes. While some of the programmes have
permanent authorization (e.g. crop insurance), others are authorized only for the life of the farm
bill. Authorization for most programmes under the Agricultural Act of 2014 was to expire on
30 September 2018. Based on expected and actual outlays, the 2014 Farm Bill has been dominated
by the Supplemental Nutrition Assistance Program (SNAP), providing food assistance to low-income
households, which has accounted for nearly 80% of the projected expenditure. The 2014 Farm Bill
was amended in early 2018, through the passage of the Bipartisan Budget Act of 2018, to provide
support for seed cotton, to make the Margin Protection Programme more attractive for small and
medium-sized dairy farms, and to make additional disaster relief available. A programme to support
the cost of cotton ginning was re-introduced as a temporary measure in March 2018. The legislative
process for the 2018 Farm Bill is ongoing.
30. The United States is a major producer and consumer of primary energy resources, and
technological breakthroughs in the domestic production of shale oil and gas have had a profound
effect on global energy markets over the last ten years. U.S. production of crude oil reached
11 million barrels per day in July 2018, for the first time in history, and the United States is now a
net exporter of petroleum products and natural gas. On the demand side, U.S. primary energy
consumption has levelled off, as the economy has become ever more energy efficient. Natural gas
has replaced coal as the principal resource in electricity generation, but coal-fired power plants still
deliver 30% of the electricity produced. About 17% of the electricity generated in the United States
in 2017 was made from renewable energy resources. The United States does not have a national
target for renewable energy or an explicit federal support mechanism. However, 29 states and the
District of Columbia have adopted "renewable portfolio standards" or similar binding targets, and a
further 8 states (and one territory) have set non-binding targets. States apply numerous measures
to promote the development and use of renewable energy resources.
31. The Economic Growth, Regulatory Relief and Consumer Protection Act, enacted in May 2018,
introduced several amendments to the regulation of financial services, including with respect to
regulatory relief, consumer access to mortgage credit, and regulations for bank holding companies.
The most noteworthy changes include: allowing banks with between US$50 billion and
US$250 billion in assets to be run with less regulatory oversight; exempting banks with less than
US$10 billion from the Volcker Rule (banning banks from engaging in proprietary trading); requiring
the Federal Reserve to tailor regulations with respect to bank size rather than "one size fits all"; and
enabling large foreign banks to avoid regulations by allowing them to tally their U.S. assets in certain
ways that keeps them below the US$250 billion threshold.
32. A new regulatory order on telecommunications was issued in December 2017, which removed
the prior requirements that providers of broadband Internet access services be subject to some of
the same rules that apply to common carriers, including a prohibition on unjust or unreasonable
practices or unreasonable discrimination. The 2017 Restoring Internet Freedom Order reversed the
policy applied in the sector, and returned to the lighter-touch framework that had been in place
before. The Order, among other things, ended utility-style regulation of the Internet in favour of
market-based policies, restored broadband Internet access service to the information service
classification, eliminated certain reporting requirements, and restored the authority of the Federal
Trade Commission (FTC) to police the privacy practices of Internet service providers (ISPs).
33. Postal and courier services are open to competition, with the exception of services reserved for
the United States Postal Service (USPS), the designated operator for universal service. Private
carriers may accept and deliver any item which does not fall within the reserved category, including
items not considered as letters, such as merchandise, newspapers, and periodicals. However, under
"the mailbox rule", delivery must be made by means that do not involve access to mailboxes or post
office boxes in USPS retail units, unless postage is affixed to the privately carried matter. USPS rates
and fees are established by its Board of Governors, and are subject to a review process by the Postal
Regulatory Commission, which regulates the USPS but not the postal services activities of the private
sector.
WT/TPR/S/382 • United States
- 16 34. With the exception of some sub-federal and local non-discriminatory limitations on the sales of
alcohol and firearms, the applied regime for distribution services does not contain any market access
or national treatment limitations. There is no federal law governing franchising; however, there are
both federal regulations and state laws regulating it. State laws vary from state to state. Franchising
is regulated by the FTC and by various state agencies.
35. Construction is not regulated at the federal level, but safety issues are. Safety regulations
concerning the construction industry are enforced by the Occupational Safety and Health
Administration at the federal level, or by equivalent state agencies. All states require contractors to
have workers' compensation insurance. There are also a number of environment-related laws,
including those related to asbestos, lead, and industrial waste. The construction industry has few
economic barriers to entry, and there are no restrictions on the repatriation of capital or profits.
Market access conditions vary somewhat, depending on whether the project is public or private.
Private construction activities are open to foreigners with few limitations, while public construction
activities are subject to Buy American provisions and to the provisions of the GPA and FTAs.
36. The regulatory framework of maritime transport and air transport services has not changed
during the period under review and restrictions to cabotage remain. Regarding maritime transport,
preferences are accorded to U.S.-flag vessels to encourage a privately-owned and operated U.S.-flag
merchant marine. The United States maintains two maritime transport programmes related to
national defense: the Maritime Security Program (MSP) and the Voluntary Intermodal Sealift
Agreement (VISA) Program. No domestic preferential treatment is granted with respect to the use
of port and harbour facilities. An MFN exemption is maintained, covering restrictions on performance
of longshore work by crews of foreign vessels owned and flagged in countries that similarly restrict
U.S. crews on U.S.-flag vessels from longshore work.
37. Only U.S.-built ships qualify for domestic service; the United States was granted an exemption
from GATT rules for measures prohibiting the use, sale, or lease of foreign-built or foreignreconstructed vessels in commercial applications between points in national waters or the waters of
an exclusive economic zone. There are no restrictions on foreign investment in U.S. shipyards or
ship-repair facilities, but floating dry-docks are eligible for loan guarantees under the Federal Ship
Financing Program only if owned by U.S. citizens.
38. The tourism services regime is open; the United States undertook full market access GATS
commitments for modes 1, 2 and 3, and full national treatment commitments for all four modes for
all four sectors. The National Travel and Tourism Office (NTTO), part of the U.S. Department of
Commerce, coordinates travel and tourism policies and programmes across federal agencies through
the Tourism Policy Council, and works to enhance the international competitiveness of the travel and
tourism industry and increase its exports.
39. The United States does not have a general e-commerce law; however, e-commerce is subject
to a number of federal and state measures that address various aspects of it. Two federal agencies
oversee different aspects of e-commerce: the Federal Trade Commission (FTC) and the Federal
Communications Commission (FCC). The FTC has authority over unfair and deceptive practices in
commerce on various aspects of e-commerce, and it may bring enforcement actions for such
practices. The FCC regulates the communications aspect of e-commerce. Electronic contracts are
governed by the Electronic Signatures in Global and National Commerce Act of 2000 (ESIGN Act),
as well as by state laws that meet the requirements in the ESIGN Act.