Japan External Trade Organization New York - JETRO NY - STATEMENT ON U.S.-JAPAN SEMICONDUCTOR ARRANGEMENT

Business Wire, July 12, 1996

NEW YORK--(BUSINESS WIRE)--July 12, 1996--

THE U.S.-JAPAN SEMICONDUCTOR ARRANGEMENT IS BASED UPON PRINCIPLES THAT ARE INCONSISTENT WITH FREE TRADE AND OPEN MARKETS. IT SHOULD NOT BE EXTENDED OR RENEWED AFTER IT EXPIRES ON JULY 31, 1996.

FOCUS:SEMICONDUCTORS 4

It is the opinion of the Japanese Government that the U.S.-Japan Semiconductor Arrangement is inconsistent with the underlying concept of free international trade embodied in the principles of the World Trade Organization (WTO). Extension or renewal of the Arrangement would permit these distortions to continue and undermine the positive effects that free trade and open markets bring to industrial-users and consumers around the world.

Specifically, the U.S.-Japan Semiconductor Arrangement uses "capital affiliation" (the nationality of the majority ownership of the manufacturing firm) to calculate foreign market share in Japan. This violates accepted principles of free trade including "Most Favored Nation Treatment" and "National Treatment". Nevertheless, in their proposal for a new agreement, the U.S. Government still demands that capital affiliation remain the sole measure by which foreign market share in Japan is calculated.

FACT 1:

CAPITAL AFFILIATION VIOLATES THE BASIC TRADE PRINCIPLE OF MOST FAVORED NATION TREATMENT. Using capital affiliation to calculate foreign market share discriminates in favor of U.S. capital-affiliated firms, whether their manufacturing facilities are based in the U.S., Japan or any other nation. This is contradictory with Most Favored Nation Treatment, which demands that all trade flows be treated on an equal basis.

Using capital affiliation, semiconductors manufactured in the U.S. by a Japanese capital-affiliated firm for export to the Japanese domestic market are excluded from the market share calculation and measures to increase market access opportunities. Semiconductors manufactured in Singapore by a U.S. capital-affiliated firm for export to the Japanese domestic market are included in the market share calculation and measures to increase market access opportunities.

GATT ARTICLE 1: GENERAL MOST FAVORED NATION TREATMENT: Any advantage, favor, privilege or immunity granted by a contracting party to any product originating or destined for any country shall be accorded immediately and unconditionally to the like product originating in/or destined for the territories of all other contracting parties.

FACT 2:

CAPITAL AFFILIATION VIOLATES THE BASIC TRADE PRINCIPLE OF NATIONAL TREATMENT. Using capital affiliation to determine market share violates National Treatment which requires that all trade flows be treated equally with domestic transactions. Under the current Arrangement, trade flows between the same combination of countries can be treated differently due to the differing capital affiliations of the manufacturers.

Using capital affiliation, semiconductors manufactured in Singapore by a Japanese capital-affiliated firm for export to the Japanese domestic market are excluded from the market share calculation and measures to increase market access opportunities. Semiconductors manufactured in Japan by a U.S. capital-affiliated firm for sale within the Japanese domestic market are included in the market share calculation and measures to increase market access opportunities.

GATT ARTICLE 2: NATIONAL TREATMENT: The products of the territory of any contracting party importing into the territory of an other contracting party shall be accorded treatment no less favorable than that accorded to the like products of national origin.

This material is circulated by KWR International, 140 West End Avenue, New York, NY 10023, Tel: 212-799-4294, Fax: 212-799-0517, E-mail: kwrintl@kwrintl.com, which is registered under 22 U.S.C. Section 611 et seq, on behalf of JETRO New York, 1221 Avenue of the Americas, New York, NY 10020, which is registered under 22 U.S.C. Section 611 et seq, as an agent of the Japan External Trade Organization, Tokyo, Japan. This material is filed with the Department of Justice where the required registration statement is available for public viewing. Registration does not indicate approval of the contents of this material by the United States Government.

For additional information on the expiration of the U.S.-Japan semiconductor arrangement, please fax 212-819-7781 or the see the contacts listed below:

CONTACT: Kazunori Iizuka, President

JETRO New York

Tel: 212-997-0412

Fax: 212-819-7781

E-Mail: hayashim@newyork.jetro.org

or

Stanton D. Anderson

Electronics Industry Association of Japan

Tel: 202-778-8255

Fax: 202-778-8087

E-Mail: semiconductor@eiaj.washington.com

or

Hajime Itoh and Naoshi Hirose

Embassy of Japan

Tel:202-939-6726 (Hirose)

Fax: 202-265-9473

E-Mail: naoshi@ibm.net