China's Ban on Imports of Japanese Fishery Products is an Act of Economic Coercion—Japan Should Use MPIA and File a WTO Complaint

MPIA and Economic Coercion

The reason why I recommend that option is that Japan is a participant in the MPIA (Multi-Party Interim Appeal Arbitration Arrangement) (Note 6). The Appellate Body, as the centerpiece of the WTO’s dispute settlement procedures, has remained dysfunctional since the end of 2019 as efforts to fill vacancies on the body have been obstructed by strong U.S. opposition. As a result, many dispute cases have remained unresolved due to the use of the “appeal into the void” (appeal to the dysfunctional Appellate Body) tactic, which prevents further review of cases following panel decisions.

To resolve this situation, major WTO members, including the EU, Australia, Brazil, Canada and China, concluded the MPIA in April 2020, and as of now, 26 WTO member countries and regions are participating in the arrangement (however, India, South Korea, and the ASEAN member countries have refrained from joining the MPIA). When complaints with panel reports regarding disputes between MPIA participants arise, the countries participating in the MPIA have agreed to refer their complaints to arbitration based on the MPIA, rather than file an appeal with the Appellate Body. As a result, the referred cases can in effect undergo an examination process similar to those implemented in the case of an appeal.

In March 2023, Japan decided, albeit belatedly, to join the MPIA, with the aim of cooperating with conscientious WTO members, such as the EU and Canada, to maintain the free multilateral trade system based on the rule of law, in the absence of a functioning Appellate Body. In particular, for Japan, a country that is geopolitically wedged between the United States and China and is unable to unilaterally engage in such power games, it goes without saying that maintaining this trade system benefits its own national interests. Moreover, by joining the MPIA, Japan has acquired an important means to contain Chinese attempts at economic coercion through the rule of law because China is also an MPIA participant (Note 7).

Japan is already enjoying the benefits of its participation in the MPIA. Precisely because both Japan and China are MPIA participants, the antidumping duties case with China concerning Japanese stainless steel (DS601) was resolved without China resorting to an appeal into the void and even prior to MPIA arbitration being initiated, for that matter (Note 8). Also, the antidumping duties case regarding barley between China and Australia (DS598) was resolved in the form of the termination of the panel procedures under the agreement between the two countries (Note 9). Among other cases of alleged economic coercion by China that have been referred to the WTO dispute settlement procedures are the China-Australia dispute over the antidumping duties imposed on Australian wine (DS602) and the China-EU (Lithuania) dispute over goods and services trade (DS610). As is clear from those dispute cases, because of the presence of the MPIA, the WTO dispute settlement procedures, despite the dysfunction of the Appellate Body, have continued to serve as an effective tool for countering Chinese economic coercion without leaving disputes in limbo due to the appeal-to-the void tactic.

Is There Any Scientific Evidence to Justify China’s Import Ban?

As Prime Minister Kishida and other government officials have pointed out, the key point of contention over China’s recent ban on Japanese fishery products is whether or not there is scientific evidence to justify the measure. Under the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), the imposition of import restriction measures taken for food safety reasons must satisfy the following conditions: (i) it must be based on scientific principles and evidence (Article 2-2); (ii) it must conform to or at least be based on the international standards set by Codex and other relevant bodies (Article 3-1 and 3-2); and (iii) it must take into account the results of the risk assessment when the importing country implements measures that achieve a higher level of protection than those based on the relevant international standards (Article 5-1).

Regarding the recent Chinese import ban, the safety of ALPS-treated water has been the main focus of discussion, but the real issue is the safety of fishery products that are imported. Therefore, it is necessary to clarify the safety standard China has set with respect to the residual radioactive substances in fishery products—in other words, whether China has set an “appropriate level of protection” (ALOP) as referred to in Article 3.3 of the SPS Agreement—and whether the level that they set is, for example, at or below 1 mSv/year in terms of radiation exposure, which is a level recommended by the International Commission on Radiological Protection (1,000 B/kg, a level set by the Codex, in the case of the residual radioactive substances in food products). In principle, Japan has adopted 100 Bp/kg, a level 10 times more stringent than the Codex standard, as its safety standard. As China has imposed a comprehensive ban on Japanese fishery products despite the already very stringent Japanese safety standard, the Chinese ALOP must therefore be significantly more stringent than the international standard despite Condition (ii) above. If so, China is required to meet Condition (iii), and its risk assessment must conform to Condition (i).

As for Condition (iii), China’s risk assessment must show, based on scientific evidence, how much radiation remains in Japanese fishery products and what risks are posed to the human body when such radiation is ingested, and in what amount, and explain why the assessment results justify the import ban. Furthermore, given that China has cited the discharge of ALPS-treated water into the sea as the reason for imposing the import ban, it must show how ALPS-treated water spreads radioactive contamination in the seas surrounding Japan and to what degree fishery products may be contaminated.

Japan has welcomed and cooperated with the IAEA’s inspections, which confirmed the safety of the plan for the discharge of treated water into the sea. In particular, the IAEA’s comprehensive report certified that ALPS removes most of the cesium 137 and other radioactive substances contained in contaminated water, and also that before the treated water is discharged into the sea, the concentration of tritium, which cannot be removed, is diluted to 1,500 Bq/L, one-seventh of the safety level for drinking water recommended by the WHO. As a result, the report recognized that the impact of the discharge of ALPS-treated water into the sea on the human body and the environment is negligible (Note 10).

Of course, that is not the only risk assessment available, and China is entitled to conduct a risk assessment of its own and has complete discretion over which scientific evidence to be adopted. If the evidence adopted by China is scientifically credible, it does not necessarily have to conform to the majority view of the academic circles or conventional theories (Note 11). However, unless China’s own risk assessment has a level of credibility that can rival the credibility of the IAEA report, the country will not be able to maintain the import ban in a manner consistent with the SPS agreement.

Hong Kong characterized its ban as a “precautionary” measure (Note 12). In doing so, Hong Kong presumably had in mind the mention of “provisional” measures in Article 5.7 of the SPS Agreement, but such measures are allowed to be taken only when there is not sufficient scientific evidence for a risk assessment (Note 13). The discharge of ALPS-treated water into the sea is not an incident that occurred accidentally as was the case with the release of radiation at the time of the March 11 nuclear disaster. It is a carefully planned action that has been prepared since Japan announced in April 2021 the basic policy of discharging treated water into the sea. Immediately after that announcement, Japan accepted the IAEA review, and five review reports have been issued since then. In addition to those reports, the IAEA has recently issued their comprehensive report (Note 14). Furthermore, South Korea has already sent an investigation team of its own to Japan and announced its conclusion that Japan’s plan for the discharge of treated water into the seas conforms with the international standards. At this time, while refusing to support the discharge itself, South Korea has denied the presence of any problem from the scientific viewpoint (Note 15). Those developments indicate the presence of sufficient evidence for China, Hong Kong, and Macau to conduct a risk assessment.

In the Korea–Radionuclides (DS495), the WTO panel recognized the absence of sufficient scientific evidence with respect to only one of the multiple measures taken by South Korea, that is, the measure immediately taken after the March 11 disaster. With respect to the measures taken afterward, the panel pointed out that there was sufficient scientific evidence available for risk assessment, citing reference data released by Tokyo Electric Power and articles carried by National Geographic magazine, among other sources (Note 16).

Isn’t China’s Import Ban Discrimination against Japan?

If China's safety standards (ALOP) cannot be met without a total embargo on marine products exported under Japanese safety standards, which are much stricter than international standards, then of course China must be applying similarly stringent standards for similar exposure risks to various foods, both those that are domestically produced, and those that are imported. Otherwise, it would be difficult to explain why only Japanese products are banned from being imported, from the perspective of protecting the health of its citizens, as ostensibly explained by China. If loose radiation risk safety standards are set for domestic and non-Japanese fishery products and non-fishery food products, while such strict standards are applied only to Japanese marine products, it is an "arbitrary or unreasonable" distinction or discrimination, and nothing but a "disguised restriction on international trade"
(which is a violation of Articles 2.3 and 5.3 of the SPS agreement).

It has been pointed out that Chinese nuclear power stations are discharging more than six times the amount of tritium discharged from the FDNPS. Nuclear power stations in foreign countries other than China are also discharging much higher levels of tritium than the FDNPS (Note 17). In light of this fact, China must provide clear explanations as to how the situations in Japan and other countries and regions are different and why it has subjected Japanese products alone to such a stringent measure without applying the same standard to domestic products or imports from other countries and regions.

Overcoming Defeat in a Fishery Product Dispute Case with South Korea

Within the Japanese government, there may be some hesitation regarding filing a WTO complaint over the Chinese import ban. In the past, Japan filed a WTO complaint over the restrictions on imports of fishery products that South Korea imposed because of contamination caused by radiation leaks from the FDNPS, and in that dispute, known as Korea–Radionuclides (DS495), the Appellate Body completely reversed the panel report’s finding, which had upheld Japan’s argument (Note 18). It may be because of this bitter experience that there has not been strong pressure from within the government to file a WTO complain, at least for now.

However, the Appellate Body’s decision in that case is questionable in some respects. This can be viewed as a special case in which the Appellate Body skillfully skirted a decision on the sensitive issue of the relationship between low-level radiation exposure and trade measures (Note 19) by pointing out a flaw in the panel’s finding. In fact, it cannot be denied that in presenting its case to the panel and in examining the contents of the interim report, the Japanese government failed to make an airtight case in that it left room for the Appellate Body to avoid making a clear-cut decision. Even so, Japan’s litigation strategy, which focused attention on the South Korean measure’s unnecessarily trade-restrictive and discriminatory nature in itself was not wrong. Japan must have learned much from the defeat in this case, and the country should learn from that experience and squarely deal with China.

As I already mentioned, for Japan, a country that is unable to engage in a geopolitical power game--unlike the United States and China—it is essential to opt for a rules-based approach in dealing with economic coercion. Doing so also enhances the legitimacy of Japan’s argument in the eyes of the international community. Moreover, in the WTO, China has consistently emphasized "institutional discourse power" (制度性話語権) in the formation of international rules and its MPIA membership and its recent application to join the CPTTP can also be viewed as part of that effort (Note 20). Recently, a leaders’ statement issued by the BRICS group, led by China, strongly called for restoring the functions of the WTO’s dispute settlement system and quickly filling the vacancies on the Appellate Body (Note 21). If China is defeated in the dispute over the import ban and if it ignores the WTO Panel decision and the MPIA arbitration awards, its behavior will be inconsistent with its stated policy. Therefore, Japan should by all means pursue this avenue of resolution.

The WTO procedures take time, but in the short term, relief for producers should be provided through measures that deliver immediate benefits, such as compensation offered by Tokyo Electric Power and the government’s measures to support the expansion of sales channels (Note 22). Referring this case to the WTO for dispute resolution would bring benefits to producers in the medium to long term by demonstrating Japan’s willingness to firmly deal with Chinese economic coercion through a rules-based approach and by providing a stable and predictable market environment. In particular, the recent import ban is not only punching below its weight as an act of economic coercion, but also the measure, which was taken without due scientific evidence, could in fact backfire against China by encouraging the Chinese people to stay away from fishery products in general, including domestic ones, and by additionally making Japanese companies even more wary of the “China risk” and inclined to leave China (Note 23). If so, China is assumed to be exploring the timing of backing down, and the referral of the case to the WTO may become the starting point for resolution.

Once, a Chinese expert asked me with an air of superiority why Japan was not participating in the MPIA and called for Japan to engage in rules-based debate. This episode evoked in me a sense of shame at Japan’s foot-dragging over joining the MPIA as a meaningless gesture of obedience to the United States. However, Japan has now joined the MPIA. Now is the time for Japan to test China’s true commitment to the rule of law, which it professes to advocate, by filing a WTO complaint over this case.

◆◆◆

Afterword

The Japanese version of this comment was initially released in September 2023. Despite three months having passed, significant progress towards a resolution remains elusive. The highlight during this period was the Japan-China summit in San Francisco in November. Regrettably, Prime Minister Kishida's efforts to persuade President Xi to lift the ban proved unsuccessful, and no major progress was observed in the bilateral foreign mistier dialogue, except for the establishment of a scientific expert meeting, but with no accompanying details (Note 24). Some government officials had suggested that taking the case to the WTO would result in a protracted maintenance of the measure until resolution, but that is misleading. Notably, more than 600 WTO disputes have been handled, the majority of which were resolved without even reaching the circulation of a panel report. This implies that there are quite a few cases that have been resolved without completing the dispute settlement process.

Contrary to the belief that the WTO process is time-consuming, there is no compelling reason to sidestep it in this dispute, particularly when the bilateral summit provided no breakthroughs. While not a perfect method of resolution, the WTO process is one of several channels that should be concurrently pursued.

Still no WTO Dispute?

Nevertheless, Ishikawa raises doubts about "the effectiveness and strategic wisdom of the WTO challenge" in this dispute, contending that:

"When it comes to radionuclides posing a carcinogenic risk irrespective of exposure levels, there is always a ‘possibility’ of adverse effects on human health. As a result, risk assessments are likely to be readily deemed appropriate." (Note 25)

This argument oversimplifies risk assessments by excessively focusing on the general nature of radioactivity. Risk assessments should be fact-intensive, case-specific, and must support the specific measure in question, as required by Article 5.1 (Note 26). While acknowledging the general carcinogenic nature of radioactivity, the crucial assessment here is the possibility that a minimal amount of residual radioactivity in ALPS water will cause cancer through the ingestion of Japanese fishery products. Ishikawa's argument is based on the Appellate Body ruling in EC-Hormone, but in that case the ruling condemned an EU risk assessment for not evaluating the specific potential for carcinogenic effects from hormones in meat and meat products and only referring to the general carcinogenic nature of the hormone in question (Note 27). The similar criticism applies to Ishikawa's argument.

Indeed, he rightly points out that "possibility" is a lower standard than "likelihood" in Annex 4.A of the SPS Agreement. However, "possibility" is a variable threshold, and assessing the degree of possibility in a specific context is part of the risk assessment. Assuming that the possibility necessarily exists when it comes to radioactivity is inaccurate. The possibility of risk that the famous Demon Core poses is completely different from the risk that the ALPS water poses. A low possibility weakens the support for the measure as required under Article 5.1, especially in terms of the most stringent measure, and could render the measure "more trade-restrictive than necessary to achieve" the ALOP set by the Member (Article 5.6). After all, "Radioactive" should not be an incantation that is used to make any SPS measure WTO complaint-proof.

Ishikawa suggests that "engaging in RCEP discussions may prove more fruitful than initiating a WTO case," emphasizing the significance of a request for discussion of emergency measures under Article 5.11.2 of the RCEP Agreement (Note 28). However, if "the efficacy and strategic wisdom of such a WTO challenge remains unclear," as he notes, the fruitfulness of the RCEP discussion would likely fall short of what could be achieved through the WTO case for several reasons.

First, obligations under Article 5.11.2 are weak and unclear, lacking clear deadlines for initiating the discussion. It remains uncertain whether an importing party is even obligated to respond to the discussion. The importing party's sole clear (but weak) obligation is to "endeavor to provide" relevant information.

Secondly, even if the matter is brought to RCEP through discussions under Article 5.11.2, finding a viable resolution seems doubtful. Essentially, Japan does not foresee effective multilateral oversight under RCEP due to its fragile institutional framework. Unlike the WTO, RCEP standing committees meet infrequently and lack comprehensive support from the ASEAN secretariat, which is provisionally responsible for the responsibilities of the RCEP secretariat. Moreover, the RCEP dispute settlement mechanism does not extend to the SPS chapter (Article 5.17.1), leaving no recourse if discussions reach an impasse. In contrast, the WTO SPS Committee has traditionally been regarded as an alternative dispute resolution forum. A more recent study emphasizes its role not only as a venue for dispute settlement but as a platform where a member can seek support from others and assess the feasibility of pursuing a WTO case regarding SPS measures. Therefore, a member has an incentive to raise "specific trade concerns" (STCs) about another member's SPS measures in such a non-judicial forum (Note 29). No comparable functionality can be expected from the RCEP discussion.

Finally, peer pressure against China within RCEP would likely be weaker than in the WTO. Japan's major free trade alliances, including Canada, the EU, the UK, and the US, are not RCEP members. The majority of RCEP parties are ASEAN countries, which are more likely to be influenced by China’s political and economic power in the region.

Ishikawa confines his analysis of the strategic importance of WTO litigation in this case solely to the intricacies of applying the SPS Agreement. However, the case at hand prompts a more profound question: how are we to address instances of economic coercion within the framework of a rules-based system, as previously discussed. To reiterate, Japan must not ignore this matter: it should actively pursue a rules-based response.

Lesson from the China-Australia case

Finally, in considering solutions to the dispute before us, we must learn a crucial lesson from the recent economic coercion that China implemented against Australia. China imposed import restrictions on a wide array of Australian products, including wine, barley, and coal in 2020, when Minister Scott Morrison demanded that China welcome an international investigation into the origins of COVID-19. Now these measures appear to have faltered after Australian industries undertook tremendous efforts to explore alternative markets. Through persistent endeavors to establish new markets and relationships such as "knocking on doors, wearing out the soles of their shoes", they have successfully diversified, reaching new markets like India for iron ore and coal, North America and Japan for wine, Saudi Arabia for grain, and Vietnam for cotton (Note 30). Armstrong's 2023 empirical findings affirm that the multilateral trading system, encompassing the WTO and CPTPP, has facilitated the diversification of Australia's export markets (Note 31).

This underscores the critical role of free trade in ensuring economic security, as emphasized in a recent WTO report; the rule-based multilateral free trading system is pivotal for our economic security. Within an open and multilateral trading system, an economy can readily identify alternative sources of supply and markets in response to emergencies or external shocks, such as the challenges posed by COVID-19, the Ukraine War, and a series of economic coercions (Note 32). This principle holds true for the current scenario. The United States has been supporting Japan's export of seafood, particularly scallops, for processing in Vietnam and Thailand, with subsequent reexport to the U.S. and European markets. While this initiative is still in its early stages, its success would serve as another compelling example of the positive correlation between free trade and economic security.