## Facts

- The European Economic Community (EEC) challenged Japan’s conduct affecting trade in semiconductors under GATT 1947.
- The dispute arose in the context of a 1986 bilateral Japan–United States arrangement addressing concerns about low-priced exports to third markets and foreign access to Japan’s semiconductor market.
- Japan implemented the arrangement through government contacts with industry and a system to monitor exports to third-country markets, including export approval-related procedures and requests to firms concerning export prices and volumes.
- The EEC asserted that Japan’s monitoring and guidance caused Japanese firms to limit exports and raise prices in third-country markets, harming EEC trade interests.
- Consultations under GATT Article XXII:1 did not resolve the dispute, and a panel was established under Article XXIII:2; the United States was allowed to participate due to its connection to the bilateral arrangement.

## Issues

1. Whether Japan’s export monitoring and government “requests” to producers and exporters constituted “prohibitions or restrictions” on exports under GATT Article XI:1.
2. Whether the third-country monitoring system amounted to action governed by GATT Article VI (anti-dumping disciplines).
3. Whether Japan’s conduct violated GATT Article I (MFN) and/or Article XVII:1(c) (commercial considerations in state-influenced trading conduct).
4. Whether Japan’s practices nullified or impaired benefits accruing to the EEC under GATT Article XXIII:2, and what recommendations should follow.

## Decision

- The panel found Japan’s implementation of third-country export monitoring and guidance inconsistent with GATT Article XI:1 because it effectively restricted exports of semiconductors to certain third markets.
- The panel did not find sufficient basis for violations of GATT Article I or Article VI on the facts presented.
- The panel treated the Article XVII:1(c) allegations as secondary to the central characterization of the conduct as export restrictions under Article XI.
- The panel concluded that the EEC suffered nullification or impairment of GATT benefits and recommended that Japan bring the inconsistent measures into conformity with its GATT obligations.

## Legal Principles

- GATT Article XI:1 covers not only formal quotas or licensing rules but also “other measures” that, in operation, make export limitations effective.
- Government conduct styled as non-binding “requests” can qualify as an Article XI:1 restriction when reinforced by sustained official involvement, administrative monitoring mechanisms, and observable trade-restrictive results.
- Measures that influence export prices and quantities may be addressed as export restrictions under Article XI:1 even if they resemble anti-dumping-related objectives; Article VI is not triggered absent the imposition of anti-dumping duties or comparable Article VI instruments.
- A claim of nullification or impairment under GATT Article XXIII:2 can be established where an Article XI:1 inconsistency alters competitive conditions and frustrates expected trade opportunities for another contracting party.

## Conclusion

The panel held that Japan’s third-country export monitoring and guidance system, though framed as cooperative and informal, functioned as an export restriction prohibited by GATT Article XI:1, thereby nullifying or impairing EEC benefits; Japan was recommended to end the export-restrictive effects and align its practices with GATT obligations.


Japan—Trade in Semi-Conductors, GATT B.I.S.D. (35th Supp.) at 116 (GATT Panel May 4, 1988)