Companies Reported Most Commitments Met and Believe Agreements Improve Their Ability to Compete, but Some Concerns Remain

In our January 1999 survey, almost all of the U.S. companies (12 of 13) and  brokers (2 of 3) operating in Japan reported that overall, the Japanese  government had implemented the 1994 and 1996 agreements to a moderate  or greater extent. Our analysis of company responses to  our survey indicates that most of these commitments have been  implemented. A Few Key Transparency and Deregulation Commitments Not Fully Met

Several companies reported concerns regarding Japan's implementation of  a few commitments in key areas. USTR is the principal  U.S. government agency responsible for monitoring and enforcing the  insurance agreements. The Departments of the Treasury and Justice play much less  active roles. In monitoring the agreements, USTR has  determined that Japan has made progress in deregulating its insurance  industry but has identified key commitments that remain unmet. U.S. Government Monitoring and Enforcement Efforts Rely Heavily on Private Sector Information

For monitoring and enforcing the agreements, USTR and the U.S. embassy  in Tokyo rely primarily on information provided by U.S. insurance  companies and industry groups, as well as on information collected by  officials at the U.S. embassy in Tokyo from Japanese sources. The Japanese government has stated that it has fully implemented both  agreements, including all deregulation actions. U.S. Insurance Industry Views U.S. Government Monitoring Efforts More Favorably Than Enforcement Actions

More U.S. insurance companies expressed favorable views of U.S.  government actions to monitor the insurance agreements than reported  favorable views of enforcement efforts. Four companies reported that U.S. government monitoring efforts had  been as effective as ineffective. Concerns of large U.S. insurers regarding U.S. government actions related  to this sale continued beyond creation of the “minute” and involved (1) U.S.  government discussions with the Japanese government during the fall of  1997 that, while not opposing Japan's approval of the sale, expressed  concern over whether the ongoing third sector activities of Yasuda and INA  met the terms of the agreements and the “minute”; (2) USTR discussions  with Japanese officials regarding Japan's December 1997 decision to  include the 1996 U.S.-Japan insurance agreement in the WTO financial  services agreement and what this development meant for the proposed  majority sale of INA and its subsequent third sector sales; and (3) two 1998  U.S. government interagency reviews of the third sector activities of  Yasuda and INA that determined that no agreement violations had  occurred. However, officials  from one company have also noted that Yasuda's activities in the third  sector have slowed. Objectives, Scope, and Methodology

The Chairman of the House Subcommittee on Trade, Committee on Ways  and Means, asked us to examine (1) the views of U.S. insurance companies  operating in Japan regarding the agreements' implementation and impact  on their ability to compete in the Japanese market; (2) the roles and efforts  of the Office of the U.S. Trade Representative and the Departments of  Commerce, State, and the Treasury in monitoring and enforcing the  agreements, and U.S. government views on whether Japan has met its  commitments under the agreements; and (3) U.S. insurance industry views  on U.S. government monitoring and enforcement efforts. To obtain the views of U.S. insurance companies regarding the agreements'  implementation and impact on their ability to compete in Japan, we  distributed a questionnaire to all 13 U.S. insurers and three brokers in  Japan that are either wholly or majority U.S. owned.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the implementation and monitoring of the U.S.-Japan insurance agreements, focusing on: (1) the views of U.S. insurance companies operating in Japan regarding the agreements' implementation and impact on their ability to compete in the Japanese market; (2) the roles and efforts of the Office of the U.S. Trade Representative (USTR) and the Departments of Commerce, State, and the Treasury in monitoring and enforcing the agreements, and U.S. government views on whether Japan has met its commitments under the agreements; and (3) U.S. insurance industry views on U.S. government monitoring and enforcement efforts.

What GAO Found

GAO noted that: (1) GAO's 1999 survey of the 13 U.S. insurance companies and 3 brokers in Japan revealed that all but 2 think that Japan has made moderate or better progress overall in implementing the 1994 and 1996 insurance agreements; (2) GAO's analysis of survey results shows that Japan has met most of its transparency (openness), procedural protection, and deregulation commitments; (3) overall, most U.S. companies reported that the agreements have had a positive effect on their ability to compete in Japan; (4) nevertheless, almost half the companies expressed concerns over Japan's implementation of key commitments such as expediting approval of insurance products and rates and limiting the activities of large Japanese companies in the specialized third sector; (5) USTR is the principal agency responsible for monitoring and enforcing the insurance agreements, with assistance primarily from the U.S. embassy in Tokyo; (6) USTR also receives assistance from Commerce and State, with a lesser level of assistance by the Departments of the Treasury and Justice; (7) USTR and U.S. embassy monitoring efforts include obtaining information on the agreements' implementation from industry groups and individual U.S. insurance companies, as well as consulting with the Japanese government; (8) in conducting their monitoring and enforcement work, U.S. government officials have noted Japanese progress in implementing the agreements; (9) however, they have also identified a few issues, which are similar to those cited by some U.S. companies, where they believe Japan has not fully met its commitments; (10) Japan, on the other hand, believes that it has fully implemented both agreements; (11) more U.S. insurance companies expressed favorable views of U.S. government actions to monitor the insurance agreements than reported favorable views of enforcement efforts; (12) about half (7 of 13) of all U.S. insurers and 2 of the 3 brokers GAO surveyed reported that U.S. government efforts to monitor agreements have been effective; (13) with regard to enforcement, about one-third of the companies and no brokers reported that U.S. government efforts have been effective; (14) around one-third of the companies reported that U.S. government monitoring and enforcement efforts have been as effective as ineffective; and (15) three major U.S. insurers expressed concerns over U.S. government monitoring and enforcement efforts concerning the protection of various U.S. company interests in the third sector.