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From @lex-luthor.ai.mit.edu:hes@REAGAN.AI.MIT.EDU Thu Jun 10 01:54:10 1993
Date: Wed, 9 Jun 1993 10:34-0400
From: The White House <75300.3115@compuserve.com>
To: Clinton-News-Distribution@campaign92.org,
Subject: Background Briefing on Japan 6.8.93
E X E C U T I V E O F F I C E O F T H E P R E S I D E N T
THE WHITE HOUSE
Office of the Press Secretary
_____________________________________________________________________
BACKGROUND BRIEFING
BY SENIOR ADMINISTRATION OFFICIALS
June 8, 1993
The Briefing Room
3:13 P.M. EDT
MR. STEINBERG: Thank you for coming this afternoon for a
BACKGROUND BRIEFING with attribution to Senior Administration
Officials on the framework for Japanese trade. [Names deleted]
SENIOR ADMINISTRATION OFFICIAL: Let me introduce
immediately my colleagues and the members of our team. [Names
deleted]
The purpose of today's briefing is to discuss with you
the beginnings of the economic framework discussions between the
United States government and the government of Japan. [Names deleted]
... is then going to discuss how we see the framework fitting into the
overall structure of U.S.-Japan relationships.
[Name deleted] is then going to discuss what we've called
the basic bargain and the macroeconomic side of our discussions.
[Name deleted] will discuss the microeconomic side of the framework
and what we've called the five baskets. And, finally, I'll make a
brief conclusion.
Before I turn it to my colleague, I really want talk only
to three topics. The first is the framework, the second is the
intent, and the third is to underline what our immediate objectives
are. The framework itself, which the four of us -- the five of us --
will describe in more detail throughout this briefing -- I just want
to sort of give you a road map for the discussion -- has two
substantive sides and it has a joint management approach, and it fits
within an overall context of the way we see the relationship.
My colleague will discuss the overall context of the
relationship. The two substantive sides I've, in essence, all ready
said is that we feel that there is a need for ongoing discussions with
respect to macroeconomic policy and with respect to microeconomic
policy -- there specifically, sectoral and structural issues. And
what we've tried to do is create a framework by which we can bring all
of those together into a context or a structure that allows a
continuing, ongoing negotiation or continuing, ongoing contact.
The second large -- the second piece of the framework is
what we've called a joint management approach. As everybody, I
think, here knows the -- at the meeting between Prime Minister
Miyazawa and the President in April, they agreed on a twice-a-year
meeting of the heads of state. One of those meetings was always to be
at the occasion of the G-7 meetings.
What we've proposed is that there be -- is that the
framework will include a management approach or a follow-up approach,
in which the leaders will discuss the status of the discussions under
the aegis of the framework and there will be deputies meetings at our
level prior to the framework -- prior to the leadership discussions so
that we can bring it up to date, and we can assess where things are.
We have two intents with respect of this, and we'll all
be underlining them, so I'll start. The first is that broadly what we
want to do is enhance the quality of the overall American-Japan
relationship, specifically with respect to what my colleague will call
the economic leg.
Second, we want to create an enduring structure for
discussion. Our view is that what we want to do is to bring together
a set of different discussions which relate to each other and are
really to impossible to disentangle, together in a way that we can
integrate them appropriately and correctly.
And finally, I'd like to underline our immediate
objectives. In the month of June, our objectives and those of our
government of Japan counterparts are not really to discuss the
substance, but to put in place a framework under which those
discussions will proceed. So therefore, what we hope to accomplish in
June in the meetings that will occur on Friday and the meetings that
will likely occur subsequent to that in which the team will go to
Japan, is to establish this framework as a vehicle for discussion and
negotiations and communication. And we would like to be in the
position in which the President and the Prime Minister can announce
that at the occasion of the G-7 meetings.
All of that having been said, I'll now turn it to my
colleague.
SENIOR ADMINISTRATION OFFICIAL: As you all know,
President Clinton met with Prime Minister Miyazawa here in Washington
last April and they agreed at that time to set up a new framework and
a new form of dialogue, in effect to establish a new kind of
partnership based on mutual respect and responsibility and one that
would have a longer term vision of our joint role in the global
economy.
As the President said, and as we have as a working group
described it, we see the relationship with Japan as, in effect, a
three-legged stool. Each of the legs is critical; one of those legs
is the security relationship. That relationship we see as very
strong. It's been an anchor for our relationship in the Pacific, an
anchor for pacific stability, and it is very fundamentally important
to both of us.
The second leg of that stool is our cooperation on a
whole range of global or transnational issues ranging from population
to environment to issues of health, such as AIDS, for example. Again,
there we see a great promise of cooperation, mutual interest, and
basically a healthy leg of the stool.
The third leg of that stool is our economic relationship,
and that is the one that needs urgent attention. In order to make
sure that the overall stool, the overall relationship is healthy --
and again, we want to stress it is our most important bilateral
relationship -- we have to address the economic imbalances.
So the President and the Prime Minister agreed to develop
a plan to address in a very concrete fashion our economic agenda. As
my colleague has said, they have agreed to meet twice yearly. We are
proposing that those twice yearly meetings be preceded by a meeting of
the deputies. And we have developed a new framework, which we hope
will be one for fruitful dialogue, leading up to that heads meeting.
And I will turn it over to my colleague, who will continue the
description.
SENIOR ADMINISTRATION OFFICIAL: The overarching
framework on the economic side is what we call the basic bargain. And
under that bargain, we will be asking Japan to do two things: to put
in place a series of policies -- in effect, a multiyear fiscal policy,
or set of policies, demand-led policies which will have the effect of
reducing Japan's global current account surpluses from the present
level, which will be 3 percent to 3.5 percent of its GDP this year, to
substantially lower levels, say, below two percent after a reasonable
period of time.
The Japanese surpluses constitute a drag on world growth,
and as such, the whole world has an interest in seeing them reduced.
And, of course, it wasn't too long ago when the Japanese global
current account was much more reasonable from the point of view of
this range we're talking about than it is today.
Second, that Japan would simultaneously pursue a series
of policies which would improve the import penetration -- the
penetration of manufactured imports into its home market, all
manufactured imports on a global basis, by a substantial amount.
Japan's level of manufacturing imports, as a share of its GDP, is
about half that of other industrial countries, and that illustrates
the dimension, or one dimension of the asymmetry associated with the
lack of import penetration of foreign-based manufactured goods.
On the U.S. side, our commitment would also be twofold.
First, to complete the job in terms of the rectification of our
asymmetry, of our imbalance, which, of course, has been our domestic
deficit, and not just to say that we will reduce that deficit by $500
billion over five years, but to complete the legislation associated
with that and to actually achieve it. And, as you know, that would
reduce our deficit in terms of its share of our economy by half.
And, second, to continue the historically open markets,
open market, which has characterized the United States for so many
years, and which has been of such benefit to the rest of the world,
including Japan. Our interest is in opening markets, not in closing
them. And we would expect to continue the attitude -- the basic
attitude toward trade which has governed U.S. policy for as long as it
has.
With that as essentially the umbrella, I'm going to turn
it to my colleague, who is going to talk a bit about the macroeconomic
framework.
SENIOR ADMINISTRATION OFFICIAL: Thanks very much. Let
me say a word or two about process and then amplify a little bit on
the underlying economics.
It is anticipated that macroeconomic discussions with
Japan will continue in the context of the G-7 ministry of finance
cooperative process; that the heads of state meeting will take stock
of the macroeconomic situation, the current account imbalance and so
forth; and that that meeting will, as Bo said, be preceded by a
deputies meeting at which the discussion at the heads of state level
on macroeconomic questions will be prepared.
The approach we're taking reflects an analysis suggesting
that there are two critical problems that Japan poses for the rest of
the world, that Japan is abnormal on two dimensions. The first, which
one might refer to as the imbalance problem, refers to Japan's chronic
global surplus.
Japan's surplus is today the major asymmetry in the world
economic system, just as the American deficits were the major
asymmetry in the world economic system in the mid-1980s. At a time
when lack of demand is an important restraint on the creation of jobs,
both in the United States and in Europe, and at a time when the scope
for fiscal expansion is not what it has been in the past because of
large deficits, the large -- Japan's substantial soaking up of demand
through its substantial surplus represents a serious problem for
economic growth both in the United States and in Europe.
The second problem is what one might refer to as the
penetration problem. As my colleague indicated, relative to other
countries, Japan's level of imports of manufactured goods are very
low, and that remains the case even after one adjusts for a variety of
respects in which Japan is thought to be special -- the fact that it
is an island nation, the fact that it has to import its raw materials,
and so forth.
What one finds is that within particular manufacturing
industries, Japan's trade is much less than that of its trading
partners. The United States, European nations, to a substantial
extent import and export goods, within the same broad industries.
There is much less of that intra-industry trade in Japan. And it is
that which accounts for the very substantial amount of friction that
is encountered as American firms and firms from other countries seek
to do business in Japan. We are seeking Japan's substantial movement
over the next several years towards internationally normal levels of
trade as represented by import penetration.
I would just conclude by stressing that the objective
here is to expand trade, not to manage it, and to encourage the
Japanese government to pursue public policies, government policies,
that will have the effect of addressing these two concerns about
imbalance and about penetration.
SENIOR ADMINISTRATION OFFICIAL: Consistent with the
principles that my colleague has outlined on the macroeconomic side,
the microeconomic side of the framework can be characterized by two
broad goals. First of all, the goal of market expansion, market
access to Japan; and second, the goal that this access be applied on
an MFN basis.
We have settled on an approach on the microeconomic side
that is a basket approach; that is to say, we have grouped issues in
the bilateral relationship with common characteristics into five
baskets. An example of a basket is government procurement, where
bringing together issues that share common elements, we feel that it's
very important to do so that agreements are not negotiated on as ad
hoc a basis as at times they have been in the past, leaving, we
believe, overall to strengthened and more comprehensive agreements,
and in addition, rationalizing the negotiation process itself and
expediting its conclusion.
The baskets themselves tend to focus on those areas where
the Japanese government exerts considerable control or influence over
the issue involved, or where, for a particular sector, the economic
asymmetry in trade is particularly severe. As I indicated, these
agreements negotiated within each basket would be applied on an MFN
basis. The agreements in the U.S. proposal would have multiple
benchmark indicators attached to them in order to
assess progress toward market access goals. These indicators can be
both qualitative and quantitative in nature, and they would be
multiple in scope.
Last, we envision that these negotiations on the sectoral
basis would do two things: They would, first of all, address issues
that are pertinent to the sectors themselves, including structural
issues that pertain to those sectors. In that way, again, leading to
more comprehensive agreements and increased access.
Second, these agreements -- the negotiation of these
agreements would be quite timebound. We would envision a very short
schedule in the negotiating process timed to coincide with biannual
visits -- or semiannual visits between President Clinton and Prime
Minister Miyazawa, once at the G-7 and then in the middle of the G-7
sometime after the first of the year.
SENIOR ADMINISTRATION OFFICIAL: My colleague and I were
just saying that we need to do this more rapidly so that you all have
more time questions, so let me conclude quite rapidly.
I wanted to discuss three things. The vision, our
principles, and I want to make a point about tone and manner. I guess
the overall point I want to make is that we see this as the beginning
of an effort to put in place a broad structure to accomplish real
change. We know we're at the beginning of that, but the goals are
substantial.
The vision really is that the in the changing global
economy there are enormous international issues in which the chances
of success in dealing with are vastly enhanced if there is a positive
and productive bilateral relationship between the United States and
Japan, who together create 40 percent of the world's gross domestic
product. And that success is going to be good for American and
Japanese workers and consumers and good for the rest of the world.
The principles that we'll pursue in following through in
this are that -- and these are all ones that we've noted; I simply
want to underline them -- we're interested in more trade not less.
Everything we do will be multilateral in character. We intend to
pursue and we believe in objective benchmarks as a fundamental aspect
of this framework. And we are committed to reciprocity so long as
it's correctly understood, which is that -- and correctly understood
in the sense that for 45 years the United States has maintained the
most open economy in the world and, in so doing, has created the
driver for the rest of the world.
Finally, tone and manner. As we've looked at the last
several years, I think all of us have been struck by the fact that
there has been a corrosive nature to the quality of our economic
relationships. We hope that in creating a framework of this kind and
by creating a larger structure under which -- whose purposes are
understood with clarity on both sides, that we can begin to move away
from the corrosive nature of the tone that has been struck and strike
one over time that is much more appropriate to what is the most
important bilateral economic relationship in the world.
That having been said, the five of us are available for
questions.
Q When you mentioned the bargain -- it refers back to
his bargain that he described. Does this -- should we take this to
mean that if the tax and deficit reduction plan does not succeed in
the Congress that this Japan policy cannot go forward?
SENIOR ADMINISTRATION OFFICIAL: First, we think the
policy will succeed. Second, that's a new question; that's one we
didn't anticipate. I think the fact that we want to underline is that
this has been an issue and an imbalance in the world economy that our
trading partners, most specifically Japan, have correctly and
appropriately pointed to for years. That is one of the reasons -- its
impact on our domestic economy was the larger reason, but that is one
of the reasons why the President has focused so much of his energies
on dealing with that problem.
If in the worst possible outcome anyone can conceive that
problem were not dealt with in line with the policies as put forward
by the President, the imbalance would be there. We would still intend
to pursue this policy and to pursue correcting that imbalance. But on
a substantive basis you're quite right, that imbalance would be there.
Q I've heard -- and you have as well -- officials over
the course of past years call for essentially what you're calling for
here in this, open markets, reduce the trade imbalance. Why is
anything going to happen now, simply because you're calling for it
again? You seem to be offering the same things that you have before,
a continued open market as opposed to the possibility of additional
protectionist measures. Why would anything change now? Why should
the Japanese --
SENIOR ADMINISTRATION OFFICIAL: Let me open with a
preamble, make three points and see if my colleagues would also like
to comment. The preamble is the following: These are very large
economies. Very smart people have dealt with this issue on both sides
in the past. It is unlikely that in some sort of stroke that we're
going to discover issues that no one else has ever discovered.
We begin by understanding that there is a continuity in
the way that government policy is made and that we build on the work
of others. I think the most fundamental perception of ours with
respect to all of that is the following: that the world economy, the
Japanese economy and our economy have changed in fundamental ways over
the last decade. The way in which we dealt with our bilateral
relationship tended to be on the margin as problems were identified.
Because in the midst of change, that's what you do. What we've done
is try to look over all of that and to create an overall framework
within which discussion can be carried forward in a different and more
integrated way. That's distinction one.
Distinction two is the flip side of the question that he
asked -- is that this President has proposed a policy which reverses
the course of the area of economic policy which was the principal area
of complaint on the course of our trading partners and, specifically,
Japan. And, therefore, we enter into these framework discussions from
a different stance.
The final point is that we've tried to put in place a
mechanism by which both within the government and outside of the
government we will manage these issues over time. And we think that
it has staying power and we think that will matter.
Q To follow --
SENIOR ADMINISTRATION OFFICIAL: Wait. Let me ask
whether there's any follow-up on -- no.
Q Is there any "or else" to this at all?
SENIOR ADMINISTRATION OFFICIAL: Why don't I -- in order
to give somebody else a chance to talk, I ask my colleague to respond
to that point.
SENIOR ADMINISTRATION OFFICIAL: We don't believe it is
productive to talk about what else, but let me make a few general
comments, since the "what else" is obviously directed toward Section
301 and other trade remedies.
The reason for the use of Section 301, the reason for
enactment of Super 301 legislation reflects extraordinary frustration
with U.S.-Japan bilateral economic relationship.
We would far rather that our bilateral relationship,
bilateral economic relationship with Japan be resolved in a positive
way than through the imposition of other mechanisms such as 301 or the
reenactment of Super 301. In our view, it would be an extraordinary
gain if those mechanisms became superfluous. The fact is we are first
embarking upon a process. We don't have a framework in place. We
have not had negotiations under the framework. We have not had
agreements put into place. We have not had implementation of those
agreements. And so our domestic law is, of course, our domestic law
and is available to us. It is not the direction in which we would
like to go, but for now, we don't have anything tangibly in place.
Q Do these agreements that you envision, will they be
enforcing 301 law, the agreements you are negotiating within the
framework, will those be agreements that are enforceable under U.S.
Section 301 law as it's envisioned right now?
SENIOR ADMINISTRATION OFFICIAL: The framework does not
affect the application of U.S. domestic law, whether 301 or
antidumping, or any other aspect of U.S. law.
Q So these agreements would be enforceable under
Section 301?
SENIOR ADMINISTRATION OFFICIAL: These agreements would
be enforceable under any aspect of U.S. domestic law. What we are
trying to say is that the U.S. views this exercise as a trade
expansion exercise. It does not enter into this exercise with the
intent of closing the United States markets to exports from Japan or
any other country.
Q On behalf of autoworkers and computer manufacturers
and others who may have thought last year and the year before under a
different administration that we did, in fact, have a framework and
some agreement and partial implementation, have we taken now one or
two steps backwards? And when can they look for increased access in
Japan's markets?
SENIOR ADMINISTRATION OFFICIAL: I don't think there's
any question that what we're doing here should be talked about, should
be thought of as a step forward. First, we're putting the economic
element in the Japanese relationship in an absolutely central well
beyond where it has been in the past.
Second, we're doing it in a way that provides for a
common government unified structure for addressing concerns.
Third, we've made clear our commitment to measuring
results as we implement our trade policy through the use of multiple
benchmarks.
Fourth, we've stated overall objectives that we will be
working towards with the Japanese both in terms of their imbalances
and in terms of penetration. This is not a retreat from the existing
tools of U.S. trade policy. This is a framework within which those
tools can be applied in order to ensure that we make as much progress
as possible in opening Japanese market and, more generally, in
expanding opportunities for trade with Japan.
Q But unless I misunderstand, which I may well, you're
still only talking about a framework. You're not talking about
implementation, agreements.
SENIOR ADMINISTRATION OFFICIAL: What we're here
previewing for you is the -- is as my colleague said, the Prime
Minister and the President agreed to set up a framework within which
these various questions could be discussed. We're having a meeting,
as we've told you, to reach a process to reach agreement on that
framework. And what we are previewing is the U.S. proposal for that
framework. That's exactly right.
Q Could you explain to us how is it crimping U.S. and
worldwide growth? How is Japan's trade surplus crimping global
growth? What have your G-7 partners specifically told you about this
plan and are they on board? Will you present a solid front in Tokyo
in July?
SENIOR ADMINISTRATION OFFICIAL: This is a proposal for
redefining the U.S.-Japan economic relationship. It is not a G-7-
Japan proposal. Japan's global surplus crimps growth because it means
that in a case of each of Japan's trading partners Japan is supplying
more goods than it is demanding and that is reducing the demand for
goods in the American economy, in the European economy, and that
reduction in the demand for goods in turn reduces the level of
production and the level of employment. Reducing that surplus is an
important vehicle for providing increased aggregate demand, which in
turn creates jobs both in the United States and in Europe. We don't
have the room for fiscal expansion because of large budget deficits.
The Europeans don't have room for fiscal expansion because of large
budget deficits. Japan has a substantial shortfall relative to its
capacity to produce and still has a budget surplus. And so it does
have the room to expand demand and drive the world economy forward.
Q Aren't you really saying that Japan's loss is the
world's gain? Isn't that what this is coming down to?
SENIOR ADMINISTRATION OFFICIAL: I don't think this has
anything to do with Japan's loss being the world's gain. Japan's
consumers have the possibility of benefiting very substantially from a
period of domestic demand-led growth.
Q What sectors are covered by these benchmarks?
Q What's the basket? What are the five sectors?
SENIOR ADMINISTRATION OFFICIAL: The five sectors are,
first, government procurement by Japan; second, regulatory reform and
regulated industries; third, Japan's automobile and automotive parts
industry in Japan and in the United States; fourth, U.S.-Japan
economic integration -- for example, intellectual property rights;
fifth, compliance with existing agreements and arrangements.
Q Could you give us some examples --
SENIOR ADMINISTRATION OFFICIAL: Let me say, these are
contained in the U.S. proposal. They are obviously not agreed to.
Q Could you give us some example in the area of
government procurements, how to --
SENIOR ADMINISTRATION OFFICIAL: I can give you a few
illustrative examples. In government procurement, for example,
computers and telecommunications. With respect to regulatory reform
and regulated industries, financial services, for example, including
insurance. The third basket is self-explanatory. The fourth, on
economic integration, I've given the example of intellectual property
rights -- technology transfer is another example. And then the last
basket, compliance, we have, of course, a number of outstanding
agreements and arrangements with Japan, compliance with which is high
on the agenda, as well as a reassessment of those agreements and
arrangements.
Q Can you give us some examples of the benchmarks you
have in mind? Qualitative and quantitative.
SENIOR ADMINISTRATION OFFICIAL: We can only, at this
juncture, speak of benchmarks in general terms. We envision multiple
indicators, both of a qualitative and quantitative nature, that would
apply to various of these agreements. For some agreements, obviously,
quantitative indicators might be more appropriate to that agreement.
For others, qualitative indicators might be more appropriate.
The point is simply that if we are to assess progress
toward market access we would like to have some objective benchmarks
against which to assess that progress. To the extent progress is not
made, that may indicate any one of a number of things including having
negotiated the wrong agreement.
Q Are you talking quotas?
SENIOR ADMINISTRATION OFFICIAL: We are not quotas, no.
Q Can you give an example of a qualitative benchmark?
SENIOR ADMINISTRATION OFFICIAL: A qualitative benchmark
might be, for example, in the case of a sector where one wanted to see
substantial process change; a comparison, for example, U.S., European,
Canadian, Japanese laws and to try and regularize the Japanese regime
more in line with other industrialized nations. That would be one
example.
Q In the auto sector, I believe that comprises a very
large part of the U.S. trade deficit with Japan. How specifically
would you propose, are you proposing sectoral talks specifically on
auto issues, and what possible kinds of benchmarks might apply there?
SENIOR ADMINISTRATION OFFICIAL: I think that we're
running ahead of ourselves. Right now, the goal is to lay out the
framework. We are not going to be negotiating the specifics of any of
these issues prior to the G-7. Post G-7, we would obviously have to
lay out what precise issues within each subcategory we wanted to
negotiate, where we thought we would like to see change, and, from
that, hopefully with Japan's cooperation, devise appropriate benchmark
indicators.
Q But does the process -- if I could just follow up on
that -- does the framework envision auto talks as a separate category,
perhaps simultaneous with other talks on other topics, or, how will
you proceed if this framework is agreed to?
SENIOR ADMINISTRATION OFFICIAL: Were the U.S. proposal
accepted, there would be negotiations ongoing in each of the five
baskets on the sectors that are contained within each of those
baskets.
Q Have you had any response yet from Japan?
Q The Japanese government was saying yesterday, the
Foreign Minister was saying as late as yesterday that Japan is going
to set the negotiations any benchmarks, American benchmarks. How
would you respond to that
SENIOR ADMINISTRATION OFFICIAL: Our negotiations with
Japan on the framework have not yet begun, and will not begin until
Friday.
Q On that subject, I wonder why, since the positions
are obviously so far apart and you want to have this done in something
like 28 days, I wonder why you've gone public with a plan that
obviously is not very close to what the Japanese would like to accept,
and do you really think you can have a framework for the leaders to
sign off on the 28th?
SENIOR ADMINISTRATION OFFICIAL: Why don't -- since we're
going to have to leave, why don't I use this as a way of ending. The
fact is that -- first of all, as my colleague has said, that we
haven't even begun negotiations, and we certainly don't intend to
negotiate publicly. Given that the discussions begin on Friday, we
felt that it was only appropriate to begin to talk with you all about
them -- the second point.
The third point is that we have no indication that the
positions of that are a part as you have said -- that all negotiations
begin with steps. The way one proceeds with negotiations is one could
say, put one proposal on the table and then one begins to discuss it
and that's exactly what we're going to do. And we have a substantial
amount of confidence, if fact, that in these periods, that in the next
period that we'll be able to finish that. And I wanted to thank you
all very much.
Q If two percent of GNP is your target, it's restoring
the status quo ante of last year.
Q Would you address that? The Japan stimulus program,
how far will it come, in your view towards this alleged two percent
goal? How do we interpret what they are doing, in fact?
SENIOR ADMINISTRATION OFFICIAL: Well, our judgement is,
is there is probably more macroeconomic measures they require.
END3:52 P.M. EDT