DUSTR BHATIA IN TOKYO: SURVEYS THE RELATIONSHIP

UNCLAS SECTION 01 OF 03 TOKYO 001692

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SUBJECT: DUSTR BHATIA IN TOKYO: SURVEYS THE RELATIONSHIP


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1. (SBU) Japan is a key partner for the United States in
its overall trade policy, and both countries need to do more
to deepen the relationship in coming months. That is how
Deputy U.S. Trade Representative Karan Bhatia underscored the
importance to the United States of Japan and the region
during meetings in Tokyo March 20. He described the priority
the United States attaches to establishing deeper regional
economic integration, pointing to the FTA negotiations
Washington has launched with Korea and Malaysia. He and his
Japanese hosts at the Prime Minister's Office, and the
Foreign, Trade, and Agriculture ministries, agreed to work
hard to advance the bilateral partnership in coming months as
Japan selects a new Prime Minister. Bhatia reminded all
parties, however, it will be hard to proceed as long as
Japan,s market remains closed to U.S. beef. Bhatia
underscored the urgency of reaching a successful conclusion
of the Doha trade round, and called on Japan to cooperate on
WTO cases Washington is considering filing against China.
End summary.

Bilateral Partnership
--------------


2. (SBU) Notwithstanding the irritant that beef represents
on overall U.S.-Japan bilateral relations (septel),the
partnership the two countries have forged over the past five
years should be reinvigorated in coming months. Assistant
Chief Cabinet Secretary Hiroyasu Ando told Ambassador Bhatia
that there were no "serious" economic issues between the two
countries. Bhatia agreed that the atmosphere had much
improved and said that, other than beef, the challenges ahead
lay more on capitalizing on opportunity rather than
minimizing problems. Bhatia said that Japan was our closest
and largest partner in the region and we should seek to
"deepen and broaden" the relationship. The two countries
should be thinking how to do this, he added, in the context
of the Prime Minister's visit to the United States
tentatively set for June.


3. (SBU) Deputy Foreign Minister Mitoji Yabunaka and Vice
Trade Minister Kazumasa Kusaka agreed that the relationship
had progressed smoothly over the past five years and both
their ministries were looking to identify the best way
forward. The departure from office of Prime Minister Koizumi
by the end of the summer makes it difficult to launch any
dramatic new initiatives at the moment. Both governments,
according to Kusaka, should take advantage of the intervening
months before the summit in June to study the architecture of
the relationship over the past five years to assess what
worked and what did not work. Although no public statement
need be made, both sides should develop a common
understanding on these points. At the summit, the leaders
could instruct their staffs to develop proposals for changes
in the architecture to be presented to the President and new
Prime Minister at their first meeting. Yabunaka suggested
that the two governments should hold talks in April or May to
prepare for a Bush-Koizumi summit.


4. (SBU) A consistent theme conveyed to Ambassador Bhatia
about reshaping the future dialogue was that the United
States and Japan should work more closely together on IPR and
energy issues. This was Ando's view at the Prime Minister's
office, and Yabunaka and Kusaka echoed it in their separate
meetings. On IPR, Ando and Kusaka said they hoped the United
States would consider favorably Japan's idea of a
non-proliferation agreement on counterfeit goods. Ando said
the Prime Minister was "personally interested" in such a
multilateral agreement. Ambassador Bhatia said there was no
disagreement with the objective and we would continue to
study the idea but we were concerned if the tactic could work
with China.


5. (SBU) Bhatia also raised "secure trade," exploring how
to use technology to protect transportation systems and
reduce transaction costs, as another area for future

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cooperation. On this issue, Kusaka complained that the
Department of Homeland Security (DHS) focuses perhaps too
much on security without taking into account adequately
commercial concerns. With better coordination, he said the
United States could achieve the same security at less cost.
Bhatia also raised with Assistant Cabinet Secretary Ando the
hope that the two governments could make more progress in
bilateral aviation talks. The current bilateral agreement is
quite restrictive, and Bhatia expressed his hope that Japan
might consider modest liberalization that would give air
carriers of both nations greater service opportunities. Ando
pledged to consider this but was otherwise noncommittal.

Regional Integration
--------------


6. (SBU) Ambassador Bhatia underscored the high priority
that the United States attaches to boosting its economic
integration in Asia. In describing the FTA negotiations
Washington has launched with Korea and Malaysia, he said that
the United States wants to "signal that we favor open markets
in the region." The Japanese officials wished the United
States luck in what is a very ambitious FTA agenda. Yabunaka
noted that he was intimately involved in Japan's FTA talks
with Malaysia. The climate there, he said, was very
political. He predicted that autos would figure prominently.
Kusaka underscored that the talks Washington has launched
with Korea were "strategically" the most important. Bhatia
noted that agreements varied from country to country, often
with very different approaches -- from broad FTA to sector
specific deals. On the prospect that the United States and
Japan could eventually work on their own FTA, Yabunaka
demurred: "I'm not sure it would be a plus for us."

Doha Round
--------------


7. (SBU) Bhatia underscored in all his meetings --
including at the Agriculture Ministry -- that the United
States attaches enormous priority to reaching a successful
conclusion to the Doha Round and it was time for all
participants to "put their cards on the table." Hong Kong
was not a failure, but the United States would like to see
much more progress -- and is looking to Japan to show
flexibility. The Administration is not counting on an
extension to Trade Promotion Authority, so the deadlines are
very real. Bhatia noted that there was no strong political
consensus for trade agreements in the United States at the
moment; trade negotiators must work hard to reach agreements
that will enjoy broad bipartisan support. He noted the close
calls already, including the one vote margin of victory for
the Central American Free Trade Agreement (CAFTA) passed last
summer.


8. (SBU) Kusaka and Yabunaka claimed Japan wants to have a
successful trade round too. Kusaka said that when Japan's
flexibility was needed, Japan was ready -- particularly in
the non-agricultural, or NAMA, talks. Japan has the most
WTO-friendly leadership ever, he argued, from the Prime
Minister to the Agriculture and Trade ministers. PM Koizumi
has the "courage" to make decisions, Agriculture Minister
Nakagawa "understands" the issues, and Trade Minister Nikai
has the political clout to make things happen. At the
Agriculture Ministry, where the institution is not known to
be as forward leaning on Doha as its minister, Vice Minister
Hiroyuki Kinoshita conceded to Ambassador Bhatia that Doha
was an important priority of the Prime Minister's. He added
that the ministry must work to advance the talks, but noted
-- somewhat elliptically -- the need to protect vulnerable
sectors.

China WTO Cases
--------------


9. (SBU) In the context of the WTO discussion, Bhatia
stressed Washington's hope that Japan would support the
United States in two cases it plans to file against China in

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dispute settlement, on IPR and auto parts. The Deputy Trade
Representative said that filing a WTO case ought not to
disrupt bilateral relations and is indeed the sign of a
mature relationship. Japan should not be uneasy about
joining the United States in these cases. In China, there
are reform elements and there are mercantilist elements, and
the best way to support the reform process is to hold
authorities there to their WTO obligations. Bhatia said the
United States understands the importance of bringing strong
cases for consideration in Geneva, and was preparing them.


10. (SBU) The GOJ is still studying the U.S. proposals and
is far from a consensus on what role Japan should play. Ando
agreed largely with Bhatia's description of the issue. We
should no longer treat China as an apprentice in the WTO, he
said, but as a full-fledged "responsible stakeholder."
Kusaka, reflecting the ambivalence of Minister Nikai -- who
is believed to be loath to confront Beijing -- was
non-committal. He told Bhatia that Japan wanted to help the
reformers in China too, but suggested there were other ways
to do this. He described some programs that Japan has
undertaken in China to educate mid-level bureaucrats in
regional governments to understand their legal obligations
better on IPR enforcement. And U.S. and Japanese
corporations should be cooperating more in areas of mutual
concern and should not hide behind governments. It was
important that China hear a consistent message from its
trading partners. But arm-twisting China, he asserted, could
be counter-productive, particularly if it looks like Japan
and the United States are "ganging up" on the Chinese.

Still Working on Consensus
--------------


11. (SBU) Yabunaka noted that Trade Minister Nikai was the
biggest obstacle in the Japanese cabinet to taking a stand in
the WTO against China on IPR and auto parts. Nikai was
widely regarded as "very pro-China," he said. The Vice
Foreign Minister reassured Bhatia that Japan was still
examining the U.S. initiative "very carefully." He noted
ruefully that Japanese commercial interests had certainly
been affected by China's non-compliance over the years.
DONOVAN