WHA A/S SHANNON'S APRIL 11 MEETING WITH METI DG

C O N F I D E N T I A L SECTION 01 OF 04 TOKYO 002058

SIPDIS

SIPDIS

DEPT PLEASE PASS USTR FOR CUTLER, NEUFFER

E.O. 12958: DECL: 04/12/2026
TAGS: PREL ETRD ECON EINV APECO XR XK LA CH JA
SUBJECT: WHA A/S SHANNON'S APRIL 11 MEETING WITH METI DG
KITAMURA

REF: A. TOKYO 2008


B. TOKYO 1960

C. TOKYO 1959

Classified By: Deputy Chief of Mission Joe Donovan. Reason: 1.4 (b)(d)
.


1. (SBU) Summary: Japan is happy with the results of its
free trade agreement (FTA) with Mexico and expects rapid
progress in FTA negotiations with Chile, METI Trade Policy DG
Kitamura told WHA A/S Shannon April 11. Little enthusiasm
for a trade deal with Brazil and its MERCOSUR partners exists
in Japan, however. Japan remains concerned over competition
with China for minerals, energy and food in Latin American
and is dissatisfied with the failure of the Latin members of
APEC to take an active role in the issues of most interest to
Japan. End summary.

Japan-Mexico FTA: Success for Both Countries
--------------


2. (SBU) The free trade agreement between Japan and Mexico
has been a "very positive achievement," according to Japan's
Ministry of Economy, Trade, and Industry METI Trade Policy
Director General Toshiaki Kitamura. In an April 11 meeting
with WHA Assistant Secretary Thomas Shannon, Kitamura noted
that the genesis of the Japan-Mexico agreement had been a
finding by Japanese industry that Japan had been losing
approximately JPY 600 billion (USD 5.0 billion at current
exchange rates) in sales because of the lack of a free trade
arrangement with Mexico. Nevertheless, the fact that
Mexico's main exports to Japan would be agricultural products
still resulted in difficult negotiations as Japan's farm
sector sought protection from Mexican competition. The
positive effect of the final agreement on trade, Kitamura
stressed, had been obvious. He provided statistics
indicating that in the April-December 2005 period (i.e., from
the beginning of the Japanese fiscal year through the end of
the calendar year) Japan's exports to Mexico had grown 37
percent in comparison to the same period a year earlier.
Similarly, imports from Mexico had risen 23 percent in the
same timeframe.

Agreement Expected with Chile by Yearend
--------------


3. (SBU) Although FTA negotiations with Chile had only
started in February of this year, Japan expected to conclude
an agreement by the year's end, according to Kitamura. He
cited Chile's substantial experience in FTA negotiations and
the fact that Chile's agricultural exports were relatively
limited as the reasons for the expected rapid progress.
Kitamura indicated that Chile exports a significant amount of
salmon to Japan but did not seem concerned that trade in that
commodity could derail progress in the negotiations. Chile,

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he reiterated, has "experience and good sense." A/S Shannon
also noted that the United States had also had a good
experience in its FTA with Chile.


4. (C) Another factor behind the rapid progress in the
Japan-Chile negotiations is that the Japanese ambassador to
Chile is a former politician from the ruling Liberal
Democratic Party (LDP),Kitamura observed. This has meant
that the proposed Japan-Chile agreement has received a degree
of support from the Japanese political leadership rarely
seen. Kitamura indicated this political impetus to pursue
FTA negotiations with Chile was stronger than any pressure
from Japan's business community, which, unlike the case with
Mexico, had not been significant. (Note: Japanese
Ambassador to Chile Hajima Ogawa previously served as an LDP
member of Japan's Lower House representing the fourth
district of Nagano Prefecture from 1986 to 2000. From 1982
to 1986, he was a secretary to leading LDP politician (and
subsequently Prime Minister) Kiichi Miyazawa. Prior to that
time, he had been an executive in Mitsubishi Corporation's
Brazilian subsidiary. End note.)

Brazil: No Enthusiasm, No Need
--------------


5. (C) Asked whether there were other possible FTA
candidates in Latin America that Japan was considering,
Kitamura said some thought been given to Brazil and the
MERCOSUR countries. He cited three reasons, however, that
negotiations with Brazil were unlikely. First, the
Brazilians themselves seemed uninterested in an agreement
with Japan. Second, the Japanese, in contrast to the
situation with Mexico, did not perceive any tangible economic
disadvantage in not having an agreement with Brazil.
Finally, Japan, Kitamura noted, already had a number of very
active economic exchanges with Brazil so that an additional
framework in the form of an FTA or an "economic partnership
agreement" did not seem necessary. As an example of those
exchanges, Kitamura added that the Brazilian Commerce
Minister had been to METI the previous day to discuss the
possibility of Brazil exporting ethanol to Japan.


6. (SBU) Kitamura believed that Japanese economic
involvement in Latin America, particularly major economies
such as Chile and Brazil, would increase gradually. Trade
Policy Deputy Director General Akira Miwa, who accompanied
Kitamura to the meeting, noted that Japanese companies, often
using Japan-supplied loans, had invested in large projects in
Brazil during the 1960s and 1970s but stopped doing so first
because of political instability in Brazil during the 1980s
and then because of the collapse of Japan's economic "bubble"
in the 1990s.

Energy: Latin America Not Part of Japan's Strategy
-------------- --------------

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7. (C) Kitamura asked whether securing energy supplies
figured in the U.S. selection of its FTA partners. A/S
Shannon replied that, with the exception of Mexico, the U.S.
had not concluded FTAs with the main energy producers in
Latin America. (NAFTA has no energy chapter.) Kitamura
indicated that, in contrast, energy had figured prominently
in Japan's thinking and lay behind its efforts to conclude
economic partnership agreements with both Indonesia and the
Gulf Cooperation Council counties. Nevertheless, energy was
not yet part of Japan's plans vis-a-vis Latin America.
Generally, the Japanese Government would provide financing to
Japanese companies looking to invest in oil and gas projects
overseas as a way of helping to secure energy resources.
Deputy Director General Miwa indicated this had been the case
with respect to Japanese investment in the Brazilian oil
company Petrobras, where the Brazilian government, looking to
counterbalance U.S. and European interests, had invited
Japanese participation (which received Japan's financial
support).

China: Latin America Gets Less Than It Hoped
--------------


8. (C) Noting that A/S Shannon was on his way to China for
consultations, Kitamura asked whether the U.S. believed China
was only interested in Latin America as a supplier of
commodities. A/S Shannon agreed that this was the case and
stressed that China, in its dealings with Latin American
countries, had been very careful not to present itself as a
strategic counterweight to the United States in the region --
much to the disappointment of some in Latin America. The
economic benefits of closer relations with China had also
been less than expected. Kitamura commented that China's
single-minded pursuit of minerals, energy and food in Latin
America and elsewhere, often without a sound economic basis,
had been a destructive force in the international
marketplace. It was important, he stressed, that the Chinese
be made to understand that their behavior in this regard did
not conform to international norms.

APEC: Latins on the Sidelines in the Duel with China
-------------- --------------


9. (SBU) Turning to the role of the Latin American
economies in APEC, A/S Shannon noted that the United States
hoped to utilize APEC to inject some of Asia's economic
dynamism and openness in the traditionally more insular Latin
countries. Kitamura expressed surprise at Shannon's
explanation of the contribution of APEC to Latin America and
said that he had not considered the importance of APEC in
this regard. He commented that, in Japan's view, the Latin
American economies in APEC have done little to advance the
issues of main interest to Japan within the organization. He
stressed that Japan saw APEC primarily as a means to engage

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and to encourage China with respect to rule-based
international systems in areas such as intellectual property
rights, investment protection, and export controls. The
Latin American members of APEC, however, had seemed
interested only in developing business ties with Asia and had
been largely silent on the substantive issues on the APEC
agenda. Deputy Director General Akira Miwa added that the
extent of Latin American interest in APEC will become clearer
when Peru chairs the forum in 2008.


10. (U) Assistant Secretary Shannon cleared this message.
SCHIEFFER