SUBJECT: EB DAS MOORE VISITS TOKYO AS GOJ

C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 005773

SIPDIS

SIPDIS

USTR FOR AUSTER CUTLER AND DAUSTR BEEMAN

E.O. 12958: DECL: 10/04/16
TAGS: EAGR ECON ETRD JA
SUBJECT: SUBJECT: EB DAS MOORE VISITS TOKYO AS GOJ
LEADERSHIP CHANGES


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Classified By: CDA Joseph Donovan, for reasons 1.5 (B) and (D).

Summary
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1. (C) As Japan's leadership changes after five years under
Prime Minister Koizumi, economic policy makers are
considering how to strengthen relations with the U.S. Few if
any, however, have any bold ideas in this area, and several
appear at least equally or more concerned with regional
bilateral or multi-party deals, judging by meetings in Tokyo
that EB DAS Chris Moore had during his September 21-22 visit.
In principle, Japan wants to cooperate on IPR, but has
specific concerns about two initiatives, including an
anti-counterfeiting agreement, that are pending between the
two countries (covered septel). On regional architecture,
Moore underscored the priority the United States attaches to
APEC, while senior Trade and Foreign ministry officials
agreed but pointed to the need for Japan to focus on
alternatives. Similarly, on Doha, GOJ officials professed to
share a view that reaching a multilateral trade agreement was
in both countries' interest, but said Japan needed more
flexibility from the U.S. on agriculture. On the FTA front,
Japan has an ambitious agenda that will be complicated by --
again -- opposition from Japan's entrenched agriculture
lobby. Septels cover aid to Central Asia and MOFA,s proposal
for Asian-Pacific statistical network. End summary.

Regional Architecture
--------------


2. (SBU) Moore underscored the importance of APEC in the
regional architecture. In separate meetings on September 21,
METI Trade Policy Director General Masakazu Toyoda and Deputy
Director General Michitaka Nakatomi claimed to be interested
in revitalizing APEC institutions, but spoke at greater
length about then Trade Minister Nikai's ideas to develop an
ASEAN plus six framework -- a scheme to bring Australia, New
Zealand, and India into a proposed ASEAN plus three framework
which Japan fears would be China-dominated. Toyoda noted
that ASEAN members were worried that too much focus on
boosting APEC would undermine ASEAN. According to Toyoda,
ASEAN countries set as a priority finishing a bilateral trade
deal with Japan before they would be interested in developing
further Nikai's idea of an ASEAN plus six deal. Toyoda said
it was time for the Southeast Asian countries to move "beyond
the fear" of being undermined by broader regional
integration, but the reality was they are not ready to move
more aggressively beyond the ASEAN context.


3. (C) Toyoda claimed that Japan was eager to press forward
on more regional integration. When Moore noted concern that
the GOJ's focus on developing an ASEAN plus six framework
could distract countries in the region from working more to
revitalize APEC, Toyoda countered -- somewhat implausibly --
that METI's focus on ASEAN plus six could serve as impetus
for more progress toward an APEC FTA. It will get people to
think about more integration, a subject on which ASEAN is
fairly "passive" at the moment. Working on an ASEAN plus six
arrangement could serve as a "building block" for APEC,
Toyoda argued. (Note: Noriyuki Mita, the head of METI's
Americas Division, who had suggested to us earlier this month
that METI's ASEAN plus six focus should be viewed as a
tactical effort to scuttle China's ASEAN plus three focus,
sat quietly as his boss described a very different strategic
view of what ASEAN plus six represented. End note.) Toyoda
noted the stiff opposition currently being put up by the
protectionists at Japan's Agriculture Ministry to any
framework that calls for more liberalization of agriculture.


4. (SBU) In a separate meeting with DDG Nagatomi, the METI
official provided us with a non-paper on APEC reform, in
which Japan "basically agrees" to a permanent Executive
Director and states a willingness to contribute, along with
others, to pay for the Executive Director,s staff. Over
dinner September 21, MOFA Deputy Director General for
Economic Affairs Yasuo Tanabe took a somewhat different
approach to the APEC issue. He said that Japan was willing
to work to strengthen APEC but was looking for U.S.
leadership as to how and on which issue this should be done.

Bilateral Relations
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5. (SBU) Several of DAS Moore's interlocutors expressed
hope that the United States and Japan could continue to

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cooperate closely on IPR concerns (septel),but had
relatively little concrete to offer when asked about the
future of the broader bilateral relationship. Toyoda
stressed the need to work closely together on a number of
fronts -- including on Doha, energy, and environmental
issues. When asked about Japan's expectations for the
bilateral relationship going forward, Nakatomi stressed that
there would be no loss of momentum with Koizumi's departure
and Shinzo Abe's emergence as the new Prime Minister.
Japan's primary focus would continue to be ensuring "good
relations" with the United States. Nakatomi added that Abe
will also want to improve Japan's relations with Korea and
China, which have been strained in recent years. Separately,
MOF Deputy Director General Tamaki seemed surprised when
asked how the U.S. - Japan relationship could be
strengthened, noting that there were no major problems
(septel).

FTA on Table?
--------------


6. (SBU) By contrast, MOFA,s Economic Affairs Bureau Deputy
Director General for North America, Sumio Kusaka, and
Director for the 2nd North America Division, Koichi
Mizushima, (who had just returned from Washington),had very
specific ideas on strengthening the relationship. Kusaka
agreed with DAS Moore,s suggestion that the first Bush-Abe
meeting be used to launch the next phase in the economic
relationship. Kusaka opened by saying that the economic
relationship needed to be put on the same "level" as the
political/security relationship, but the question was how.
In this regard, Kusaka said his personal view was that the
idea of a U.S.-Japan FTA "should not be taken off the table."
He suggested, again personally, that the two countries could
undertake discussions or a joint study for a year or two of
the FTA idea, without a priori agreement on the outcome.
Such a move would give direction to the countries,
integration efforts in the meantime, perhaps through
"building blocks." However, even a discussion of an FTA
would arouse opposition.


7. While not disagreeing with Kusaka, Mizushima stressed a
building block approach in more-or-less the current
arrangement. He said that the June summit statement had
called for strengthening the economic relationship with a
focus on IPR, energy security, and secure trade and that
U.S.-Japan cooperation in these areas could "flow" to other
countries. Without limiting the current regulatory reform
and investment dialogues, he suggested that future
sub-cabinet meetings be patterned on the one last June. They
should be strategic and provide action-oriented instructions
for intersession work which could be done by existing or ad
hoc working groups as appropriate.

Japan's Other Bilateral Ties
--------------


8. (SBU) Most interlocutors agreed that Japan's relations
with other countries in the region would continue to be
complex, presenting a host of different problems. Prime
Minister Abe will have his hands full with China and Korea,
but there had been progress to show on other fronts.
Economic Partnership Agreements had been reached -- if not
ratified yet -- with a number of countries, including the
Philippines and most recently Chile. DDG Tanabe described
how GOJ negotiators are already taking a "building blocks"
approach, incorporating what they have learned in each
successive round of talks. Japan would continue to negotiate
Economic Partnership Agreements with individual ASEAN
countries before negotiating one with ASEAN as a whole.


9. (C) Tanabe noted that the current talks with Indonesia
were proceeding slowly, quipping that this was not so much a
reflection of opposition in Jakarta, but of a more relaxed
pace of work by the Indonesians. Japan's willingness to
reopen certain sections of the Philippines agreement, he
conceded, had set an unfortunate precedent. Jakarta, for
example, is now demanding a more liberal regime for health
care workers to seek employment in Japan. Still, he said
that the health care worker issue was not what had held up
the Philippine negotiations. Instead a top politician and
high level Philippine jurist, who had been disgruntled with
an arbitration decision involving construction of a new
Manila airport, had waged a strong and ultimately successful
battle against including investor-state dispute settlement
provision in the investment chapter.

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Australia FTA?
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10. (C/NOFORN) METI DG Toyoda predicted that talks on an
FTA with Australia would be difficult. Canberra, he said,
wants to complete a study of the feasibility of an agreement
in time for the APEC summit in November 2006, in hopes that
the two sides could move to the next stage of negotiations
soon afterward. The GOJ is more cautious. Toyoda pointed to
the center of opposition in Japan as being the Agriculture
Ministry, where there is nervousness about Australia's
insistence about keeping agriculture on the table. The METI
official noted, however, that even Japan's Business
Federation (Keidanren) was queasy about moving too fast over
rice. Keidanren, according to Toyoda, pointing to the
"environmental implications" of an ambitious deal with
Australia, would not support the elimination of tariffs on
rice.


11. (C/NOFORN) Moore replied that keeping standards high
should be a priority in negotiating bilateral deals. Mita,
who was the Director of METI's EPA/FTA Division prior to
moving over to the Americas Division, agreed about the need
for ambition, but stressed the need for "flexibility" --
which for Japan means primarily not to expect too much on
agriculture. Takabe was more optimistic that the study would
be completed this year and that a deal could eventually be
reached. The Australians had indicated that they did have
flexibility on agriculture, but refused to be more specific
until negotiations started.

Cooperation on Doha
--------------


12. (SBU) When Moore underscored the importance for both
Japan and the United States of reaching a successful
conclusion to the Doha Round, and encouraged stronger
Japanese leadership in this area, his interlocutors professed
to want to reach a deal too. We have a choice of following
the "Seattle model" or the "Doha model," Toyoda said. His
main point was that when the United States, Japan, and the EU
work together -- coordinating their positions in advance --
there is much greater likelihood of success in multilateral
talks. Toyoda said that the current talks inside the G-6 had
stalled. This group is something of a microcosm of the
broader WTO membership, he said, but to get the talks moving
again, the biggest developed countries needed to do more
coordinating of their positions in advance. He conceded that
big differences remained between Japan and its American and
European partners over agriculture and offered little reason
to be optimistic that Japan's agricultural interests were
going to change anytime soon. Kusaka said that the U.S.
November elections were holding up progress on Doha. When
Moore cautioned against thinking that the elections would
change the U.S. position, Kusaka explained that negotiating
partners were looking at the elections to gauge the
possibilities of an extension of Trade Promotion Authority.
DONOVAN