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 TOKYO 00005773 001.2 OF 003 Classified By: CDA Joseph Donovan, for reasons 1.5 (B) and (D). Summary -------------- ¶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 -------------- ¶5. (SBU) Several of DAS Moore's interlocutors expressed hope that the United States and Japan could continue to TOKYO 00005773 002.2 OF 003 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. TOKYO 00005773 003.2 OF 003 Australia FTA? -------------- ¶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