MOFA ECONOMIC DIRECTOR GENERAL ON SUB-CABINET

C O N F I D E N T I A L SECTION 01 OF 04 TOKYO 001377

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E.O. 12958: DECL: 03/30/2027
TAGS: ECON ETRD EAGR EINV PREL WTRO SENV JA
SUBJECT: MOFA ECONOMIC DIRECTOR GENERAL ON SUB-CABINET
CONCERNS: NEED TO PREPARE FOR SUMMIT

Classified By: Amb. J. Thomas Schieffer. Reason: 1.4 (b,d)


1. (C) Summary: The exchange of information on free
trade agreements and discussion of food safety issues
remain the most sensitive topics for Japan at the
upcoming sub-Cabinet meetings in Washington, according
to the Director General for Economic Affairs of the
Japanese Ministry of Foreign Affairs (MOFA).
Publicity regarding these topics could have serious
domestic political repercussions in Japan, the
official said. Nevertheless, MOFA, at least, believes
a formulation could be found to publicly refer to
ongoing FTA exchanges. Japanese willingness to engage
with the United States on secure trade issues appears
to have strengthened, but the MOFA official downplayed
the need for a bilateral exchange on transparency.
Although he welcomed greater U.S. activity in APEC, he
did not foresee quick consensus within the
organization on a Free Trade Area of the Asia-Pacific
as the preferred model for regional economic
integration. No decision has been made on a location
for the 2008 G-8 summit. End summary.

Sub-Cabinet to Set Econ Agenda for Summit
--------------


2. (SBU) Meeting with EMIN and ECOUNS on March 28,
MOFA Economic Affairs Director General Yoichi Otabe
stressed that the agenda for the upcoming sub-Cabinet
economic meetings should not go much beyond those
areas already discussed: intellectual property rights
(IPR),energy efficiency, and secure trade, along with
exchanges on transparency, free trade agreements, and
food safety. Otabe added, however, that World Trade
Organization Doha Round negotiations and cooperation
on development assistance should also form a part of
the dialogue. The main purpose of the sub-Cabinet
meetings, Otabe indicated, should be to establish the
economic content of Prime Minister Abe's meetings with
President Bush when the Prime Minister makes his
planned visit later in the spring.

FTAs and Food Safety Remain Highly Sensitive Topics
-------------- --------------


3. (C) The exchanges on food safety and free trade
agreements (FTAs) would be the most problematic for
the Japanese, according to Otabe. The present
political environment in Japan required that both
topics be handled cautiously, especially before the
upcoming elections, he noted. Japan, Otabe observed,
is not yet ready for FTA negotiations with the United
States, so while a public statement on the exchanges
was possible, it should avoid language indicating that
the two countries were even exploring the possibility
of a bilateral FTA. (Comment: Willingness to have
any public statement on this topic is a change for
MOFA. End comment.) The main concern on the Japanese
side, Otabe said, is opposition from the country's
agricultural lobby. He added that he believed the
U.S. textile industry, which would need to abandon its
remaining protection in the advent of U.S.-Japan FTA
negotiations would also be an obstacle. While Japan
had no particular interest in increased textile
exports, textiles would need to be included to meet
WTO requirements that a free trade agreement cover
substantially all trade, he said. State laws also
could complicate the completion of an investment
chapter in any U.S.-Japan FTA, Otabe speculated. More

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importantly, Otabe emphasized that the United States
and Japan, as the world's two largest economies, would
seriously undermine the multilateral trade
negotiations underway in the WTO if they began
movement toward a bilateral FTA. Nevertheless, he
indicated that the Ministry of Foreign Affairs was
comfortable with the "information exchange" format
that had been applied to date, although he stressed
that that view was not necessarily shared at the
Ministry of Agriculture, Forestry, and Fisheries
(MAFF).


4. (C) Turning to food safety, Otabe stated that
this issue, too, is politically very sensitive,
particularly in light of the series of local and
national elections coming up this year. The GOJ does
not want the topic of food safety to appear in any
public announcement regarding the sub-Cabinet
meetings, Otabe said. He acknowledged that
discussions on food safety are natural and normal
between two large trading partners like the United
States and Japan, but emphasized that, in the present
political climate in Japan, it would be wiser to avoid
any publicity on that topic especially in relation to
the Prime Minister's upcoming visit.

Japan Hopes DHS Will Join Secure Trade Discussion
-------------- --------------


5. (C) As for the other issues such as IPR and
energy, much work had already been done between the
United States and Japan in these areas and working out
some sort of joint document in which they are included
should pose no problem, Otabe believed. He expressed
regret that officials in Washington did not appear to
fully appreciate Japanese efforts to date on these
issues. EMIN replied that some additional work on
secure trade issues might be need in order to ensure a
bilateral agenda that would sufficiently engage the
Department of Homeland Security (DHS),a vital
participant on the U.S. side. In addition, despite
Japanese sensitivities regarding discussion of food
safety, any effort to move toward greater economic
integration between the United States and Japan in the
medium to long term must include agriculture, EMIN
stressed.


6. (C) Otabe acknowledged EMIN's point on DHS
participation in the secure trade agenda and noted
that, while in Washington recently, he had personally
met with officials at DHS and encouraged their
participation in the sub-Cabinet process.
Nevertheless, he pointed out that all countries have
their sensitive economic areas. The U.S.-EU trans-
Atlantic partnership, he noted, had progressed little
from where it began a decade ago because of
fundamental differences on certain issues.
Consequently, it was not necessarily good to have too
aggressive an agenda. Asked how MOFA responded to
interest from the Japan Business Federation
(Keidanren) and others in the possibility of a U.S.-
Japan FTA, Otabe said he had cited the problem of
undermining the WTO and the fact that the United
States and Japan already have a range of economic
agreements in place as factors that argued against the
need for a bilateral FTA. He acknowledged, however,
that these arguments had not convinced his
interlocutors from the Japanese business community.


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Transparency: No Need for Bilateral Exchange
--------------


7. (SBU) Otabe also expressed the view that a
bilateral exchange on transparency would not be
necessary in the context of the sub-Cabinet meetings.
Japan had improved greatly in this regard since the
days of the Structural Impediments Initiative, he
noted. What remained were largely minor issues that
did not really merit an independent agenda item in the
sub-Cabinet dialogue, especially as they were already
being covered in the regulatory reform talks. ECOUNS
explained that one of the main issues remaining was
lack of foreign participation in Japan's policy
advisory councils. Otabe replied that foreigners had
been allowed to participate in some advisory bodies.
In fact, MOFA had identified four non-Japanese
citizens sitting as members of government advisory
bodies according to an official of MOFA's Second North
American Division who accompanied Otabe. Also, as the
interests among members of the foreign community in
Japan varied, the Japanese government faced a
difficult question of which foreigners should be
invited to sit on these bodies and which should not,
Otabe stressed. Nonetheless, Otabe allowed that there
might be some minor bilateral issues to discuss.

APEC Cooperation Welcome but FTAAP Support Uncertain
-------------- --------------


8. (C) If the United States and Japan were to
discuss transparency issues, Otabe averred, it should
be in the context of APEC, where it would be
beneficial to press other countries in the region to
become more transparent in their policy and regulatory
processes. EMIN recounted that this kind of
cooperation regarding third countries had been a major
topic of discussion during the sub-Cabinet exchanges
in 2006 and added that many in Washington had gained
the impression that Japan had wanted to focus on third
country issues to the exclusion of a substantive
bilateral agenda. There had also been strong
differences regarding the pursuit of a Free Trade
Agreement of the Asia-Pacific in the context of APEC
during the last round of sub-Cabinet meetings, EMIN
noted.


9. (C) Otabe welcomed renewed U.S. interest in APEC
-- Japan, he noted, had long encouraged greater U.S.
attention to the organization -- but cautioned that
the ongoing discussions in APEC this year were
unlikely to yield agreement on any single option for
greater regional economic integration. Too many other
proposals from Japan and other member economies --
ASEAN Plus 3 and ASEAN Plus 6, for example -- were
already on the table and had strong supporters.

G-8
---


10. (SBU) With respect to the agenda for the annual
G-8 meeting, Otabe pointed to environmental protection
and climate change as being central agenda items both
this year and probably when Japan hosts the meeting in

2008. Otabe indicated that the Japanese government's
main coordinator on this issue is MOFA Global Affairs
Director General Koji Tsuruoka but that it was not yet
clear who Tsuruoka's counterpart would be in the USG.
Otabe said that Japan had yet to decide on a location

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for the G-8 summit in 2008. As for timing, he noted
that Japan would want to wait until the latter half of
July after France has assumed the EU Presidency from
Slovenia and the U.S. Independence Day and the French
Bastille Day holidays have passed.

Comment
--------------


11. (C) Although he raised all the usual caveats and
cautions about pushing an overly ambitious bilateral
economic agenda -- and the possible political fallout
in Japan that could result if the substance of U.S.-
Japan discussions became public -- Otabe seemed more
positive than our other MOFA interlocutors regarding
our proposals for the upcoming sub-Cabinet meeting.
The extent to which this reflects thinking elsewhere
in the Foreign Ministry, not to mention other agencies
and the Prime Minister's Office, however, is unclear.
SCHIEFFER