JAPANESE REACTIONS TO DOHA IMPASSE

C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 002268

SIPDIS

STATE FOR EEB/MTA, EAP/J
DEPT PASS USTR FOR MROHDE, WCUTLER
GENEVA FOR USTR

E.O. 12958: DECL: 08/18/2018
TAGS: ETRD PREL JA WTRO
SUBJECT: JAPANESE REACTIONS TO DOHA IMPASSE

REF: TOKYO 2109

Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b/d).


1. (C) Summary: Japanese business representatives and trade
officials are disappointed by the failure to reach agreement
on modalities for concluding the Doha Development Round,
although agricultural interests seem relieved. Industry
still seeks liberalization in key NAMA sectors, such as
electronics and autos, and expressed concern about falling
behind countries like Korea in market access amid competitive
liberalization resulting from FTAs. GOJ officials are
pessimistic about an agreement this year, and stressed the
need to craft some positive strategies going forward to
mitigate perceived failure. All expected the failure of
multilateral talks to generate renewed efforts by Japan to
negotiate new bilateral trade arrangements, although reform
of sensitive sectors like agriculture may require a WTO
agreement to justify unpopular change. End summary.

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Introduction
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2. (C) EconOffs have solicited local Japanese views on the
July WTO ministerial. Sources for this report include
Ministry of Foreign Affairs (MOFA) Ambassador to the WTO Jun
Yokota, MOFA DG for International Economics Yoichi Otabe,
Ministry of Economy, Trade and Industry (METI) Director
General Tsunehiro Ogawa, Japan Business Federation
(Keidanren) Director for International Economic Affairs
Kazuyuki Kinbara.


3. (U) Japanese media report a general sense of
disappointment over the failure of the July WTO Ministerial
to produce an agreement, especially by industry. Japanese
agricultural interests, however, are relieved. Both sides
are quoted saying "better no agreement than a bad agreement."
A Cabinet shake-up immediately after the Geneva meetings,
plus the Olympics, resulted in public debate over the WTO and
reform passing out of the media spotlight very quickly.
Also, as ministries are still adjusting to the leadership
change, internal GOJ discussions are ongoing and contacts
stressed that views and observations were their own.

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Japanese Business Reaction
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4. (C) The Japan Business Federation (Keidanren) is "greatly
disappointed" by the failure of the WTO Ministerial to reach
agreement on modalities for concluding the Doha Development
Round, according to Director for International Economic
Affairs Kazuyuki Kinbara. Kinbara and a small team from his
bureau were in Geneva for most of the negotiations. Kinbara
admitted Keidanren was quite pessimistic at the start of the
talks. They judged WTO Director General Pascal Lamy's
initial prediction of a 50-50 chance of success to be "too
optimistic". However, as the talks progressed, Keidanren
observers became more hopeful. This made the final failure
all the more regrettable, Kinbara noted.


5. (C) On Keidanren's core issue, non-agricultural market
access (NAMA),agreement was very close, Kinbara noted.
Despite the collapse of the talks, Keidanren is confident
progress on NAMA modalities "would not have to start from
zero," whenever negotiations resume after the summer recess.


6. (C) In Geneva, Keidanren also consulted with the National
Association of Manufacturers and the U.S. Business Roundtable
to coordinate strategy and positions. On the broad direction
of the negotiations, all three business groups have similar
views, Kinbara reported, although priorities differed in some
cases. On the tariff levels and special safeguards in
developing countries, Kinbara felt that U.S. and EU business
associations were somewhat "more demanding" compared to
Japanese firms.

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7. (C) Keidanren members' priority was to reduce the
relatively high remaining EU tariffs on high-tech
manufactured products such as electronics and selected autos
and auto parts. Under the Lamy draft text, tariff on the
former would fall from 14 percent to 5.1 percent, and on the
latter from an average of 10 percent to approximately 4.4
percent. In both cases, the reduction is significant,
especially for Japanese manufacturers who are increasingly
worried about international competitors -- Kinbara mentioned
Korean firms in particular -- who benefit from an expanding
network of bilateral free trade agreements.

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Trade Officials' Concern over the Trading System
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8. (C) Yokota expressed concern about the possibility of a
long break in negotiations, arguing this could undermine the
credibility of the multilateral trading system. If a
prolonged hiatus seems likely, he argued, key members should
discuss mitigating strategies as well as the status of offers
currently on the table. Japan does not see the current
compromise as a final goal and would still like to see
improvements to the Lamy text, Yokota added. He
acknowledged, though, the complex process Lamy went through
in order to craft the compromise text. Still exploring
options, Ogawa also asked about U.S. willingness to
liberalize cotton, if it would help win Chinese and Indian
agreement on safeguard measures.


9. (C) Should agreement this year prove out of reach, all
sides should strive to show some positive outcome, Yokota and
Ogawa agreed. Yokota stressed, though, we should not shift
prematurely away from strong commitment to agreement now in
order to pursue 'early harvest' goals. He suggested, in
addition to "early harvest" options under discussion,
improving the dispute settlement understanding might be
another intermediate target. Otabe, however, thought an
early harvest might prove impossible to produce. Members
will differ on what all, or a sufficient number of them have
agreed upon so could be included in a early harvest package.
Otabe is also skeptical of what might be achieved in a
September WTO meeting; if ministers could not agree in July,
it is unlikely members will be able to make significant
achievements in September. He also noted that while Indian
and Chinese demands for a special safeguards mechanism caused
the Ministerial to end without result in July, there were
other serious problems sitting further down on the list that
could have had the same effect. Argentina has serious
outstanding concerns, Otabe notes and Japan continues to have
serious answered demands over the numbers of sensitive
product exceptions allowed and also over TRQs.


10. (C) Japanese trade policy would likely not change with
the failure to conclude the DDA, Ogawa felt, but this result
would reinforce Japan's need to continue to pursue bilateral
and plurilateral arrangements in addition to the WTO. Ogawa
acknowledged bilateral arrangements, even a prospective deal
with the U.S., would not be sufficient motivation for Japan
to push through domestic agricultural reforms. He added,
though, Japan should see this as only a grace period and not
a long-term reprieve from agricultural reform.


11. (C) Yokota mused, somewhat philosophically, that perhaps
the long-used approach to negotiating detailed WTO agreements
may no longer work. Perhaps WTO members need to reassess how
the Organization negotiates. He observed fissures among
developing members have made them more conscious of their own
interests and less prepared to speak as a bloc. He also
acknowledged the real difficulties that some members, notably
India and China, face in adjusting to trade liberalization.
The U.S. is frequently seen lacking sympathy or understanding
for the plight of poorer countries, and sometimes overly
concerned about enriching U.S. farmers, he added. Such
differences make it harder to reach agreements, even ones
that could confer substantial collective benefits. Perhaps

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wealthier WTO members should reexamine some of their
assumptions, he concluded.
SCHIEFFER