A/S SULLIVAN DISCUSSES G20 FINANCIAL SUMMIT AND

C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 003153 SIPDIS STATE FOR E, EEB AND EAP/J NSC FOR LOI GENEVA FOR DAVE SHARK E.O. 12958: DECL: 11/13/2018 TAGS: ECON EFIN PREL JA SUBJECT: A/S SULLIVAN DISCUSSES G20 FINANCIAL SUMMIT AND DOHA WITH METI VM ISHIGE AND DG OKADA REF: TOKYO 2994 Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 b/d. ¶1. (C) SUMMARY: EEB Assistant Secretary Sullivan held meetings with METI Vice Minister for International Affairs Hiroyuki Ishige and DG for Trade Policy Hideichi Okada November 5. Topics included the upcoming G20 Summit and the potential to conclude Doha Development Agreement (DDA) modalities by year's end. Ishige and Okada each said PM Aso is debating whether to call on Asian economies with trade surpluses to stimulate domestic demand at the November 15 G20 financial summit. The PM has not made a decision, but is leaning toward calling on the Chinese and Korean governments to stimulate domestic demand to offset declining exports and to buoy global confidence. They also stressed the need for the November 15 leaders' communique to include a specific "by the end of 2008" deadline to complete DDA modalities, but stressed Japan cannot propose such forward-leaning language. Ishige and Okada agreed with A/S Sullivan that proposed language on "no incremental trade and investment protectionism" is needed and hoped one to two sentences on trade in the G20 leaders' statement would reassure world economies. Sullivan, during his meeting with Okada, raised the TKS-Goss case (ref) and said the governments should encourage the two firms to reach a private settlement. END SUMMARY. "PROTECTING AGAINST PROTECTIONISM" -------------- ¶2. (C) METI DG Hideichi Okada, who had just returned from a trip to the Gulf Cooperation Council (GCC) states, told A/S Sullivan that sovereign wealth fund (SWF) managers in the region are pessimistic and they "don't see a way out" of the financial crisis. The GCC's views, Okada explained, reinforced his feeling that "now is the time to protect against protectionism." Okada also agreed with A/S Sullivan that moving forward on Doha, specifically on a framework for an agreement before the year's end, is important. Sullivan said the October G8 Leaders' Statement on open investment and open trade needs to be expanded during the G20 Washington meeting, and added he hoped the U.S. and Japan would continue to work together well on these issues, particularly in light of recent French comments calling for a SWF to protect French industry. Assistant Secretary Sullivan also complimented the GOJ for its proposal of a "no incremental protectionism" plan for inclusion in the G20 communique. ¶3. (C) METI Vice Minister Hiroyuki Ishige told A/S Sullivan the European Commission is open to a strong political message along the lines of "finish DDA as quickly as possible." Ishige said European Commission DG for External Trade, David O'Sullivan, told him in Brussels the week of October 27 the Commission is positive about G20 Summit language similar to "no later than by the end of the year." Ishige said Japan shares the USG's and European Commission's time frame for DDA but prefers to have the G20 issue the statement, as that group is broader than APEC's economies. Assistant Secretary Sullivan repeated what he told Okada, that while DG O'Sullivan may be supportive, France does not agree with such a specific deadline. Ishige noted that while Japan supports the USG's position, it cannot take a leadership role in proposing the language because of Ministry of Agriculture, Forestry and Fisheries's (MAFF) reluctance. Assistant Secretary Sullivan stressed the USG and USTR Schwab are working to have one to two sentences in the leaders' communique calling for action on Doha by the end of the year. PM ASO MAY CALL FOR ASIAN-LED FISCAL STIMULUS AT G20 SUMMIT -------------- -------------- TOKYO 00003153 002 OF 002 ¶4. (C) Ishige said that while Japan cannot propose DDA language, PM Aso is considering calling upon Asian countries with trade surpluses (China and South Korea) to stimulate domestic demand at the G20 summit. He said global growth is stalling and the U.S. cannot be the world's consumer at this time. It is incumbent upon China and others to spur domestic demand-led growth at a time when export growth is contracting. Assistant Secretary Sullivan said this step would send a positive signal to the world, and Asian fiscal stimulus could benefit all our economies. He added the G20 Summit communique might not have a statement of this nature, therefore, the PM's call would be welcomed and important. ¶5. (C) Okada also raised the possibility of PM Aso calling upon Asian economies with large surpluses to spur domestic demand. He said someone has to start spending again and China is the one obvious country. Assistant Secretary Sullivan agreed China could take stimulus action, noting South Korea had recently floated its own stimulus proposal. Okada said the PRC will be cautious about a domestic stimulus plan because it is acting hesitantly in this global financial crisis. However, with export growth receding and U.S. consumption shrinking, Asia's export-focused companies and SMEs will be negatively affected if no action is taken. Assistant Secretary Sullivan agreed and noted the U.S. introduced a $1.6 billion fiscal stimulus plan in February 2008 which had a positive effect on the real economy. He said similar moves by Asia countries (China, South Korea and Thailand) would be extremely welcome. TKS-GOSS -------------- ¶6. (C) Assistant Secretary Sullivan raised the TKS-GOSS case with METI DG Okada noting Goss company discussions with USG officials in Washington. A/S Sullivan stressed the USG does not want this case to become an irritant and is encouraging a company-to-company solution. In this regard, he hopes METI is advising the companies in the same manner. Okada said METI wants both firms to try harder to reach a settlement and he does not want the governments involved. ¶7. (U) This message was cleared by A/S Sullivan subsequent to his departure from Japan. SCHIEFFER