SECOND JAPAN-CHINA ECONOMIC DIALOGUE -- LONG ON

C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 001279 SENSITIVE SIPDIS STATE FOR E, EEB AND EAP/J NSC FOR DANNY RUSSELL AND JIM LOI GENEVA FOR DAVE SHARK E.O. 12958: DECL: 03/11/2019 TAGS: ECON EFIN PREL CH JA SUBJECT: SECOND JAPAN-CHINA ECONOMIC DIALOGUE -- LONG ON DOCUMENTS, SHORT ON DETAILS REF: A. TOKYO 1019 ¶B. TOKYO 984 ¶C. TOKYO 33 Classified By: EMIN Robert F. Cekuta, Reason 1.4 (B) and (D) ¶1. (C) Summary: After an 18 month hiatus, Japan and China held the second High Level Economic Dialogue June 7 in Tokyo. Foreign Minister Hirofume Nakasone and his Chinese counterpart, Vice Premier Wang Qishan, issued 11 documents highlighting cooperation in areas including promoting a global economic recovery, concluding the WTO Doha round of trade talks, establishing a working group to protect intellectual property rights, ensuring food security, and enhancing environmental protection and energy savings. Details on the 11 documents are still vague and will need to be worked out in the coming weeks according to MOFA, China Economic Division Director Masashi Ogawa. On the margins of the economic dialogue, METI Minister Nikai and Chinese Commerce Minister Chen Deming singed a memorandum of understanding establishing an annual IPR working group and Nikai reiterated Japan's concerns about a proposed Chinese compulsory certification system for IT products. Nakasone and Wang agreed to meet again in 2010 in China. End Summary. A Lot to Discuss, But Few Measurable Results -------------- ¶2. (C) After almost 18 months, Japan and China finally held their second bilateral High Level Economic Dialogue June 7 in Tokyo. Foreign Minister Nakasone and Vice Premier Wang led their respective delegations during a half-day of talks. The agenda was particularly long because of the combination of world events -- global financial/economic crisis, DPRK, and H1N1 -- and the extended time between the first and second meeting. The Japanese and Chinese delegations spent considerable time on the world economy, the Doha Development Agenda (DDA),IPR, H1N1 influenza, food safety, assisting developing countries with infrastructure projects, environment concerns, energy conservation/efficiency, agriculture, science and technology, and the DPRK. The agenda was ambitious, and Ogawa added, "we needed more time to cover the issues. We planned for four hours and it lasted five." While the agenda was ambitious, the outcomes were less so with Vice Premier Wang on numerous occasions taking "note of Japan's high level interest" and, at the opening, showing some dissatisfaction in having to work with only ministers. Wang, however, was sufficiently satisfied with the talks to propose a third round in China in 2010. ¶3. (C) In some areas, Japanese and Chinese ministerial officials tended to depict the ball as being in the U.S. court, particularly with regard to an early conclusion to the Doha trade talks. Nikai and Chen agreed successful conclusion of the DDA would give the world economy a boost, but called for greater leadership from the U.S. and President Obama as the way to break the deadlock between developed and emerging economies to reduce trade barriers. Japan States Its Cases, But Hears Little of Substance -------------- -------------- ¶4. (C) Foreign Minister Nakasone and METI Minister Nikai raised several bilateral irritants with Vice Premier Wang and Commerce Minister Chen, but were mainly told the Chinese government "noted" Japanese concerns. During discussions on food security, Japan and China issued a statement that "ensuring the safety of food and products is extremely important for the people's lives." However, China made no concession to resolve the 2007 tainted dumpling case even against the backdrop of steeply falling Japanese demand for Chinese food items. Minister Nikai made a similar push with Commerce Minister Chen on both IPR and the proposed May 2010 compulsory certification system for IT products. Again, Chen made no concessions other than agreeing to regularize an IPR working group which is to convene for the first time later in ¶2009. (NOTE: Japanese patent officials estimate Chinese firms' pirated goods have resulted in JPY9.3 trillion ($96.9 billion) in cumulative losses for Japanese companies. END NOTE.) Assistance to Developing Countries and S&T -------------- ¶5. (C) The quantity of documents issued by Japan and China can be considered positive given that neither side had TOKYO 00001279 002 OF 002 discussed in detail any of the eleven issues in more than 18 months. The quantity, however, hides the failure to agree in many areas on the substance of the issues. The documents, which are not yet public, "emphasized the need for further efforts in areas such as S&T, small and medium-sized enterprises, and product safety" or agreements "to consider extending loans to Japanese or Chinese companies launching infrastructure projects in developing countries." Let's Meet Again -------------- ¶6. (C) Following the conclusion of the second High Level Economic Dialogue, Nakasone and Wang agreed to a third meeting for sometime in 2010. Ogawa said MOFA is very pleased with this result because China has yet to agree to another economic dialogue meeting with the EU. Thus, the agreement to meet again is seen here as a step in the right direction for both countries because of the size and degree of integration of their bilateral trade relationship. China is Japan's largest trading partner (exports $120 billion; imports $93 billion) and Japan is one of the top five foreign investors in China ($59 billion as of 2006). The two countries' economic leadership should meet on a regular basis to ensure, to the extent possible, the bilateral trade and investment relationship operates as smoothly as possible. ZUMWALT