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

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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