METI LOOKING TO CONTINUE FORMAL BILATERAL ECONOMIC

C O N F I D E N T I A L TOKYO 000187 SIPDIS STATE FOR EEB AND EAP/J NSC FOR JIM LOI USTR FOR WENDY CUTLER AND MICHAEL BEEMAN E.O. 12958: DECL: 01/27/2018 TAGS: ECON EFIN SENV PREL JA SUBJECT: METI LOOKING TO CONTINUE FORMAL BILATERAL ECONOMIC DIALOGUE UNDER THE OBAMA ADMINISTRATION REF: TOKYO 157 Classified By: CDA James P. Zumwalt for reasons 1.4 (b) and (d). ¶1. (C) Summary: METI wants to continue a bilateral economic dialogue similar to the Economic Partnership for Growth (EPG) with the U.S., according to METI Vice Minister for International Affairs Hiroyuki Ishige. He envisions the new partnership having three pillars -- (a) macro-economy and trade, (b) investment, and (c) energy and the environment -- with the process led at the deputy or vice-minister level. Ishige noted PM Aso is seeking an early meeting with President Obama, prior to or on the margins of the April G20 Summit, and thought the leaders could kick off discussion there of the type of formalities they would like to see and then come to a final agreement on the structure of the dialogue, at the latest, on the margins of the G8. Ishige also noted METI is closely following the debate in Congress on the Administration's economic revitalization package. He raised specific concerns about a potential new "Buy American" provision and aspects of the auto bailout program that, he said, would not be WTO consistent. End Summary. ¶2. (C) METI VM Ishige told EMIN January 26 Japan wants to renew its economic partnership dialogue with the U.S. under the Obama Administration and feels the world's first and second largest economies should continue to use this "permanent fixture" to cooperate on regional and global issues. "President Bush did not make trade problems the main issue in the relationship," and the new framework should continue with this approach, according to Ishige. Interagency discussions have yet to start within the GOJ, Ishige said, but he envisions the new framework focusing on three pillars: (1) macro-economic and trade discussions; (2) investment policies; and (3) energy and environment policies. ¶3. (C) The results of these discussions should be reviewed at the President/PM level, but some issues, e.g., energy and climate change, should be moved to ministerial level rather than staying at the subcabinet level. ¶4. (C) Turning to topic areas, Ishige said the investment talks had been very successful and therefore should continue. Energy and the environment have also become top priorities for both governments, making their inclusion in a new dialogue self explanatory. The global economic and financial crisis and the need for greater macro-economic and trade policy coordination, which includes regulatory reform, are also high on METI's list of topics to discuss with the new Administration. ¶5. (C) EMIN agreed the U.S.-Japan economic relations have prospered but noted trade issues such as U.S. beef exports, rice, and med-pharm continue to require attention; how would these be addressed? Results are important for showing the value of such exchanges. Ishige agreed the new framework must produce results on specific issues, remarking it is also important as an opportunity for U.S. and Japanese senior officials to coordinate regional and global positions prior to larger international meetings such as the G8, the G20, or UN climate change negotiations. ECONOMIC RE-VITALIZATION BILL WTO CONSISTENT? -------------- ¶6. (C) Ishige said he wants to travel to Washington the week of February 2 for meetings following his visit to Davos for the World Economic Forum annual meeting. However, he recognizes many of those he would want to meet may not be in place and therefore requires him to postpone the trip. METI is aware the USG is focusing on the economy and is looking to quickly pass the Economic Re-vitalization bill now being debated in Congress. METI is monitoring the draft legislation to see if it will contain new "Buy American" provisions which could raise WTO consistency concerns for Japanese companies, Ishige asserted. For the same reasons, METI is following closely US discussions about measures to help the auto industry. ¶6. (C) Comment: Compared to MOFA (ref),METI is clearly not as far along in formulating a new U.S.-Japan economic partnership framework. Ishige and his Americas Division team are committed to a new dialogue and to deepening bilateral cooperation, but they are not convinced MOFA's approach is sufficient. METI International Affairs Director Yasuhisa Nakao separately expressed some frustration to Emboffs that MOFA had not consulted closely with METI prior to the release of its January 24 report on a proposed framework for future U.S.-Japan economic and trade relations. Nakao also expressed frustration with the approach Japan's Ambassador to the U.S. Fujisaki is taking. He stressed Fujisaki appears to be driving the process and MOFA Second North Americas Division is undervaluing parts of the relationship, i.e., APEC coordination in 2010 and 2011, in its haste to create a fait accompli a new framework. ¶7. (C) Comment continued: Charge and emboffs will meet 27 January with MOFA Deputy Minister Otabe and will report on the results of their conversation on these issues septel. End Comment. ZUMWALT