From: H-Japan Editor
Editor's Note: The following message from Ira Wolf, as well as a forthcoming
response by John Campbell, were originally posted to the Dead Fukuzawa
Society (DFS) mailing list. Both authors have agreed to allow their comments
to be reposted on H-Japan and welcome any comments.
MITI Throws Down the Gauntlet on Trade Negotiations with the
United States -- Did Anyone Notice?
On Friday, March 15, MITI Vice Minister for International Affairs
Sakamoto gave a very important, profoundly disturbing, and little
reported upon speech at the Foreign Correspondents Club of Japan, at
which he announced the end of meaningful bilateral trade negotiations
with the United States. Here are a few excerpts from the first part
of his speech.
1. The US and Japan have outgrown an era in which their relations
were swayed by trade frictions.
2. We have now entered an era in which we must work together to
solve global problems.
3. Bilateral negotiations on sectoral issues were necessary because
GATT rules were not fully developed.
4. The WTO...can be regarded now as the constitution of world
trade.
5. Considering the globalization of industrial activities, it is no
longer relevant to negotiate and have an agreement on issues related
to global industries in a limited bilateral context such as between
Japan and the US.
6. The era of bilateralism is over. This is not to say that
bilateral frictions will disappear. But any such friction from now on
will have to be solved in accordance with the WTO and other
international rules and follow market mechanisms.
He then went on to discuss semiconductors and film (a favorite subject
of mine.)
On semiconductors, he repeated the MITI position that we no longer
need any such arrangement, in any form...By extending such an
arrangement, we would allow managed trade to spread throughout the
world with a possible use of Section 301. As the two biggest
economies in the world, we cannot be that irresponsible. He denied
that the arrangement was responsible for increasing foreign
semiconductor sales (despite statements to the contrary over the years
by Japanese semiconductor industry leaders.)
On film, he repeated the MITI position that this is a competition
policy issue so the only relevant agency is the JFTC, that the JFTC
has been drastically strengthened as a result of SII, that the film
industry as an oligopoly has been under JFTC's watchful eye (If my
mother had brought me up under such a watchful eye, I would probably
be in jail by now), and that the OECD should conduct a case study of
the film markets of major countries including the US and the EU. (I
fail to understand what this has to do with Japanese market barriers,
other than to divert world attention from Japan.)
He pointed out the February 21 JFTC announcement of a survey of the
film industry, which, he said, would have two distinct features: (1)
it will cover Japan's film market as a whole, including Kodak, and (2)
it will look into competitive conditions and laws in Japan, the US,
and Europe. Now with the JFTC survey on the Japanese (film) market
going on, it would be completely inappropriate for MITI to intervene
on this issue.
He continued by repeating that we must solve disputes based on
international rules and market mechanisms. If an area is outside the
WTO, we should create a bilateral dispute resolution mechanism (an
idea proposed by the Japanese Government for many years as a way to
undercut US trade law.)
He concluded: Let us not allow such (trade) disputes to distract us
from more pressing global issues such as the security, environment,
energy, and strengthening international rules...We don't really have
the time to indulge in trade disputes.
Here are few of his responses to questions. (I paraphrase his
answers.)
1. Japanese imports have increased because of exchange rate changes,
change of economic conditions, and efforts of foreigners. It had
nothing to do with market access agreements.
2. We have had informal talks with the US on semiconductor agreement
extension, with Ambassador Shapiro and at lower levels. If the US
raises this issue formally, we will listen, but our answer will still
be no.
3. On film, the JFTC is a quasi-judicial organization. Their
decisions are comparable to the First Instance Court of the Judicial
System. Because the government cannot negotiate with their judgment
and their judgment could be distorted by social or political pressure,
it would not be appropriate to negotiate with a foreign country.
The US approach to film is a threat to other countries. This is not a
trade issue or something involving unfair trade practices; it should
be handled under competition policy. It is not an appropriate
approach under the WTO which clearly states that unilateral action is
inconsistent with the WTO. (I do not believe this latter statement is
accurate, especially since the WTO has no jurisdiction over
competition policy and many other areas.)
COMMENTS
First, I noted today a Nikkei report that Japan will refuse to extend
the bilateral paper agreement when it expires in 1997, with the
explanation that the government has no role to play. So, this new
MITI policy is already spreading.
Second, this is the broadest and most direct presentation I have seen
of Japan's policy on bilateral trade negotiations with the United
States. The message is clear: We will never engage you again in
meaningful bilateral trade negotiations. This despite the fact that
the WTO was not designed to address all trade problems in the world,
not to speak of the pervasive indirect trade barriers that still
predominate in so many sectors in Japan.
Competition policy issues are not covered by the WTO -- in fact,
competition policy will likely be one of the core issues in any future
round of world trade negotiations. Other barriers that have no
relationship to WTO rules (Vice Minister Sakamoto's Constitution of
World Trade) include:
--over-regulation in Japan
--Amakudari
--administrative guidance
--the still very cozy relationships between many industries and
politicians
--blocked access to the distribution system in many sectors (including
the Large-Scale Retail Store Law)
--a still deeply imbedded buy Japan attitude among many corporate
and government procurement officials
--Japanese government industrial policy that still favors domestic
companies in industry after industry. (For those of you who believe
that the era of industrial policy in Japan is over, please ask MITI
what the hundreds of officials are doing everyday in the Industrial
Policy Bureau and why thousands of Japanese business leaders show up
at MITI in early January to pay their respects.)
Third, most of the existing US/Japan bilateral agreements (which are
almost all MFN-based) were necessary because GATT rules were
insufficient to deal with Japanese market access barriers, a fact well
understood by Japanese negotiators in the past. We called these
agreements GATT-plus. The new Japanese government policy explained
by Vice Minister Sakamoto will render all these agreements invalid.
Finally, the challenge Vice Minister Sakamoto throws out to the United
States is unprecedented. No longer will the two governments be able
to sit down to work out problems. Only when Japan decides, for
whatever reason, that it is willing to talk to the United States, will
there be a discussion. The implications of this are profound and
should be very troubling to the United Sates.
P.S. You might find the full text of Vice Minister Sakamoto's speech
on the MITI home page (http://www.miti.go.jp)
P.P.S. Feel free to pass this message to anyone.
Ira Wolf
Tokyo
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