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Cablegate: U.S.-Japan Business Council: Bilateral Strategic

VZCZCXRO7026
RR RUEHFK RUEHGH RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #3112 3150547
ZNR UUUUU ZZH
R 100547Z NOV 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 8679
INFO RUEHBJ/AMEMBASSY BEIJING 6303
RUEHNE/AMEMBASSY NEW DELHI 8611
RUEHUL/AMEMBASSY SEOUL 2278
RUEHFK/AMCONSUL FUKUOKA 0866
RUEHGZ/AMCONSUL GUANGZHOU 0001
RUEHHK/AMCONSUL HONG KONG 6624
RUEHNAG/AMCONSUL NAGOYA 8913
RUEHNH/AMCONSUL NAHA 3226
RUEHOK/AMCONSUL OSAKA KOBE 4651
RUEHKSO/AMCONSUL SAPPORO 1437
RUEHGH/AMCONSUL SHANGHAI 0508
RUEHBS/USEU BRUSSELS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS TOKYO 003112

SENSITIVE
SIPDIS

STATE PASS USTR FOR AUSTR CUTLER AND DAUSTR BEEMAN

E.O. 12958: N/A
TAGS: ETRD EINV PREL JA
SUBJECT: U.S.-JAPAN BUSINESS COUNCIL: BILATERAL STRATEGIC
DIALOGUE KEY TO GLOBAL COMPETITIVENESS

REF: TOKYO 2811

1. (SBU) The U.S. and Japan must build on their close
economic relationship to become more competitive in the face
of rapid developments in technology and the emergence of new
global competitors, according to a new report "U.S.-Japan
Economic Integration: Enhancing Competitiveness and Securing
Our Future in Asia", issued by the U.S.-Japan Business
Council (USJBC). Developing a high-standard U.S.-Japan
economic partnership agreement, the USJBC argues in its
recently released report, would be an effective way for both
countries to increase their competitiveness in East Asia (the
report specifically cites growing competition from China and
India) and globally by better allowing U.S. and Japanese
companies to boost productivity throughout their value
chains; by enabling innovative companies in both countries to
take advantage of economies of scale as they meet rising
demand for their products/services; by becoming a catalyst
for needed domestic economic reforms; and enabling the U.S.
and Japan to take the lead jointly in shaping the emerging
trade and economic architecture in Asia -- a step that would
improve both countries' competitive positions vis-a-vis other
economies.

2. (SBU) Meeting with econoffs, USJBC Economic Partnership
Agreement (EPA) Task Force Chair and AFLAC Japan CEO Charles
Lake and AFLAC Senior V.P. and Director for Governmental and
Legal Affairs Andy Conrad acknowledged the low probability of
the U.S. and Japan launching comprehensive free trade
negotiations in the near term. They noted the report states
"globalization fatigue" and an overcorrection to the focus on
Japan in the eighties and nineties in the U.S., and the
pressures of agricultural interests in Japan, as well as its
dual economy and vertically-segmented policy making regime on
top of the confused political outlook in Tokyo, make a free
trade agreement/economic partnership agreement unlikely in
the near future. Nevertheless, the scope of U.S.-Japan trade
and other economic relations as well as evolving
Trans-pacific dynamics leads the USJBC to suggest a building
block approach through which the U.S. and Japan can
prioritize elements of their strategic dialogue on
trade-enhancing measures to enable firms to better compete in
each others' markets, and thereby compete better regionally
and globally. Citing Boeing as an example, Lake said many
manufacturers with operations in both Japan and the U.S.
require a borderless supply chain to remain efficient and
competitive in the global economy. Lake also noted
information contained in the report showing the share of
intra-regional trade in Asia has increased to levels almost
commensurate with that among the EU economies; in contrast,
the share of intra-regional trade in NAFTA is considerably
less. He questioned how effective Japan has been in taking
advantage of the growth in regional trade flows. Without
more rapid and comprehensive reform, Japan might find itself
sidelined in terms of regional economic integration.

3. (SBU) Lake said the USJBC timed the report to engage
policymakers during the U.S. political transition and to
spark calls for reform within the Japanese business
community. He expressed concern that the slow pace of
economic reform in Japan, as well as competing investment
opportunities elsewhere, particularly from China, will
continue to draw policymakers' attention away from the
strategically important U.S.-Japan economic and trade
relationship. The USJBC advocates a ratcheting up of the
U.S.-Japan strategic dialogue and greater engagement with the
Japanese business community to drive a more robust domestic
reform agenda. To this end, the USJBC is promoting the
report's recommendations in its discussions with senior
government officials, the broader trade policy community, and
the media.
SCHIEFFER

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