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Cablegate: Ambassador Marantis Seeks Greater Trade And

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RR RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #0338/01 0530602
ZNR UUUUU ZZH
R 220602Z FEB 10
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 9520
INFO RUEHBJ/AMEMBASSY BEIJING 3171
RUEHUL/AMEMBASSY SEOUL 9852
RUEHGP/AMEMBASSY SINGAPORE 7473
RUEHFK/AMCONSUL FUKUOKA 8931
RUEHNAG/AMCONSUL NAGOYA 5931
RUEHNH/AMCONSUL NAHA 1263
RUEHOK/AMCONSUL OSAKA KOBE 2749
RUEHKSO/AMCONSUL SAPPORO 9417
RUEHIN/AIT TAIPEI 7585
RHEHAAA/WHITE HOUSE WASHDC
RUEATRS/TREASURY DEPT WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEHGV/USMISSION CD GENEVA 3637
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 04 TOKYO 000338

SENSITIVE
SIPDIS

STATE FOR EAP/J, EAP/EP, AND EEB
STATE PASS USTR FOR DUSTR MARANTIS, AUSTR CUTLER, MBEEMAN,
AND DLEE
USDA/FAS FOR BERMAN
NEC FOR LSUMMERS

E.O. 12958: N/A
TAGS: ETRD EAGR EINV APEC PREL JA
SUBJECT: AMBASSADOR MARANTIS SEEKS GREATER TRADE AND
ECONOMIC COOPERATION, PROGRESS ON TRADE IRRITANTS WITH
JAPANESE OFFICIALS

REF: TOKYO 221

SENSITIVE BUT UNCLASSIFED. NOT FOR DISTRIBUTION OUTSIDE USG
CHANNELS.

1. (SBU) Summary: Deputy U.S. Trade Representative
Demetrios Marantis called on senior Government of Japan (GOJ)
political and career-level counterparts to work closely and
quickly with the USG to prevent protracted trade irritants
related to beef, autos, and Japan Post privatization from
becoming political irritants. Resolution of these issues will
allow Japan and the U.S. to focus more attention on further
building bilateral cooperation in key areas such as trade
liberalization in the Asia-Pacific Economic Cooperation
(APEC) forum and the Doha Development Agenda, intellectual
property rights protection, and promoting trade in
environmental goods, he said. GOJ officials acknowledged the
USG's desire for Japan to allow access for U.S. beef and beef
products on the basis of science and international standards,
but asserted that lingering food safety concerns and
purportedly weak consumer confidence necessitate further
evaluation of this proposal. Ambassador Marantis noted the
USG is considering WTO-related action against Taiwan for
failure to implement its beef agreement a development that is
bringing greater attention to our beef trade with Japan and
underscores the need to find a science -based solution with
Japan in the short term. He asked his counterparts to work
on resolving outstanding U.S. concerns on beef with greater
urgency. GOJ officials disagreed that Japan's eco-car
subsidy program discriminates against U.S. manufacturers,
arguing that although the program applies separate fuel
efficiency mileage ratings for U.S., Japanese, and European
models that differ in terms of calculation method, they are
in fact compatible and fair. On Japan Post, GOJ officials
said they understand fully the USG's level playing field and
transparency concerns, but cautioned that political
sensitivities on this issue are high since lawmakers have
already begun deliberating internally the contents of new
legislation to reform of the country's banking, insurance,
and postal services behemoth. End summary.

2. (SBU) Deputy U.S. Trade Representative Demetrios Marantis
focused much of his discussion in Tokyo on ways to resolve
high priority bilateral trade issues related to beef, autos,
and insurance, while also underscoring the importance of
strengthening cooperation in areas such as APEC and in
dealing with third country concerns. Ambassador Marantis met
on February 1 with the following Japanese officials: State
Secretary for Foreign Affairs Koichi Takemasa, State Senior
Vice Minister and Director of the National Strategy Office
Motohisa Furukawa, Assistant Cabinet Secretary Chikao Kawai,
Deputy Foreign Minister Yoichi Otabe, Ministry of Economy,
Trade and Industry (METI) Vice Minister for International
Affairs Hiroyuki Ishige, and Agriculture Vice Minister for
International Affairs Shuji Yamada. He also engaged on a
broad range of economic and trade issues, including the
aforementioned bilateral irritants, over dinner with State
Secretary Takemasa, Senior Vice Minister for Internal Affairs
and Communication Masamitsu Naito, Senior Vice Minister for
Education, Culture, Sports, Science and Technology Masaharu
Nakagawa, State Secretary for Foreign Affairs Tetsuro
Fukuyama, and Lower House Chairman of the Land and
Transportation Committee Hiroshi Kawauchi. Additionally,
Ambassador Marantis met with the American Chamber of Commerce
Japan Board of Governors, as well as local and American news
outlets, and gave a separate interview with NHK Television.

Beef

TOKYO 00000338 002 OF 004


----

3. (SBU) Ambassador Marantis expressed concern that market
access for U.S. beef and beef products remains a troubling
irritant, one that overshadows the otherwise strong and
growing agricultural trade relationship between the United
States and Japan. He called on the GOJ to allow access for
beef that is both science-based and consistent with World
Organization for Animal Health (OIE) standards. The U.S. has
a proven track record for mitigating potential risk for BSE
(Bovine Spongioform Encephalopathy) and has asked the OIE to
consider reclassifying the U.S. as "negligible risk" for BSE,
he said. Vice Minister Yamada agreed it is important to
ensure food safety based on science, but asserted the beef
issue remains difficult to resolve due to what he claimed is
a lack of consumer confidence resulting from the
"regrettable" frequency of shipments of U.S. beef that fail
to comply with Japan's import protocol. Ambassador Marantis
countered that the U.S.-Japan beef protocol is not
commercially viable since it does not conform to OIE
guidelines and that mis-shipments have occurred as a result.
He noted the majority of the 13 mis-shipments identified by
authorities since Japan implemented its protocol did not
involve specified risk materials (SRMs), but rather resulted
from technical inabilities to comply with Japan's unique
requirements.

4. (SBU) Ambassador Marantis said the USG is considering
WTO-related action against Taiwan for its government's
failure to implement its beef agreement and in that light
underscored the importance for Japan to make progress in the
short term on the beef issue. If Japan could make a clear
commitment to full OIE compliance, the USG would be willing
to work with the GOJ towards an interim step if that would
help politically, he said. Vice Minister Yamada noted the
previous Liberal Democratic Party (LDP) led administration
had put forth a (non-OIE consistent) interim proposal to
allow imports of beef from cattle up to 30 months of age --
something Canada is currently negotiating with the GOJ -- but
that there is no negotiation with the United States on this
proposal and Japan,s current government has not yet
discussed whether it would endorse this option for beef trade
with the United States. He said the Food Safety Commission
(FSC) continues to evaluate the U.S. system for adequate
control of BSE, and would likely take a "negligible risk"
reclassification into account should the OIE move in this
direction, but would not speculate on the FSC's final
decision.

5. (SBU) Vice Minister Yamada acknowledged the opportunities
upcoming visits by Secretary Vilsack (April) and USTR Kirk
(June for the APEC Trade Ministerial) will provide to address
the beef issue, but declined to say when he thought Japan and
the U.S. could begin deepening their discussions to remove
this trade irritant from the bilateral agenda. Assistant
Cabinet Secretary Kawai said beef is a "very important" part
of the U.S.-Japan trade relationship and must be resolved,
but argued Japan must proceed carefully. The new Democratic
Party of Japan (DPJ) led government must manage a highly
sensitive set of economic and political challenges in the
run-up to the July Upper House elections in which the party
seeks an absolute majority, he said. Senior Vice Minister
Furukawa suggested the beef issue be addressed as part of a
broader list of bilateral issues. Singling out beef tends to
generate a "here we go again" reaction from GOJ officials, as
well as the public, who Furukawa claimed see this as just
another example of U.S. pressure being brought to bear on
Japan. He further suggested it is important to work with the

TOKYO 00000338 003 OF 004


DPJ government at the political level, noting bureaucratic
engagement as done under previous LDP administrations is no
longer sufficient.

Autos
-----

6. (SBU) In all of his discussions, Ambassador Marantis
underscored USG concerns with Japan's eco-car subsidy
program. These concerns which are rooted in issues of
fairness related to implementation, could erode the goodwill
generated by changes Japan announced January 19 that opened
opportunities for U.S. and other autos imported using the
Preferential Handling Procedures (PHP) certification process
to also qualify for eco-subsidies. He noted that certain
aspects of the eco-subsidy program are viewed by U.S.
industry and members of Congress as discriminatory, in
particular Japan's decision to use different fuel economy
standards for U.S. vehicles (based on Environmental
Protection Agency "city" mileage ratings) and European
vehicles (based on an EU "combined city/highway" rating).
Ambassador Marantis urged the GOJ to be more inclusive in its
program by also using a combined mileage rating for U.S.
vehicles.

7. (SBU) State Secretary Takemasa argued that Japan's method
of calculation for U.S. vehicles approximates closely the
standards applied to European and Japanese vehicles. A
combined rating applied to U.S. cars would make far more U.S.
vehicles eligible for the program than either Japanese or
European models, he claimed. Vice Minister Ishige echoed
similar sentiments, noting it would be "extremely difficult"
to consider the U.S. proposal for a combined rating since the
EPA city mileage rating was in fact the most compatible with
Japan's system of measurement. We must be fair, he said,
noting that his ministry has been subjected to continual
media scrutiny -- which largely portrays METI as having
already caved to U.S. pressure. (Note: Per reftel, METI
informed us February 3 of its decision not to revise its use
of the EPA city mileage rating; METI subsequently posted to
its website a list of U.S. models imported under the PHP
program that are deemed eligible for Japan's eco-subsidy
program; 43 foreign-made vehicles in total qualify, according
to METI: 8 U.S. and 35 European models. End note.)

Japan Post
----------

8. (SBU) Ambassador Marantis reiterated the USG's strong
desire for the GOJ to take into account level playing field
and transparency concerns as lawmakers consider new
legislation and regulations governing the privatization of
Japan Post -- the country's banking, insurance, and postal
services behemoth. He told his counterparts USTR attorneys
are of the opinion the USG has a strong WTO GATS (General
Agreement on Trade in Services) case relevant to Japan's
national treatment obligations, but expressed his desire to
work closely with the GOJ to resolve this issue bilaterally.
State Secretary Takemasa said the GOJ is well aware of U.S.
concerns and that he agrees transparency in the reform
process is "absolutely essential." Assistant Cabinet
Secretary Kawai noted the GOJ has made every effort to
solicit industry input in preparation for drafting the
legislation that will commence in the coming weeks, including
two hearings last December and a public comment period that
closed January 20 (for which the USG also submitted
comments). Ambassador Marantis welcomed these opportunities
but underscored the importance of ensuring that such comments

TOKYO 00000338 004 OF 004


are fully taken into account before final decisions are made.
Both Takemasa and Kawai separately cautioned that given the
high political focus and sensitivity on this issue, it is not
an ideal time to discuss the Japan Post issue through
detailed bilateral talks particularly with active discussions
already going on within the GOJ on the contents of proposed
legislation.

9. (SBU) Senior Vice Minister Naito argued level playing
field concerns should take into account the needs of
consumers in more isolated rural areas. With this in mind,
he said the GOJ's new legislation will mandate universal
service for postal and certain other products regardless of
whether they are profitable. He questioned the private
sector's definition of a level playing field, claiming such
companies are only interested in operating in Japan's larger
cities where they can expect to make a profit. Ambassador
Marantis said governments should not assume where businesses
will choose to operate but rather focus on ensuring the same
level of access for all market participants.

Trade and Economic Cooperation
------------------------------

10. (SBU) Ambassador Marantis stressed that the United States
also seeks to work closely with Japan to continue to build a
common agenda on economic and trade issues ranging across
bilateral, regional, and multilateral initiatives. APEC is
proving to be an excellent opportunity, he stressed, to
strengthen our cooperation on regional economic integration,
and he expressed hope that Japan will work to achieve a
number of concrete deliverables in its 2010 APEC host year in
addition to teeing-up deliverables for the 2011 U.S. host
year. On cooperation relating to environmental goods, Deputy
Minister Otabe said that Japan strongly supports working
closely together with the United States and other partners on
the Trade and Climate Initiative. Noting that Japan has been
on the record for some time in support of moving forward with
such an initiative, he pledged Japan,s support to help with
recruitment of other developing countries to join the core
group and suggested Canada may seek to link an announcement
on this work to the G-8 meeting this summer. Ambassador
Marantis said he hoped the Initiative would be ready to
announce prior to the G-8.

11. (SBU) Deputy Minister Otabe and Ambassador Marantis also
shared similar views on the importance of staying in close
touch on issues of mutual concern relating to China, and
proposed that the planned USTR/State ) MOFA/METI deputies
meeting in the Spring would be an ideal opportunity to step
up senior level coordination in this area. Both agreed that
APEC is another ideal topic to add to the agenda for that
meeting.

12. (SBU) On the bilateral front, Ambassador Marantis
stressed his hope that the United States and Japan can move
forward with an updated bilateral Regulatory Reform
Initiative in the very near term. Suggesting that it has
taken time to work the issue through Japan,s new government,
Otabe expressed his expectation that Japan will be prepared
to move forward soon.

13. (U) This message has been cleared by USTR.
ROOS

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