Foreign Relations of the United States, 1961–1963, Volume XXII, Northeast Asia

332. Memorandum of Conversation⁰

Washington, June 20, 1961.

SUBJECT

• Liberalization of Trade and Payments

PARTICIPANTS

• [Here follows the same list of persons as Document 331.]

The Secretary said that we would appreciate the observations of the Prime Minister regarding Japan’s plans to liberalize its trade and payments restrictions. The United States has a very lively interest in this problem as do other countries. We recognize that trade liberalization becomes involved in domestic political problems in the United States and perhaps likewise in Japan. In the United States, exporters tend to take for granted their export markets and are not politically vocal. On the other hand, those manufacturers affected by imports become politically vocal, creating difficult domestic problems for trading countries such as the United States. The Secretary said that we feel Japan’s trade policies are somewhat restrictive and hope that the Prime Minister might comment on the possibility of greater liberalization.

Prime Minister Ikeda said that there is considerable opposition to liberalization from certain segments of Japan industry. Nevertheless, two years ago, when he was Minister of International Trade and Industry, he insisted upon undertaking liberalization of trade and payments so that the Japanese economy could stand on its own feet. Japan now plans virtually full liberalization by 1963. This target takes into account that some industries are well developed, while others, such as the automobile industry, are lagging behind. The Prime Minister thought that by 1963 Japanese industry as a whole would be prepared for liberalization.

The Secretary commented that the trade liberalization question is very timely for the U.S. Next year, Congress will consider the renewal of U.S. trade legislation. There has been a steady increase in protectionist pressures in the U.S., the Secretary explained, due to several internal economic factors: (1) the movement of industry into traditional free trade areas of the United States; and (2) the growing pressure for protection on the part of the trade union movement due to fears of unemployment resulting from imports. Opponents of liberal trade legislation are seeking every possible rationalization for defeating renewal of our current trade agreements legislation. In particular, they are canvassing the positions of other governments with a view to using foreign efforts to restrict imports from the U.S. to support opposition to liberal U.S. trade legislation. The Secretary concluded that this is a matter of real concern to us and that we would appreciate anything the Prime Minister can do to accelerate Japanese trade liberalization.

Mr. Ball commented that, as the Prime Minister recognized, Japan had a greater number of quantitative restrictions on imports than any major trading country. The U.S., he said, is doing its best to persuade other nations not to invoke GATT Article 35¹ against Japan. We are basically seeking to create an international trading system in which most favored nation treatment is accorded all countries and there are no quantitative restrictions against imports. Mr. Ball pointed out that the items liberalized by Japan are mostly agricultural products and U.S. manufacturing interests have complained about restrictions against their products. We hope, therefore, with the general upswing in the Japanese balance of payments and the increase in their reserves, Japan will see its way clear to accelerate the pace of its liberalization program and go fairly far to full liberalization by the end of 1961.

Prime Minister Ikeda replied that invocation of GATT Article 35 creates problems for Japan in trade liberalization. In addition, there are domestic problems since 40 per cent of population is employed in the agricultural sector where productivity is low. There are also many small and medium-sized industries with low productivity. Nevertheless, Japan intends to accelerate its liberalization program to achieve 90 per cent liberalization by 1963.²

0. Source: Department of State, Secretary’s Memoranda of Conversation: Lot 65 D 330. Confidential. Drafted by Swayne and approved in S and B. See the source note, Document 331.
1. For text of the Protocol of Provisional Application of the General Agreement on Tariffs and Trade, signed at Geneva October 30, 1947, see TIAS 1700 (two volumes), or 61 Stat. (pts. 5 and 6). Article XXXV provides for non-application of the Agreement between particular contracting parties.
2. In a further discussion of this subject the morning of June 21, Foreign Minister Kosaka stated that U.S. protectionist measures such as those then contemplated on tile and glass made trade liberalization more difficult for Japan, and he pointed out that the United States had a favorable merchandise trade balance of some $5 billion yearly. Rusk responded that although protectionist pressures had risen in the United States since the immediate postwar period, there was no question as to the policy the United States wished to pursue. (Department of State, Secretary’s Memoranda of Conversation: Lot 65 D 330)