363. Memorandum of Conversation0

SUBJECT

  • Japanese Copper Ore Purchases; Trade Liberalization by Japan; Trade Expansion Act

PARTICIPANTS

  • Mr. Hajime Fukuda, Minister of International Trade and Industry
  • Mr. Akira Nishiyama, Minister, Embassy of Japan
  • Mr. Keiichi Matsumura, Director, Bureau of International Trade, Ministry of International Trade and Industry
  • Mr. Tetsuro Ohata, Commercial Counselor, Embassy of Japan
  • Mr. Akira Harada, Bureau of International Trade, Minister of International Trade and Industry
  • Mr. Michiyoshi Kawada, Commercial Secretary, Embassy of Japan
  • Mr. Makoto Watanabe, Attache, Embassy of Japan
  • Mr. Edward Gudeman, Acting Secretary of Commerce
  • Mr. Clarence D. Martin, Under Secretary of Commerce
  • Mr. Jack N. Behrman, Assistant Secretary of Commerce for Domestic and International Business
  • Mr. Eugene M. Braderman, Director, Bureau of International Commercial Affairs
  • Mr. Richard Holton, Economic Advisor to the Secretary of Commerce
  • Mr. Saul Baran, Director, Far Eastern Division, Bureau of International Commerce
  • Mr. John S. Stillman, Deputy to the Under Secretary
  • Mr. Robert M. Klein, Chief, Japan-Korea Section, Far Eastern Division
  • Mr. John F. Knowles, Department of State

A friendly and relaxed atmosphere prevailed throughout the luncheon. The only specific problem discussed at significant length concerned the American side’s request that Japan take action to relieve the distress of American copper smelting companies.1 Minister Fukuda said he had not been aware of this problem, promising to look into it and try [Page 755]and do something upon his return to Tokyo. Otherwise, discussion of a substantive nature focussed upon the American desire that Japan take further action to liberalize trade and the Japanese desire for information on American trade policy and how it would be implemented in the future.

[Here follows discussion of Japanese purchase of copper ores and concentrates.]

United States Foreign Trade Policy and Trade Liberalization by Japan

As the luncheon began, Secretary Gudeman alluded briefly to the investment made by Bell and Howell in a Japanese firm as an example of mutually beneficial American investment in Japan.

A question from Fukuda about pictures on the wall of vintage American automobiles led to some discussion of automobile prices in Japan and Japanese duties on imports of American cars, particularly on compacts as compared with the German Volkswagen. Secretary Gudeman took the opportunity of casually pointing out that American car imports are one item which the United States would like Japan to liberalize. Fukuda responded by citing the narrow and congested condition of Japanese roads as one reason why Japan is restricting American car imports. In response to a question from Fukuda, Matsumura said that American compacts are being imported by Japan and commented that the base price of American compacts is higher than that of the Volkswagen. Assistant Secretary Behrman observed that the American compact is placed in a higher domestic Japanese tax category than the Volkswagen. Fukuda then expressed, in Japanese, some doubt to Matsumura as to the reasonableness of the Japanese policy of determining the automobile tax on the basis of horsepower.

In offering a toast at the end of the luncheon, Secretary Gudeman emphasized the American belief that trade and economic relations should be viewed as having two aspects: short-range and long-range. There is often a conflict between the two, exemplified at present by the measures which the United States feels obliged to take in view of its balance of payments problem. The Trade Expansion Act, on the other hand, is an example of long-range United States policy. The United States is aware of Japan’s disagreement with short-range United States policies in such areas as the Buy American policy, shipping, and textiles but hopes Japan will understand why these policies have had to be adopted. The United States and Japan each wish the other to be its leading customer. Both countries have a common interest in freer trade as the means of achieving higher standards of living and have a common interest in partnership vis-a-vis the totalitarian world.

Fukuda, in his toast, said the relationship between Japan and the United States is such that the two countries cannot be separated, whatever [Page 756]happens. Japanese deeply regret Pearl Harbor and are very grateful for the generosity which the United States showed, in spite of Pearl Harbor, during the Occupation of Japan. Japan, he said, well knows how much the Japanese economy depends upon the United States. He shares Secretary Gudeman’s view of the importance for the future of cooperation between the two countries in order to raise standards of living. Regardless of problems existing between Japan and the United States at present, they do not and ought not interfere with United States-Japan friendship and with their long-term relations.

In the discussion which followed the luncheon, Secretary Gudeman offered to answer any questions the Japanese might have regarding the Trade Expansion Act. Fukuda then asked to what extent adjustment assistance would be provided to American companies. Secretary Gudeman pointed out that this is a new law and that negotiations under the Act with foreign countries have not as yet begun. It is our hope, he said, that any adjustments in the United States will be made under the trade adjustment part of the Act rather than through increases in tariffs. We recognize that higher tariffs protect the least efficient manufacturers and for this reason the new law contains no peril point provision, unlike previous legislation. We also recognize that, to a degree as yet unknown, certain American companies will be hurt by the negotiation of lower tariffs. Companies which are injured through the action of the United States Government and not through any action of their own must be given assistance. Assistance to labor, such as labor retraining programs, is the responsibility of the Department of Labor. The Department of Commerce is responsible for assistance to business and is all ready for the problem when it arises, having put a man on the staff 6-7 months ago to study methods of assistance.

Assistant Secretary Behrman pointed out that there are many in the American business community who do not like the system of adjustment assistance provided for by the Act. They can be expected to press for higher tariffs. In this connection, the Japanese should be aware that the new Act provides for an industry-wide investigation whenever one company appeals for a rise in tariff. Japanese should not be concerned when they hear of such investigations because it is the final decision, and not the investigation, which truly reflects current United States trade policy.

Secretary Gudeman then described the steps whereby the Tariff Commission investigates an appeal for a higher tariff and submits a recommendation to the President who makes the final decision whether or not to change a tariff or, alternatively, to provide adjustment assistance under the Act. Mr. Braderman then emphasized to the Japanese guests his observation over twelve years that Japanese concern over protectionism in the United States has been sparked by sensational and inaccurate [Page 757]Japanese press reports of Tariff Commission recommendations and not by the final decisions that were taken.

Minister Fukuda replied by saying that Japan is prepared to cooperate in the implementation of the Trade Expansion Act. He wished, however, to reiterate one point; namely, the cooperation of the maximum number of countries would be needed in order to realize the purpose of the Act to the fullest extent. He understood the principle of expanding trade on the basis of lower tariffs and higher consumption. The United States should recognize, however, that the various countries have different problems according to their stage of economic development. In this connection, he referred to Japan as being in the category of middle development. In illustration, he suggested the possible analogy of the movement of a fleet wherein the pace must be set by the slowest ship and not by the fastest in order that the fleet move together. He hoped the United States would give further study to this point in its implementation of the Act.

Secretary Gudeman responded with the hope that Japan would liberalize its view of worldwide trade and jokingly accused Minister Fukuda of not giving due credit to Japan in placing Japan in the category of middle development.

Assistant Secretary Behrman observed that there are times when a country can benefit from unilateral tariff concessions; namely, under conditions of full employment and a worldwide growth in trade. The United States intends to lead the world toward a worldwide reduction in tariffs but, since it has problems of its own, it is not in a position to lead without assistance from other countries.

  1. Source: Department of State, Central Files, 411.9441/12-462. Confidential. Drafted by John F. Knowles of EA/J.
  2. Documentation on this problem is ibid., 494.004, 494.006, 494.42, and 894.2542 for 1961 and 1962.