364. Telegram From the Department of State to the Embassy in Japan 0

1062. Joint ECONCOM. Based on uncleared memo of conversation.1 Discussions second day of conference continued in atmosphere of candor and friendliness.

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1. Agenda Item IV. In prepared statement MITI Minister Fukuda emphasized various restraints on Japanese trade. Cited voluntary controls and variety of means by which US can “restrict” imports. Observed real question is what attitude of USG will be, characterizing example of blouses and trousers as indication of USG reaction to industry pressures which distressing to Japanese. Welcomed Trade Expansion Act. Noting apparent US dissatisfaction with Japanese liberalization, pointing to rapid pace of liberalization and to difficulties faced by Japan because of small scale and dual nature of economy, underemployment, relatively low level of technology, etc. Said Japan endeavoring to diversify markets to avoid undue concentration on single market but cited European QR’s and limitations of LDC markets as difficulties. Referring to recent European countries agreement disinvoke Article XXXV2 pointed to “safeguards” requested in return. Requested US support for Japanese efforts.

MAF Minister Shigemasa reviewed nature Japanese agriculture and fishery industries citing difficulties in expanding and diversifying agricultural production. Stated agricultural and fishery commodities 74 percent liberalized. Emphasized importance of Japan as the leading market for US agriculture (paying cash) and expectation of its further growth. Expressed Japanese intention to cooperate in conservation and development of marine resources but stressed Japanese concern over Bartlett Amendment.

Commerce Acting Secretary Gudeman discussed scope and extent of US market, Japanese complaints of “protectionism” in US, Tariff Reclassification Act,3 US dedication to freer trade.4

Interior Secretary Udall made statement on trade and investment in natural resources. Cited recent Reclamation Bureau purchases from Mitsubishi and Hitachi. Pointed out opportunities for Japanese investment in resources of US giving examples. Expressed hope both countries can continue cooperation in conservation of marine resources. Cited large Japanese fish product exports to US.

In prepared statement Agriculture Secretary Freeman emphasized need for reduction of trade barriers. Stated US has fewer protections of farmer than most countries. Emphasized US efforts make effective use of abundance of food (e.g. Food for Peace) but pointed out limitations on use of food in economic development. Observed that in passing TEA Congress stressed its use to gain improved access to foreign markets for [Page 759] US farm products. Pointed out that US is world’s second largest agricultural importer and one-half of $4 billion US agricultural imports compete directly with US products. Expressed hope that problem of import of Kobe beef could be solved by early 1963. While mandarin orange problem more difficult US working on it. Said US supported GATT sponsored conference in early 1963 to develop international grain agreement and sought Japan’s support. Pointed out, however, such agreements did not constitute panacea.

Discussion. In response to Gudeman statement Fukuda said Japan would like to act on liberalization in accordance US views. Agreed with Gudeman that voluntary controls had benefited Japan by avoiding clash of interest with US. But would hope voluntary controls could be gradually relaxed. Re TEA said if only tariffs reduced while other restrictions (QR’s and voluntary controls) remain Japan could see little hope of expanded trade.

Ohira requested on behalf of absent Minister of Transportation that US give careful consideration to Japanese statements re shipping and aviation problems.

In response to Fukuda’s request Udall said present outlook for tobacco-ferroalloy barter not good in view present status US stockpile.

In response to Fukuda’s question re possibility US would propose long-term woolen fabric arrangement, Secretary said we had reached no decision to request such an agreement. Gudeman added that we are pressed, however, for some relief for short term.

2. Agenda Item V. (afternoon December 4)

Under Secretary Ball made initial statement this item. Characterizing present free world situation as process of redrawing trade patterns and habits involving development of EEC itself, inclusion of UK (followed by 2 to 4 Scandinavian countries) and resultant realignment of trade of Commonwealth countries, stressed need for initiative by other trading nations, particularly US, Canada and Japan to bring about redrawing of trade lines before restrictive patterns become solidified. US initiative through enactment TEA can be effective only if all work together to reduce trade barriers. US hopes begin consultations early 1963 with Japan and other trading countries in preparation for formal negotiations. Stressed US intention to negotiate across the board on broad categories and urged Japanese participation on that basis. Stressed importance rapid removal of QR’s during preparatory year (1963), including disinvocation Article XXXV by European countries and Japan’s movement toward greater liberalization in manufactured as well as raw materials. Congratulated Japan on Ikeda’s success in Europe. Discussed development of OECD and Japan’s relationship thereto. Said US has told European members we look forward to Japan’s full OECD membership. Said we look forward to expanding role and full membership [Page 760] for Japan soon as possible (in his view should be realized before too long) and assured Japanese US feels strongly this matter and will do all we can to bring it about.

Ohira reviewed Japan’s general trade problems emphasizing LDC’s foreign exchange shortage and consequent need expand Japan’s trade with US and Europe. Characterized results of Ikeda visit as encouraging re expansion of trade with Europe but not optimistic re removal discrimination against Japan. Said to extent possible Japan would participate in across the board negotiations and consider liberalization of remaining items. Said on many items of interest to Japan would prefer removal other restrictions rather than tariff reductions.

In response to Ohira’s questions Ball said US equally concerned that EEC be outward looking and we would exert every effort to see that its policies nondiscriminatory. Responded re difference between OECD and GATT. Re questions on “restrictive” provisions TEA Ball said this Act most liberal ever enacted in US stressing choice given President as to remedies which may be applied. Said he could not envisage situation where US would accord anything but MFN treatment to Japan.

In response to Secretary’s question regarding Japan’s willingness participate in across the board negotiations Fukuda said unable to answer without further study. At Miyazawa’s urging Fukuda explained nature and place in Japanese economy of small and medium sized industry and difficulty presented by US objective of 50 percent tariff reduction over 5 years with only 10 percent reservation. Also said Japanese industry does not have access to assistance such as trade adjustment provision of TEA. Therefore matter required further study.

Ohira interposed to say there no doubt Japan willing to participate.5

Further discussion Items IV and V deferred to December 5.6

Rusk
  1. Source: Department of State, Central Files, 411.9441/12-562. Confidential; Limit Distribution. Drafted by Vettel and approved by Yager.
  2. Two papers drafted by Fearey record the material summarized in this telegram. JAE/R-10 covers Agenda Item IV, “Expansion of Trade and Promotion of Economic Relations between Japan and the U.S,” discussed the morning of December 4. JAE/R-15 records the afternoon discussion of Item V, “Trends in International Trade and Economic Relations.” (Both ibid., Conference Files: Lot 65 D 533, CF 2191)
  3. For text of this Article of the GATT, see 62 Stat. (pt. 2) 1994.
  4. For the Tariff Classification Act of 1962, P.L. 87-456, approved on May 24, 1962, see 76 Stat. 72.
  5. In Gudeman’s prepared statement the perceived inadequacies of the Japanese import liberalization program received an analysis similar to that in Document 366. The statement is in Department of State, Conference Files: Lot 65 D 533, CF 2187.
  6. JAE/R-15 reports Fukuda as saying “at this meeting I can say that we will cooperate with you, but I cannot positively say under what terms and conditions and by what methodology, pending a little more study and investigation.” JAE/R–15 also indicates Tanaka added his assurances of Japanese participation in an across-the-board tariff reduction to Ohira’s.
  7. According to telegram 1072 to Tokyo, December 6, there was no further discussion of Items IV and V in the concluding day of the meeting; instead the Committee considered Agenda Item VI on foreign aid. (Department of State, Central Files, 411.9441/12-662)