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206. Memorandum From Nicholas Platt of the National Security Council Staff to the President’s Assistant for National Security Affairs (Brzezinski) and the President’s Deputy Assistant for National Security Affairs (Aaron)1

SUBJECT

  • The Japanese—What Have They Done for Us Lately?

At the staff meeting March 29 you asked whether the apparently endless series of high-level consultations with the Japanese have produced any tangible results. The answer is that they have, although the Japanese response has at each stage been too late and too little to make much political impact. When you mark where we were when we began intensive efforts to solve the trade problem 18 months ago and where we are now, the substantive progress becomes more measurable.

What Have the Japanese Done?

American pressure during the series of meetings since September 1977 has been focused on encouraging the Japanese to reduce their massive current account surplus and open their markets wider to imports of foreign manufactures. In response, the Japanese have:

—Adopted stimulative budgets resulting in a growth rate of about 5.5 percent—less than the 7 percent targeted, but higher than any other major industrialized democracy.

—Allowed the yen to appreciate 25 percent during 1978.

—Voluntarily limited exports to the U.S. of cars, ships, TV’s, textiles, and steel.

—Allowed imported cars easier pollution standards than applied to their own.

—Reduced industrial tariffs on items of particular importance to us like computers and color film.

—Made major long-term concessions on the MTN, including industrial tariff cuts averaging 44 percent.

—Made major increases in key agricultural quotas like beef, citrus, and leather.

—Purchased emergency imports of uranium enrichment services and other commodities worth an estimated $3 billion.

—Increased the volume of manufactured imports at a rate of 10 percent a year.

—Reversed the trend in the current account surplus. If current projections prove out, the current account surplus for fiscal 1979 (April 1–[Page 603]March 31) will be $7.5 billion, still huge, but roughly half of what it was last year.

The frictions and pressures attending the embarrassing size of the Japanese surplus have encouraged the Japanese to be more cooperative on a wide variety of other issues. During the 18 months in question, for example, the Japanese have:

—Taken the initiative to increase their contribution to United States military base costs in Japan from roughly $500 million to $700 million a year. Some of this reflects yen appreciation, but most is in the form of increased payments for military housing, labor, and administrative costs.

—Placed orders to purchase and coproduce over the next several years $6.5 billion worth of U.S. aircraft, including F–15’s and P3C’s, strengthening air defenses and anti-submarine warfare capability and improving interoperability with U.S. forces.

—Responded to our requests for contributions to politically related aid programs, such as those for Egypt.

—Become, after us, the second largest donor to the UN High Commissioner for Refugees.

—Cooperated in working out joint energy R&D projects.

—Undertaken half the costs of the Fulbright program.

What More Do We Want?

A lot. We are still pressing the Japanese for measures to open their markets wider and further reduce their general account surplus. We want them to:

—Abolish agricultural quotas altogether.

—Import more manufactures from us.

—Simplify import procedures.

—Permit government procurement of American equipment, particularly computers and telecommunications gear.

—Provide improved reciprocal access for American banks and insurance companies.

—Speed up tariff cuts.

—Encourage direct investment in the United States.

—Contribute more to U.S. base costs in Japan and to refugee programs.

—Increase aid to Egypt and Turkey.

—Effect structural changes in their economy to ensure that the trends begun through current policies will last.

We will continue to push for these actions as long as our economies are out of balance, and some beyond that.

What Do They Want?

The Japanese want us to:

—Keep our markets open to their products.

—Maintain the strength of the dollar.

—Curb our voracious oil appetite.

—Control inflation.

—Above all, leave them alone on economic issues.

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Why Are We Doing It This Way?

The current approach features steady, coordinated pressure through constant consultation involving blunt talk in private and a minimum of public bluster. This approach reflects the growth of the relationship, and Japan’s increase of relative power within the relationship; the proven long-term nature of the problem; and our heightened understanding of the way decisions are made in Japan.

Even this steady pressure method has its political costs. Our constant coordinated stress on the economic imbalance has the Japanese wondering whether we care about anything else, particularly the Mutual Security Treaty, upon which our strategic position in Asia is based. It has caused some Japanese to question the value of the relationship, and the fitness of the U.S. as an ally, and to call for a search for alternatives, not only in the economic but the security field as well. Most Japanese officials feel otherwise; they recognize that the economic issues have to be resolved in order to protect the strategic and political benefits of the connection with the U.S.

On balance, therefore, the steady approach seems the best middle course between apathy and excessive pressure. We believe it will work.

What Is Next?

The series of consultations beginning with Foreign Minister Sonoda’s visit this week and including Prime Minister Ohira’s visit in May and President Carter’s visit to Japan in June represent a critical juncture in our relationship. The way both sides handle the meetings will determine whether we can cooperate to achieve progress or face a sour, deteriorating relation. Our best chance of success lies in continuing the steady pressure approach stressing in private the things we care about, but keeping public rhetoric cool. We want to prove that the economic issues are vital, that progress is being made, and that several years will be required to achieve success—while demonstrating the benefits of the political and strategic relationship. We must give the Japanese the time of day, spending adequate time to discuss the issues and avoiding comparisons with the number and length of meetings with the Chinese, the Soviets, or the Europeans. By the time we are finished with this round, we will not have accomplished everything we want, but, as in the past, we will be measurably ahead of where we are today.

Henry Owen concurs.2

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Country Chron File, Box 25, Japan: 4–5/79. Confidential. Sent for information. A stamped notation reads: “ZB has seen.”
  2. Owen initialed his concurrence. At the bottom of the page, Inderfurth wrote: “ZB, I think the President should see this memo (updated) prior to his May 2 meeting with Ohira. Rick.”