Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

208. Memorandum From the Special Representative for Economic Summits (Owen) to President Carter¹

Washington, April 11, 1979

SUBJECT

• US-Japanese Economic Relations (U)

This memorandum reports meetings I had in Tokyo with the Prime Minister and cabinet ministers, and subsequent discussions with the Japanese Foreign Minister and others in Washington,² to prepare for your May meeting with Ohira. Here is the scenario we talked about:

1. Trade. Bob Strauss would go to Tokyo before³ the Ohira visit to:

a. conclude negotiations with Japan about government procurement and tariff staging (the two outstanding MTN issues);

b. get Japanese agreement to other specific actions in the trade field (e.g., improving import procedures), which would be an earnest of good intent. (C)

Bob’s visit will be contingent on a clear indication that the Japanese are prepared to make serious concessions. (C)

2. Longer-Term Agreement. Against this background of progress, you and Ohira would, if you approve, conclude an agreement with these elements during his visit:

a. Ohira would state Japan’s intent to reduce its external surplus by increasing its imports of manufactures and by shifting to greater reliance on domestic demand in sustaining its growth. Ohira’s statement would be balanced by a statement of the US intent to reduce its account deficit by following appropriate economic policies. Both statements would be included in the communique to be issued after Ohira’s visit.

b. The two countries would agree on regular economic follow-up discussions. These discussions would focus on quantitative trends in Japan’s current accounts and imports of manufactures. We have made clear to the Japanese that they will face damaging US counter-action if these trends do not march in the right direction, i.e., if the trend goals foreshadowed by the declaration are not fulfilled. (C)

c. A US-Japanese Wise Men’s Group, made up of distinguished private citizens on each side, would be set up to advise you and the Prime Minister about long-term economic trends and problems in the US-Japanese relation. Mike Mansfield believes that advice from such a group would make it easier for the Japanese to accept the kinds of structural changes we want. (C)

3. Other Agreements would also be concluded during the Ohira visit, in order to meet Japanese concerns—regarding US-Japanese agricultural trade, energy research and development, and cooperation in providing technical aid to Asian LDCs. (C)

State, Treasury, and STR have participated in developing this scenario, which tracks the memo on US economic strategy toward Japan that I sent you, after discussion with these agencies, some time back.⁴ The agreement with Japan described in paragraph 2 follows the proposal that Mike Blumenthal made to you when he returned recently from Japan.⁵ (C)

Underlying this scenario is a belief that the Japanese want to get their current surplus down to manageable proportions, and are prepared gradually to open up their market to foreign manufacturers. But powerful domestic obstacles are involved; and it will be a matter of years, at best, before the process is completed. So we need to create a framework within which this process can work itself out, and to show continuing progress in the meantime. That is the purpose of the proposals described above. (C)

On the basis of talks on the Hill, I believe that these actions would defuse Congressional protectionist pressures. Senator Bentsen and Congressman Jones,⁶ two members of Congress much interested in Japan, have both indicated they would view this outcome as substantial progress. (C)

Success hinges on the Japanese making sufficiently forthcoming proposals to warrant Bob Strauss going to Tokyo on trade and to warrant our submitting a draft US-Japanese economic communique to you for approval. The Foreign Minister and his party have gone back to Tokyo to consider these matters further. Although they made optimistic noises as they left, significant differences between us and them remain. We will hear from them shortly; I will let you know as soon as we do. (C)

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 41, Japan: 1–4/79. Confidential. Sent for information. Carter wrote at the top of the page: “ok. J.” Brzezinski also initialed at the top of the page. The memorandum was sent to Brzezinski for forwarding to Carter under cover of an April 11 note from Owen, who reported that Platt had seen the memorandum. (Ibid.)
2. A memorandum of conversation of Owen’s March 19 meeting with Japanese Ministry of Finance officials is in the Carter Library, National Security Affairs, Staff Material, Special Projects File, Henry Owen, Box 22, Memcons: 1–4/79. Sonoda visited Washington April 6–10 for meetings preparatory to Ohira’s visit in May.
3. Carter underlined the word “before.”
4. Apparently a reference to Document 203.
5. Blumenthal met with Carter on March 6; see footnote 6, Document 203. Blumenthal’s proposal is contained in the March 5 memorandum to Carter in which he reported on his recent trip to China and Japan. Carter approved the further exploration of the proposal on the copy of Blumenthal’s memorandum in the Carter Library, Records of the Office of the Staff Secretary, Presidential File, Box 122, 3/7/79 [2].
6. Representative James R. Jones (D–Oklahoma) was Chairman of the House Ways and Means Committee task force on Japanese commercial practices.