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Japan's Position in the APEC Economic Leaders Meeting Regarding Trade and Industry

Press Conference

21 November 1996

MAJOR TOPICS

1. Introduction of speaker and briefing status
2. Japan's position in the APEC Economic Leaders Meeting regarding trade and industry
3. Japan-Republic of Indonesia relations
4. Japan's efforts in the area of regulatory reforms
5. ABAC chairmanship and export credit agency
6. Infrastructure project cooperation
7. Information Technology Agreement (ITA)

1. Introduction of speaker and briefing status
   
   Official of the Ministry of Foreign Affairs:Good evening, ladies and gentlemen. Welcome to the first APEC press briefing. This briefing will be given by Mr. Kazumasa Kusaka, who is Director-General of the Economic Cooperation Department of the Ministry of International Trade and Industry. If you have a question, please proceed to one of the microphones. Thank you very much.

2. Japan's position in the APEC Economic Leaders Meeting regarding trade and industry
   
   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: Good afternoon. My name is Mr. Kusaka from the Ministry of International Trade and Industry. Japan is one of the Senior Officials Meeting (SOM) leaders. Today, I would like to speak about the Economic Ministry's perspective on this Asia-Pacific Economic Cooperation (APEC) Meeting. My talk remains a kind of background briefing, because we are going to discuss these matters starting tomorrow. I have four areas to talk about. One is on the Individual Action Plans (IAP). The second one is the investment area. The third is infrastructural investment, especially export credit agencies (ECA) cooperation. Fourthly, is the ITA. These are the areas of major interest to us.

   A. The APEC Individual Action Plans

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: Firstly, regarding the IAPs submitted, we have 18 IAP reports submitted without any grade of F. Some are A+, some could be B- or C+, but all are good ones. However, the improvement of these IAPs is as important as a good start. That is the first topic on which I would like to speak. I would propose a kind of creation of a mechanism for the clear improvement of the private sector opinions in improving the Manila Action Plan for APEC (MAPA) and Individual Action Plans.

   B. Investment environment

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: Secondly, that APEC should initiate a full-scale effort to improve the investment environment.

   C. Infrastructural investment and export credit agency (ECA) cooperation

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: Thirdly, we will be advancing cooperation among the region's export credit agencies in order to promote private-sector investment in infrastructure. Let's look at each of these areas in detail. The first point I would like to make concerns the creation and the appropriate and effective mechanism for involving private-sector opinions in the continued improvement of the MAPA and the IAPs. The Ministry of International Trade and Industry (MITI) recently asked a wide range of Japanese businesses what they saw as important areas in the Asia-Pacific region, including the Japanese market. Japan's Action Plan was subsequently formed using these opinions as a reference. We also passed on those opinions vis-vis other APEC members as they were asking that members voluntarily consider these and reflect them in their IAPs, and feed back members' responses to the private sector. We intend to continue with this approach because, those businesses have a stake in this region's, free and open trade and investment. Involving the private sector or the business sector automatically guarantees the dynamically-evolving process of the IAP improvement mechanism. If a mechanism can be established in APEC for continued communication between the business sector and member governments, this would be important for both government and business. In addition, there is a need for APEC as a whole to absorb private sector opinions more thoroughly through mechanisms such as the APEC Business Advisory Council (ABAC). Japan's proposal seems to be gaining gradual acceptance by the other APEC economies. This is the first point. For the second point, regarding the investment environment, there is no doubt that what has supported the economic growth of the Asia-Pacific region has been direct investment from other private-sector interests, in response to clear protection of investment and stable investment policies. APEC economies, which have grasped these points, have worked steadily on deregulation in order to attract investment and to promote growth. APEC, too, has engaged in various efforts to improve the investment environment. However, the present situation is far from adequate. The investment environment of the host economy is absolutely vital. More exact and transparent rules will help attract both foreign and domestic capital to finance long-term projects such as infrastructure investment. This issue impacts the interests of all three parties involved, namely invested economies, investment recipient economies and the private sector. This was the second point. The third point is on Infrastructure Investment and Export Credit Agencies Cooperation (IICA). Asian infrastructure demand over the next decade is expected to be massive -- approximately US$1.3-1.5 trillion. This is a scale impossible to cover with public funds alone. With a view to domestic budgets, the provision of efficient infrastructure services and the expansion of private-sector project opportunities, etc., we need to see, not the current 10%, but about 30% of this demand met through private-sector investment. Infrastructure shortage issues hamper economic growth, and we have to remember that further liberalization in the area of trade and investment has to be fostered by steady economic growth. If the economy is in recession, no democratically elected government can undertake very aggressive and ambitious liberalization measures which might be economically, politically or socially very, very painful. So, what should the Government be doing? I believe that official development aid is not too appropriate. An appropriate APEC would entail dividing roles between the public- and private-sectors on the basis of the market mechanism, with the public- and private-sectors cooperating as equals in such areas as improving the investment environment. In fact, MITI has been calling for an IICA cooperation within APEC.

   D. Information Technology Agreement

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: Fourthly, or finally, on the ITA, I think you are aware of Japan's position. We support it -- one of the most enthusiastic supporters of the ITA concept. We think that this ITA initiative in the area of information technology to eliminate tariffs in this area would be one of the most important deliberatives at the Singapore Ministerial Conference (SMC) of the World Trade Organization (WTO). Also, this should be very important in this year's APEC as a kind of a symbol of APEC's liberalization process. Realization of the ITA will contribute to strengthen the competitiveness of participating economies. These are the four areas of interest to us. Let me conclude my remarks here. Those are the comments that I wanted to make and I would be delighted to answer any questions you may have.

3. Japan-Republic of Indonesia relations
   
   Q: Do you have any intentions or plans to raise the issue of the National Car Program in Indonesia and Timor, and Indonesia also didn't put the automotive sector together with agriculture and chemicals in the reduction of tariffs list, so what do you think about this? If the answer is yes, will it be raised in the bilateral meeting or in the Leaders Meeting? Second question: your government, together with the United States, submitted a protest of the National Car Program in Indonesia in the WTO a few weeks ago. Why didn't you use an internal dispute settlement mechanism in APEC?

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: The last one, why don't we use the dispute settlement mechanism here in APEC?

   Q: Yes.

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: In APEC, President Soeharto of the Republic of Indonesia has proposed to create a kind of mediation mechanism and we have been working on that, but, we have not created anything concrete yet. On the matter of the National Car Program, we did have a bilateral meeting and raise our concern at the bilateral at the ministerial level with Minister of Industry and Trade Ir. Tungki Ariwibowo of the Republic of Indonesia and our Minister of International Trade and Industry Shinji Sato yesterday. Some press material should have been supplied yesterday evening. The issue is now being discussed in Geneva at the World Trade Organization (WTO). We had the first session at the beginning of this month and the second one is scheduled early in December. That is my understanding.

4. Japan's efforts in the area of regulatory reforms
   
   Q: What areas of concern are you pushing through in your Individual Action Plan's, since Japan is already an industrialized country?

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: Could you repeat your question?

   Q: What areas of concern are you pushing through in your Individual Actions Plans since Japan is already an industrialized country?

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: Yes, as you rightly pointed out, Japan's tariff level is already very low at this moment. Last year, at the Osaka APEC Meeting, as a kind of down payment, we promised to accelerate the Uruguay Round tariff reductions in the area of 700 industrial goods. Business people do not consider that Japan's tariffs pose real barriers to Japanese markets. So, the area we are making an effort in is the area of regulatory reforms, especially those that have a great impact on market access, because that would reduce a kind of transaction cost. For facilitation of cross-border flow of people, goods and services, not only tariffs but other domestic regulations or standards, or other areas like quarantine. So, you will see the content of Japan's IAP later on, but these are the areas we are putting emphasis on.

5. ABAC chairmanship and export credit agency cooperation
   
   Q: On what conditions did you agree to accept the chair of the ABAC? I know that you are one of the big pushers of the ABAC. So, I wanted to find out what arrangement you have with the Philippines to agree to this chairmanship for another round. In relation to your briefing, you mentioned the export credit agency. I did not really understand your explanation. How exactly will it function among the member countries of APEC?

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: The first question, did you say the Chairmanship of ABAC? The ABAC chairmanship is decided among themselves, among the business people. I am not familiar how the next year's chair was decided. They themselves will choose the chairman, or the co-chairman. That is how the selection is made. This is my understanding. On the export credit agency cooperation. In most of the developing economies, the ECAs are newly created and not well equipped. Some area of technical cooperation is needed, including training of personnel, and also the exchange of information among ECAs, which includes broad exchanges of information, and those on specific projects. Thirdly, they will be working on the improvement of the investment or business framework, so there will be several areas they will be working on. But, the existence of an effective ECA risk cover done by these national ECAs will facilitate the private capital flow, the investment into this region to finance that infrastructure investment.

6. Infrastructure project cooperation
   
   Q: Does this mean that there will be more loans coming for the less prosperous members of APEC?

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: Not necessarily Japan's money to the Philippines. But, rather that the APEC spirit is of equal partnership. Increasingly, these infrastructure projects are becoming multinational, multi-sourced. Japan, the United States, and some others had been major suppliers of equipment and services. Recently, we see very active participation by some of the ASEAN economies into those infrastructure projects or big projects in this region or in some parts of Indochinese projects. So, that's not a one-way matter from developed economies to developing economies. You will be an investor yourself in the near future.

7. Information Technology Agreement (ITA)
   
   Q: I have one question, part one and part two. Part one regards the investment agreement. Now, there are two schools. One is the multilateral investment agreement developed by the OECD, which somehow promotes full liberalization of investment. The question is, in one instance, the transfer of technology requirement by host countries -- When I talk with Japanese businessmen under some kind of pressures, they don't move to promote transfer of technology to host countries. So, some regulations of host countries, that means not liberal, may be useful for economic development of underdeveloped countries. The second concerns the Information Technology Agreement. Japan is now quite competitive in almost all items of information technologies. So, Japan wishes to promote information technology. But, when Japan looks at history, all strategic industries promoted and developed intervention by some kind of government assistance, including tithe protections, subsidies, etc. Actually, MITI is quite famous for protecting and developing Japanese industries. Why are not Japanese industries not so competitive? Because MITI protected infant industries. How can Japan promote the Information Technology Agreement?

   Director-General of the Economic Cooperation Department Kazumasa Kusaka of the Ministry of International Trade and Industry: First, we are working, in the area of investment rules, they are going on not only here, but in the Organisation for Economic Co-operation and Development (OECD), but could also start in the WTO. We would like to see multi-fora dynamism in the discussion of investment rules. The thinking is that the better the investment environment is, the more both foreign and private capital will be invested into the economy to finance long-term projects. So, as I said, the benefit is not only for the investor economy, but also for the host economy and business. Of course, it is always better for the participants to participate in the rule-making process. So, in this sense, we would like to see WTO study and analysis start as early as possible, because the OECD's work is very much limited in the number of participants. Regarding your second question on the merit of the ITA when an economy is in the development stage. We are aware that diversity of economic situation, but the merit of that participation to the ITA is not only the merit of producer or exporter of these specific parts and components. Also, downstream industry which could be the assembling industry, such as computers or electrical devices which use semiconductors would suffer a higher rate of protection. So, when one maintains a high rate of tariffs on parts and components, one has to carefully examine the implications of those. Thirdly, the benefit has to be studied from the perspective of users, and consumers. I mentioned not only business users, but also households or students. As we come into the information age, if information technology is very expensive, that will hurt that economy's education, businesses, or households. Taking all these points into consideration, each economy should make decisions as to how it would benefit them from participating in the ITA, or not. Thank you very much.