Ambassador Thomas S. Foley's Speech to the Asian Affairs Research Council

Tokyo, Japan
January 23, 1998

(As prepared for delivery)

Thank you for that kind introduction. It is a pleasure and an honor to be speaking here today at the Asian Affairs Research Council. Your history of vigorous, thoughtful is course on global issues is an illustrious one, dating as it does from the days of Prime Minister Ikeda in the early l960s, and involving many Japanese and international leaders. As inter dependence between Japan and the broader world grows ever deeper, your role of fostering cross-national dialogue is increasingly vital. I am pleased that American Ambassadors to Japan since Edwin O. Reischauer have contributed to your deliberations, and that I can build on that fine tradition.

I would like to speak today about U.S.-Japan relations within the context of a changing Asia-Pacific region. Our bilateral ties, beginning with the indispensable U.S.-Japan Security Treaty, are clearly invaluable in their own right. We must never lose sight of our primary task of assuring bilateral health and vigor. Yet U.S.-Japan relations exist within the context of a larger Pacific region whose own growth and volatility profoundly shape the agenda on which Tokyo and Washington must communicate and collaborate. The U.S. and Japan can be crucial "partners for growth" in a Pacific region of vital - indeed, central - importance to us both. Asia's record of economic growth over the past three decades and more has been remarkable. The region's share of global GNP has climbed over the years since high growth began here in Japan more than forty years ago from less than one tenth of global GNP to a full quarter of world output. Asia has also become an increasingly important market, for both the U.S. and Japan. Indeed, since the mid-l980s U.S. trade with Asia, including Japan, has grown considerably larger than that with Europe. Since 199l Japanese exports to other nations of Asia have exceeded even those to the United States.

Asia is also critical to both our nations in financial terms. Both Japan and the U.S. each have close to $l00 billion of direct investment in the Asian region. Our portfolio investment and bank lending are also substantial, as is well known.

The bottom line is this. Asia's stability is crucial for both the United States and Japan. We must make determined, farsighted cooperative efforts to preserve that stability. There can be no lines drawn down the middle of the Pacific. Ensuring stability for this region is a process that needs to include us all.

Prosperity in the Pacific may seem an elusive goal, a midst the current shadows of financial turbulence and the tensions of economic transition. Yet we must not, in the pessimism of the moment, lose sight of this region's enduring strengths. Capital formation in Asia remains at the highest levels in the world, even if "formed capital" is at times significantly misallocated. The people of this region know how to save and sacrifice. They have a strong commitment to education. The possibilities of renewed growth are decidedly here, for all the region, once needed structural changes are made, and confidence is restored.

In the dynamic yet fluid global economy now emerging, the U.S. and Japan together must play central roles inbuilding a New Pacific Community. That new community must reflect and foster the realities of a growing regional economic interdependence, and the pressing need for structural reforms. Such needed reforms will bring greater balance and stability to Pacific interdependence. Let me touch briefly on four basic ways that the U.S. and Japan can work together as "agents for growth" to help build and stabilize the Pacific community of the future.

One key priority must clearly be to further strengthen APEC. This has been a consistent concern of the Clinton Administration since President Clinton's historic initiative in convening the Blake Island Leaders meeting in l993. The Bogor Declaration of l994 provided a farsighted, ambitious blueprint for regional trade liberalization, while the Osaka Summit of l995deepened proposals for concrete cooperation. The recent Vancouver Summit, where I had the opportunity to join in a number of Japan-related discussions, broadened the APEC community, with the admission of important new members. Despite clear and often painful economic problems that the APEC economies confront, they committed themselves at Vancouver to continued liberalization, through actions such as early voluntary sectoral liberalization (EVSL), and a reaffirmed adherence to new World Trade Organization (WTO) financial standards. Japan's cooperation has been vital throughout the APEC process.

A second priority is continued and even intensified bilateral U.S.-Japan diplomatic coordination. There are many useful steps, complementing APEC in building the New Pacific Community of the coming century that our two nations can take. Joint support for ASEAN, especially in its current economic difficulties, is essential. Reinforcing the credibility of the U.S.-Japan security alliance by implementing the September l997Guidelines agreement is likewise vital. So is thinking creatively and cooperatively about the long-term energy, food, and environmental needs of the Asia-Pacific region - needs that will require sustained attention once the current financial crisis passes. The U.S. and Japan, as major global importers, have a large stake in the long-run stability of world resource supplies, as well as in the integrity and smooth functioning of global financial markets.

Special analytical and policy attention to North east Asia, where bitter historical memories remain and regional dialogue continues to be underdeveloped, deserves to be a third priority of our joint efforts to build a New Pacific Community. Some progress, to be sure, is evident. In the Korean Peninsula Energy Development Organization (KEDO), the U.S. and Japan cooperate with the Republic of Korea and others to defuse the dangers of nuclear proliferation in North Korea. We also support the efforts of Prime Minister Hashimoto and President Yeltsin to heal differences between Japan and Russia, such as those made at the November, l997 Krasnoyarsk summit.

A fourth and final focus of our efforts needs to be here in Japan. Within Northeast Asia - indeed, within the Pacific as a whole - Japan's economy of nearly $5 trillion looms very large. Its prosperity profoundly affects the stability of the Pacific region, and indeed the world beyond.

We support macroeconomic-policy measures by the Japanese government to bring about domestic-demand led recovery in this country, as well as thorough-going deregulation steps. Such steps will be vital in promoting a faster rate of long-term growth, and the palpable welfare gains to future generations that such deregulation will inevitably entail. A liberalizing civil-aviation agreement, telecommunications reform, and an abolition of the Large Store Law that genuinely enhances international access to the Japanese market are among our particular policy concerns at this time.

Obviously, these varied steps will be important in furthering positive U.S.-Japan relations. Yet they will perhaps also be critical to the restoration of prosperity elsewhere in Asia, and far beyond. The world needs now, more than ever, to have a growing and open Japanese market.

In the new Pacific era now dawning, Japan and the United States, with our economic scale, technological sophistication, and common commitment to democratic principles, will have a central and indispensable role. We need to stand together as pillars of stability and agents of growth for the region as a whole. The dividends will be great - for both our countries, and for all the world.

Thank you very much.