Remarks by Ambassador Thomas Foley to the Japan-U.S. Southern Conference (Nanbuikai)
IMPERIAL HOTEL, TOKYO
OCTOBER 28, 1999
(AS PREPARED FOR DELIVERY)
Thank you for that kind introduction.
It is a pleasure to be invited here today to address the Japan-US Southern Conference annual meeting. Earlier this month I had the opportunity to address one of your sister organizations - the Japan-US Southeast Conference. I understand that the Japan-U.S. Southern Association has its roots in the formation of the Japan U.S. Southeast Association.
The original Japan-regional US association - the brainchild of Mr. Norishige Hasegawa, President of Sumitomo Chemical Corporation and Governor George Bushby of Georgia - was intended to provide a forum for "the promotion of friendly relations with Japan in the areas of international trade, culture, industry, technology and commerce through cooperation and association." It is thanks to the efforts of non-governmental organizations such yours that our two countries maintain the strong bond that we do, and continue to exchange valuable information which keeps us abreast of new developments.
I understand the theme for this year's conference is "Strategies for Success toward the 21st Century." I cannot think of two countries more qualified to discuss this topic than Japan and the United States. I believe one of the key strategies for success as we enter the new millennium is in fact a quality that has been central to the relationship of our two countries over the years: the ability to build on our strengths in new and creative ways. For governments and corporations alike, the ability to evolve with the changing landscape is certainly key to remaining competitive.
The US and Japan have both independently demonstrated the repeated ability to adapt successfully, becoming world economic leaders in the process. And although Japan has found itself in the throes of economic and societal change over the past several years, it is now showing signs of a recovery.
There is, however, an interdependence to the US-Japan relationship that might at first glance appear surprising given the geographic and cultural distance between us. Yet with closer scrutiny, it is not at all surprising, given the breadth and depth of our shared values. In fact, there is a particularly unique shared sense of values between the Japanese and the people of the Southern U.S.: from a mutual appreciation of the importance of social demeanor and hospitality, to a unique respect for the fighting spirit and persistence exhibited by U.S. Southerners.
This sense of shared values has made it possible for our relationship to withstand the tests of both time and change. It has given rise to a great alliance, to which the U.S. and Japan have continued to reaffirm their commitment over the years.
Across the board, the US-Japan alliance is proving itself up to the challenge of the 21st Century, from our security relationship to our economic relationship to our mutual commitment to the future of Asia's recovering economies and the Common Agenda of our environmental activities.
The Security Relationship
Recognizing that the U.S.-Japan security alliance, including the forward-deployed U.S. forces in Japan, is central to the stability of the Asia-Pacific and that we share a responsibility to contribute to peace and prosperity, we have maintained and enhanced our strategic alliance over the decades. We will continue to do so in response to the changing security environment in the region.
Over the past two years we have taken a number of significant steps, including: updating our defense guidelines; new agreements to cooperate on theater ballistic missile defense research and on Japan's indigenous satellite program; and progress on consolidation and realignment of the U.S. base presence in Okinawa.
While we continue to engage North Korea through the Four Party Talks, through Dr. Perry's work and other diplomatic channels, maintaining strong deterrence helps guard against any miscalculations on Pyongyang's part. In this regard, it is imperative that the U.S., Japan and the Republic of Korea present a common front.
Our shared sense of values is evident in our cooperative political efforts. Our interest in peace and democracy in Asia is promoted through coordination of our diplomatic efforts there and around the world. We share basic assumptions concerning democratic government and the principles underpinning it. We have both worked actively to promote these principles in Cambodia, the Philippines, Mongolia and most recently, Indonesia. We are working to achieve a peaceful settlement of the problems of East Timor, and both of our countries are cooperating with the UN High Commissioner for Refugees to address humanitarian needs. We are also both contributing to the multinational peacekeeping force there, to which Japan has pledged $100 million in financial assistance.
Through Common Agenda initiatives, our two countries are working closely together to tackle such "global issues" as environment, health, science and technology, and natural disaster reduction. Our partnership has enabled the U.S. and Japan to combine expertise and pool resources at a time of tight budgets.
To cite some examples: together, in collaboration with the World Health Organization, UNICEF and Rotary International, we have virtually eradicated polio in the western Pacific region. We have also protected 100 million acres of the richest environmental areas in Latin America and the Caribbean through financial and technical support to local environmental NGOs.
The Japan-U.S. economic relationship is of course the most important bilateral economic relationship in the world, and continues to prove itself adaptable to a constantly changing and evolving global business environment.
In the years after the war, the task before us was the rebuilding of a devastated Japanese economy. A decade later we worked together to assure Japan's place as a full-fledged member of the trading community when it entered the GATT and the OECD with strong American support.
Concerns about trade imbalances between the U.S. and Japan arose as early as the 1960s, however, leading to growing pressures to open Japan's market more fully. Those efforts focused first on eliminating trade barriers - tariffs and quotas - through successive GATT rounds, and lowering bars to investment through OECD disciplines.
Since the mid-1980s that emphasis has shifted. Starting with the Market-Oriented Sector Specific (MOSS) talks of the Reagan Administration and the Structural Impediments Initiative (SII) of the Bush Administration and culminating in the Framework Agreement of the Clinton Administration, our market access negotiations have moved beyond merely eliminating border barriers to trade to detailed scrutinizing of the domestic structure of Japan's economy.
Consequently, the problems now facing our negotiators and exporters of goods and services have become more complex and difficult. It is easier to identify and negotiate tariffs and quotas than it is to debate the efficacy of antitrust enforcement, or the validity of interconnection fees, but we are finding innovative ways to frame and address our problem areas. Some have criticized these new approaches as intrusive, but I believe the changes reflect instead the close and growing integration of our two economies. When two economies are as linked as ours are, no issue is entirely domestic.
Japan's decade long economic slump has had a serious effect on other Asian economies, and the results can be seen in declining figures for U.S. exports to Japan. We have encouraged our Japanese colleagues to use all available means to generate economic growth, from fiscal spending and bank restructuring to wide-ranging deregulation of the Japanese economy.
The bilateral economic and trade relationship will undoubtedly continue to be a source of friction on occasion, but it is also clear that the world is changing fast. Revolutionary changes now underway in information technology, finance, and manufacturing offer new opportunities and challenges to the U.S.-Japan economic partnership. We have responded with three initiatives to ensure that both nations will continue to prosper in this new world.
First, to build an even stronger world trading regime that can adapt to fast-paced change, our two nations are working together to launch a new WTO round next month that will strengthen trade disciplines, boost trade and investment, and stimulate growth. We have areas of dispute - antidumping and agriculture to name a few - but as the world's two largest trading nations we also have a mutual goal of deepening and broadening the framework for multilateral trade.
Second, in our bilateral talks, we are promoting regulatory reform that will increase productivity, open markets, lay the basis for sustainable economic recovery in Japan, and prepare us for the challenges of our aging societies. Under the U.S.-Japan Deregulation Initiative, our officials meet to work out market-opening reforms in sectors such as pharmaceuticals, housing, financial services, and telecommunications.
In telecom, for example, we are pressing for further reforms that will promote the development of a vibrant information technology market in Japan and expand the use of the Internet and e-commerce. And I predict eventual success, not just because of the truth of our arguments, but also because there is a clear and growing domestic constituency in Japan that recognizes how monopoly prices and restrictive practices have raised costs and slowed Japan's participation in the internet society.
Third, the U.S.-Japan Investment Working Group will intensify its efforts to encourage changes that will promote foreign direct investment (FDI) and corporate restructuring in Japan, particularly by facilitating mergers and acquisitions. In the last fiscal year, FDI in Japan amounted to only 0.27% of its Gross Domestic Product, compared to 8.5% in the US. As a result, Japan has missed out on the benefits that the US has enjoyed from foreign investment, including increased employment, the introduction of new technologies, and the innovation that greater competition inevitably brings.
Fortunately, this too is an area where changing attitudes in Japan reinforce our efforts. Japan can make good use of foreign capital and entrepreneurship, and already we are seeing major positive changes, especially in the financial services area. American firms are playing an increasingly significant role in Japan's recovery. Of last year's $10.5 billion of FDI in Japan, $6.3 billion - 60 percent - came from the U.S.
Increased American investment in Japan means important benefits for Americans as well, providing an engine of growth for jobs here at home. American manufacturers can sell more in Japan if they own and control their distribution systems.
U.S. retailers operating in Japan generate manufacturing jobs in the United States providing the goods they sell in Japan. U.S.-based restaurant chains active in Japan, for example, source many of their products at home, processing them into products ready for final preparation in restaurant kitchens in Osaka and Tokyo. Finally, U.S. financial services firms entering the Japanese market report that they generated hundreds of jobs in the U.S. to support the Japanese market. The end result: U.S. companies will benefit, and so will U.S. workers. The end result is more business for US firms, more jobs and better wages for US workers.
We have come a long way in our economic relationship over the past 50 years. Our mutual commitment to maintaining a strong bilateral, regional and multilateral trading regime that can ensure prosperity for our citizens has remained constant, but the way we achieve this goal continues to change as markets evolve.
The principal challenge facing Japan and the United States as we enter the next Century is: to continue to build a strong and vital partnership in the areas of security, politics, economics, business, agriculture and the environment while at the same time reducing barriers hindering our progress and limiting our growth.
I know that our two countries share a sense of mission in the world: the need to take the wealth of information we possess as the world's two most important economies and share this bounty with the rest of the globe. I am convinced that with our joint ability to adapt to the constantly evolving environment around us, ten years from now the milestones I have listed throughout this speech will have equally impressive sequels.
This brings me back again full circle to the work of organizations such as the Japan-US Southern Conference. Never underestimate the role that you have to play in the building and evolution of this most important international relationship. The contact and interchange that goes into the planning of these yearly conferences alone, before the meetings even begin, is helping to craft the tone and quality of US-Japan relations.
Our work at the government level is to guide that process and help to work through the stumbling blocks we encounter along the path. Without the careful maintenance that takes place among the individuals, corporations and organizations in our respective countries, however, the guidelines governments try to set would have little effect.
I commend you for your work and for creating a permanent forum for dialogue between our two business communities. I wish you continued success into the next millennium.