Commerce Secretary Praises Partnership with Japan

Secretary of Commerce Carlos Gutierrez
Speech to the American Chamber of Commerce in Japan
Tokyo, Japan

March 31, 2006

Speaking to the American Chamber of Commerce in Japan on March 31, Secretary of Commerce Carlos Gutierrez announced greater U.S.-Japan IPR cooperation, encouraged Japanese tourism to the U.S. and emphasized the safety of American beef.

MODERATOR: Good morning, everyone. We're going to get started because the Secretary has a very tight schedule. My name is Robert Grondine. I'm a former president and former chairman of the ACCJ. Currently, I'm on the board and acting as senior adviser to President Charles Lake this year. I'm going to give a very short introduction, and then we're going to get right into the Secretary's comments. I want to thank everybody for joining us this morning on this wonderfully brisk morning. I'm sure that cold weather woke everybody up.

Today, we have the honor of introducing United States Secretary of Commerce Carlos Gutierrez. Mr. Secretary, I must say, you could not have picked a more perfect time to come to Japan. I hope you've had some opportunity in your schedule, anyway, to view the splendid cherry blossoms, which are really in full bloom today, just for your visit.

Secretary Gutierrez joined the US government about a year ago, after a long and distinguished career in the private sector, serving most recently as chairman of the board and CEO of the Kellogg Company. His impressive career with Kellogg began in 1975, when he entered the company as a sales representative. In nominating Secretary Gutierrez, President Bush said he understands the world of business from the first rung on the ladder to the very top. He knows exactly what it takes to help American businesses grow and create jobs. Secretary Gutierrez will speak today about the Bush Administration's pro-growth agenda and the US-Japan commercial relationship.

He was born in Havana, moved to the United States in 1960, and has had a wonderful career living the American dream, starting at the bottom and going to the very top of one of America's iconic companies. Without further ado, we'd like to welcome Secretary Gutierrez.

SECRETARY GUTIERREZ: Thank you. Thank you very much and good morning. And Bob, thank you for that very kind introduction. I want to thank all of you for being here this morning and taking the time on such a chilly morning to get here at this time. I do want to, before I begin, I'd like to congratulate Japan on beating Cuba. I could just stop right there. And winning the World Baseball Classic last week - it was a great victory, and it says a lot about the Japanese team and Japanese baseball. So, congratulations to all.

Also on the subject of good news, I'd like to thank the ACCJ for your contributions to our growing economy in the US. We have had some great economic numbers. We have had some great performance, and I just want to share some of that with you today. Our GDP per capita, as you well know, is one of the highest in the world, very close to Japan's. But the important thing is that we have created 5 million jobs since August of 2003. Our GDP growth last year was about 3.5 percent, and you compare that to other G-7 economies - Canada: 2.9, Italy: 0.3, Germany: 0.9, France: 1.5 percent, the European Union as a whole: about 1.5 percent - so, nothing like it in the world, and wefre extremely pleased that we have some momentum, and we appear to have something very strong going. Productivity is strong. The rates of growth of productivity are the highest we've had since World War II, well above the average. So again, extremely strong performance.

Inflation remains in check in spite of increases in energy prices. Real after-tax income, which is important, has risen over 8 percent per person since January 2001. So take-home pay, all-in, with benefits, after taxes, is up on a per capita basis, in real terms, eight percent since President Bush took office. So very strong performance, and as you know, Japan is the second-largest economy in the world after the US, the second-largest nation-state economy. It's fashionable to talk about the European Union as the largest economy, but if you talk about countries - nations - Japan and the United States are the two largest economies in the world.

As such, we believe that our nations have a responsibility to lead the world to greater prosperity, peace and stability. Japan has traditionally been the engine of growth in Asia. Recently, as we know, economic obstacles, economic issues, economic problems have reduced Japan's role in the region. And to restore its economic vitality, Japan has been making some hard economic choices. Its fourth-quarter GDP, as you well know, was very impressive. We were very, very impressed to see what happened in the fourth quarter in Japan. And Japan has - again, as you well know - has seen three consecutive years of economic growth. That is a great start. That begins to look like a trend. And that looks like something that we haven't really seen in quite a while.

We know Japan still faces a number of structural problems. It's going to be difficult. It's not going to be an easy road, and there's going to have to be persistence in tackling them to fully regain momentum and once again be a leader in a region that's undergoing dramatic economic changes. And I say "a leader" from the standpoint of economic vitality, growth and leading the way from an economic standpoint.

Japan is our longtime friend and ally. We are grateful for Japan's decision to help in Iraq's reconstruction and Japan's continuing support in the rebuilding of Afghanistan. Prime Minister Koizumi has also directed his government to be helpful in reaching an ambitious outcome in the important Doha round of trade negotiations. President Bush is committed to expanding free and fair trade. We know that open markets spread freedom and create prosperity for US companies and workers and our trading partners. And Japan's help in ensuring that we get that message out has been instrumental. Japan and the United States have enjoyed a long and fruitful trading partnership. Japan is our fourth-largest trading partner and our third-largest export market. And we have - perhaps most importantly - we have a long-standing strategic friendship. Not just interests - we have friendship, and that, we take very seriously and we value very highly.

I want to thank the ACCJ for your important role in promoting commerce between the United States and Japan. As you know, we still have a long way to go to reach our full potential as trading partners. As much as we have done together, as much as we have achieved, we can still do so much more.

I understand that you're putting together a white paper on the business environment here in Japan, and I look forward to your report. In my meetings with government leaders yesterday, we discussed a number of market-opening issues, trading issues, and let me just share some of these with you. Opening Japan's market to US beef: We believe and we are absolutely convinced that our beef is safe. If you think about it, the United States is one of the largest beef consumers in the world. Our consumption of beef per capita is some of the highest in the world. We have a very safe beef-consuming population. We have the world's safest food supply. And we just want the opportunity to demonstrate that we can deliver the best beef in the world, at the right specifications, at the right standard, as Japan requires it. Our beef is safe. I'd like to say that 10 times. I know we don't have much time this morning. So that's the first message that we send out to our partners.

Pricing for innovative US pharmaceuticals and medical devices, as well as a speedier approval process for these products: We believe that Japan can have access to more innovation, more up-to-date innovation, more current innovation, if you break through the system today that exists on pricing products, and some of the regulatory speed that is lacking, in order to get these medical devices to market. In some instances, we've heard of some pharmaceuticals and some medical devices that are three or four generations behind. That can be fixed. Japan deserves better. That can be fixed with regulatory reform.

Improving the investment climate in opening up public works projects to US design and construction firms: There are some things that Japan does better than anyone in the world. We won't dispute that. But we know that we do quite well in construction. It is one of our best industries. It is one of the sectors where we have some of the highest productivity rates in the world, so we can help. We can help in design. We can help in construction. We can help in bridges and airports. We can help in train stations. We can be of help, and that can help the productivity of construction and that very important sector. So we also talked about that.

Minister Nikai and I announced yesterday a very important partnership to protect intellectual property rights. Intellectual piracy is a huge global issue, especially for countries like Japan and the United States, where we have been growing through our innovation, through our patents, through our trademarks, through our brands, through our copyrights. We can't allow a world to be created where our intellectual property is not respected. So it affects both American and Japanese companies and workers, probably more so than any other two countries in the world. So safeguarding the hard-won patent and trademark protections of innovative and creative people is one of my highest priorities as your Secretary of Commerce. By enhancing bilateral cooperation and IPR protection and enforcement, Minister Nikai and I believe we can better address IPR concerns and protect our assets. We will do everything that we can to ensure that your brands and your patents and your technology are protected in the world. We're very pleased to work with Japan on this important issue, and we can't think of a better partner. And I encourage US and Japanese industries to work closely with our governments to tackle this problem. We need your help. We need to know where we should direct our focus.

Our two nations seek an Asia in which the power of democracy and democratic values are free to peacefully transform the region. We are extremely proud to be partners with Japan in this great goal, and we know that we have a tremendous future of partnership and friendship ahead of us.

Before I close out, I have a couple of announcements to make. First of all, in the area of tourism: At home these days, interestingly, as we drive around Washington, DC, we see reminders of the ties between our two countries. Right across the street from my office in Washington, DC, the cherry trees that were a gift from Japan to the United States are just beginning to bloom, as they are here in Tokyo, and that is a reminder, a beautiful reminder, of the friendship and partnership that exists between Japan and the United States. Those cherry blossoms are attracting visitors from across our country and around the world, and many visitors coming to Washington are from Japan.

This summer, the Department of Commerce is launching a multimillion-dollar campaign in Japan to encourage more of our Japanese friends to visit the United States. We hope they will come and see the broad array of cultural and entertainment attractions that our country offers. This is only the second time that we've done such a major tourism promotion campaign. The only other we've done is in the UK. Last year, we welcomed nearly 4 million Japanese visitors. In 2006, we hope to welcome more. The point I'd like to make is that Japanese tourists are more than welcome in the United States. We'd love to see you there. Visit our country. Visit the sights, and share the experiences.

My second announcement is - and for that, I'd like to ask Bob Grondine to take the stage with me, if you could come up, Bob, please - it's my privilege today to present the American Chamber of Commerce in Japan with this certificate of appreciation. This certificate commemorates the ACCJ's more than 50 years of service in promoting open and fair trade between the United States and Japan, and its strong partnership with the Commerce Department's US Commercial Service. So Bob, on behalf of the Commerce Department and the nation, thank you very much.

And in closing, I'd just like to remind us all that if we have learned one thing over the past 10 or 20 years - and I'm sure that you have seen it here in Japan better than any other country - is that there is no substitute for growth. There is no substitute. If an economy isn't growing, there are things that you can't provide for society. When an economy is growing, it seems like everything is possible. And I hope and I trust that Japan is entering, once again, a new era of growth. And you are here when it's happening, and you are truly at the right place at the right time. I can think of nothing better for Japan. I can think of nothing better for Asia, and from an economic standpoint, I can think of nothing better for the world at large. So thank you very much for everything you are doing, and thank you for your time.

MODERATOR: We do not have a lot of time, but we have time for a couple of questions that the secretary has agreed to take.

QUESTION: Thank you Mr. Secretary. You just came from China, and we're seeing here - with Japan's manufacturing base being shifted to China and Japanese imports of consumer goods and stuff from China increasing - the increasing integration between Japan and China and the rest of Asia. I wonder if you could comment on that trend and what impact you think that will have on the United States and US trade and business policy toward Asia.

SECRETARY GUTIERREZ: As you know, China has built its economy on the basis of manufacturing of commodity-type products. What we have seen in the US is that our new jobs are being created in the area of higher-value manufacturing, differentiation of products, higher technology, and, in many cases, new services. So at a time when China is growing as a manufacturing exporter of low-priced goods, our unemployment is declining, our economy is growing, and the average take-home pay per American is increasing. This suggests the model and the theory that while some countries are manufacturing low-priced commodities and exporting them, other countries should be building an economy on the basis of value added products, higher technology, and higher paying jobs. And for that to continue, we know that we need higher skilled workers, which is really our challenge long-term to remain competitive. And to keep the numbers that we have and keep the growth that we have, we're going to need a lot more focus on math and science. We're going to need a lot more focus on R&D, so we want to make our R&D tax credits permanent. We want to ensure better linkage between what the public sector is working on, in terms of basic research, and the private sector. But very importantly, we really want to make clear to students that there is a wonderful future in math and science and engineering. Because that's what we will need to continue down the path of positioning our country as a manufacturer of high-value goods, as opposed to competing on price, on commodities, which we believe eventually China has to graduate from. At some point, they're going to have to make the leap as well to branded items, higher technology items. And interestingly, in their five-year plan, they're talking about becoming an innovation society, which we think is very favorable, because it forces them also to think about things like intellectual property, which we think is good for the world trading community.

QUESTION: I'm Glen Fukushima. Mr. Secretary, we read in the newspapers that there's going to be FTA - free trade agreement - negotiations between the United States and Korea. I remember back in the 1980s, when I worked at USTR, that then-Ambassador to Japan Mike Mansfield proposed an FTA between the United States and Japan. Do you think it's likely that in the near future there will be an FTA between the US and Japan, and if so, what kind of form would that take? Thank you.

SECRETARY GUTIERREZ: That's a great question, and you know, conceptually, without getting into the details, and what a great thought, if we could get two countries of this size to come together even more. I know that USTR would be thinking through this, so I'm talking a little bit removed. Free-trade agreements are not negotiated by Commerce. I believe that in order to get to the stage where we would have a free-trade agreement, we would have to tackle some big obstacles that are still remaining in our structures, our mutual structures. And I would expect that agriculture would be a major stumbling block for those negotiations. Now I say that a little bit removed. Because I've heard about it over the last couple of days, I'm going to take it up with Ambassador Portman when I go back and ask him the question as to what is the current status and what's the thinking on that. It's a great question, and I'll follow up on it in Washington. Thank you.

QUESTION: Ira Walsh with Pharma in Japan. Thank you very much for your comments on the health-care sector. We appreciate your help and your great staff's assistance over the years. I wonder if in your discussions this week and over last year with Japanese leaders, if you have gotten any sense that there is a real feeling of concern that there has to be some very significant structural change here in the economy, as their demographics change and so on - not just evolutionary change, but radical structural change?

SECRETARY GUTIERREZ: Well this is my first trip as Commerce Secretary to Japan, so I can't give you any really deep insights, and if I do, please be a little suspicious. (Laughter.) But what I felt was that there is recognition that change has to happen. The demographic reality is very clear and very much in the top of the minds of all ministers with whom I met. The question that I think, as you say, is the big one is, is it going to be gradualism? Is it going to be a slow, continuous improvement? Or is there room in the system for a bold, one-time decision or a bold move? And I don't know. I think that's a cultural issue. I think that's a political issue. I think it's an issue of what is feasible and what is practical. I came away, though, thinking that change is inevitable. What form it takes and how it's done, I think we'll have to see. But I did not speak with anyone who didn't recognize that Japan is going to have to continue down the path of reform. And I'll tell you, especially now when these numbers are beginning to come in, and the growth begins to look good, I think that's probably the greatest motivator to continue down the path of reform, is to keep it going. So I think we'll continue to see reform and change.

MODERATOR: Thank you very much. That will conclude the program for today. I'd like to ask for a warm round of applause. (Applause.) And as one last order of business, though your presentation was well framed and beautifully presented, we know that you're traveling, so we in so we're going to give it to you light and easy to carry: A certificate of appreciation from the Chamber.