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C O N F I D E N T I A L SECTION 01 OF 04 TOKYO 002058 
 
SIPDIS 
 
SIPDIS 
 
DEPT PLEASE PASS USTR FOR CUTLER, NEUFFER 
 
E.O. 12958: DECL: 04/12/2026 
TAGS: PREL ETRD ECON EINV APECO XR XK LA CH JA
SUBJECT: WHA A/S SHANNON'S APRIL 11 MEETING WITH METI DG 
KITAMURA 
 
REF: A. TOKYO 2008 
 
     ¶B. TOKYO 1960 
     ¶C. TOKYO 1959 
 
Classified By: Deputy Chief of Mission Joe Donovan.  Reason: 1.4 (b)(d) 
. 
 
¶1.  (SBU)  Summary:  Japan is happy with the results of its 
free trade agreement (FTA) with Mexico and expects rapid 
progress in FTA negotiations with Chile, METI Trade Policy DG 
Kitamura told WHA A/S Shannon April 11.  Little enthusiasm 
for a trade deal with Brazil and its MERCOSUR partners exists 
in Japan, however.  Japan remains concerned over competition 
with China for minerals, energy and food in Latin American 
and is dissatisfied with the failure of the Latin members of 
APEC to take an active role in the issues of most interest to 
Japan.  End summary. 
 
Japan-Mexico FTA:  Success for Both Countries 
--------------------------------------------- 
 
¶2.  (SBU)  The free trade agreement between Japan and Mexico 
has been a "very positive achievement," according to Japan's 
Ministry of Economy, Trade, and Industry METI Trade Policy 
Director General Toshiaki Kitamura.  In an April 11 meeting 
with WHA Assistant Secretary Thomas Shannon, Kitamura noted 
that the genesis of the Japan-Mexico agreement had been a 
finding by Japanese industry that Japan had been losing 
approximately JPY 600 billion (USD 5.0 billion at current 
exchange rates) in sales because of the lack of a free trade 
arrangement with Mexico.  Nevertheless, the fact that 
Mexico's main exports to Japan would be agricultural products 
still resulted in difficult negotiations as Japan's farm 
sector sought protection from Mexican competition.  The 
positive effect of the final agreement on trade, Kitamura 
stressed, had been obvious.  He provided statistics 
indicating that in the April-December 2005 period (i.e., from 
the beginning of the Japanese fiscal year through the end of 
the calendar year) Japan's exports to Mexico had grown 37 
percent in comparison to the same period a year earlier. 
Similarly, imports from Mexico had risen 23 percent in the 
same timeframe. 
 
Agreement Expected with Chile by Yearend 
---------------------------------------- 
 
¶3.  (SBU)  Although FTA negotiations with Chile had only 
started in February of this year, Japan expected to conclude 
an agreement by the year's end, according to Kitamura.  He 
cited Chile's substantial experience in FTA negotiations and 
the fact that Chile's agricultural exports were relatively 
limited as the reasons for the expected rapid progress. 
Kitamura indicated that Chile exports a significant amount of 
salmon to Japan but did not seem concerned that trade in that 
commodity could derail progress in the negotiations.  Chile, 
 
TOKYO 00002058  002 OF 004 
 
 
he reiterated, has "experience and good sense."  A/S Shannon 
also noted that the United States had also had a good 
experience in its FTA with Chile. 
 
¶4.  (C)  Another factor behind the rapid progress in the 
Japan-Chile negotiations is that the Japanese ambassador to 
Chile is a former politician from the ruling Liberal 
Democratic Party (LDP), Kitamura observed.  This has meant 
that the proposed Japan-Chile agreement has received a degree 
of support from the Japanese political leadership rarely 
seen.  Kitamura indicated this political impetus to pursue 
FTA negotiations with Chile was stronger than any pressure 
from Japan's business community, which, unlike the case with 
Mexico, had not been significant.  (Note:  Japanese 
Ambassador to Chile Hajima Ogawa previously served as an LDP 
member of Japan's Lower House representing the fourth 
district of Nagano Prefecture from 1986 to 2000.  From 1982 
to 1986, he was a secretary to leading LDP politician (and 
subsequently Prime Minister) Kiichi Miyazawa.  Prior to that 
time, he had been an executive in Mitsubishi Corporation's 
Brazilian subsidiary.  End note.) 
 
Brazil: No Enthusiasm, No Need 
------------------------------ 
 
¶5.  (C)  Asked whether there were other possible FTA 
candidates in Latin America that Japan was considering, 
Kitamura said some thought been given to Brazil and the 
MERCOSUR countries.  He cited three reasons, however, that 
negotiations with Brazil were unlikely.  First, the 
Brazilians themselves seemed uninterested in an agreement 
with Japan.  Second, the Japanese, in contrast to the 
situation with Mexico, did not perceive any tangible economic 
disadvantage in not having an agreement with Brazil. 
Finally, Japan, Kitamura noted, already had a number of very 
active economic exchanges with Brazil so that an additional 
framework in the form of an FTA or an "economic partnership 
agreement" did not seem necessary.  As an example of those 
exchanges, Kitamura added that the Brazilian Commerce 
Minister had been to METI the previous day to discuss the 
possibility of Brazil exporting ethanol to Japan. 
 
¶6.  (SBU)  Kitamura believed that Japanese economic 
involvement in Latin America, particularly major economies 
such as Chile and Brazil, would increase gradually.  Trade 
Policy Deputy Director General Akira Miwa, who accompanied 
Kitamura to the meeting, noted that Japanese companies, often 
using Japan-supplied loans, had invested in large projects in 
Brazil during the 1960s and 1970s but stopped doing so first 
because of political instability in Brazil during the 1980s 
and then because of the collapse of Japan's economic "bubble" 
in the 1990s. 
 
Energy: Latin America Not Part of Japan's Strategy 
--------------------------------------------- ----- 
 
TOKYO 00002058  003 OF 004 
 
 
 
¶7.  (C)  Kitamura asked whether securing energy supplies 
figured in the U.S. selection of its FTA partners.  A/S 
Shannon replied that, with the exception of Mexico, the U.S. 
had not concluded FTAs with the main energy producers in 
Latin America.  (NAFTA has no energy chapter.)  Kitamura 
indicated that, in contrast, energy had figured prominently 
in Japan's thinking and lay behind its efforts to conclude 
economic partnership agreements with both Indonesia and the 
Gulf Cooperation Council counties.  Nevertheless, energy was 
not yet part of Japan's plans vis-a-vis Latin America. 
Generally, the Japanese Government would provide financing to 
Japanese companies looking to invest in oil and gas projects 
overseas as a way of helping to secure energy resources. 
Deputy Director General Miwa indicated this had been the case 
with respect to Japanese investment in the Brazilian oil 
company Petrobras, where the Brazilian government, looking to 
counterbalance U.S. and European interests, had invited 
Japanese participation (which received Japan's financial 
support). 
 
China: Latin America Gets Less Than It Hoped 
-------------------------------------------- 
 
¶8.  (C)  Noting that A/S Shannon was on his way to China for 
consultations, Kitamura asked whether the U.S. believed China 
was only interested in Latin America as a supplier of 
commodities.  A/S Shannon agreed that this was the case and 
stressed that China, in its dealings with Latin American 
countries, had been very careful not to present itself as a 
strategic counterweight to the United States in the region -- 
much to the disappointment of some in Latin America.  The 
economic benefits of closer relations with China had also 
been less than expected.  Kitamura commented that China's 
single-minded pursuit of minerals, energy and food in Latin 
America and elsewhere, often without a sound economic basis, 
had been a destructive force in the international 
marketplace.  It was important, he stressed, that the Chinese 
be made to understand that their behavior in this regard did 
not conform to international norms. 
 
APEC:  Latins on the Sidelines in the Duel with China 
--------------------------------------------- -------- 
 
¶9.  (SBU)  Turning to the role of the Latin American 
economies in APEC, A/S Shannon noted that the United States 
hoped to utilize APEC to inject some of Asia's economic 
dynamism and openness in the traditionally more insular Latin 
countries.  Kitamura expressed surprise at Shannon's 
explanation of the contribution of APEC to Latin America and 
said that he had not considered the importance of APEC in 
this regard.  He commented that, in Japan's view, the Latin 
American economies in APEC have done little to advance the 
issues of main interest to Japan within the organization.  He 
stressed that Japan saw APEC primarily as a means to engage 
 
TOKYO 00002058  004 OF 004 
 
 
and to encourage China with respect to rule-based 
international systems in areas such as intellectual property 
rights, investment protection, and export controls.  The 
Latin American members of APEC, however, had seemed 
interested only in developing business ties with Asia and had 
been largely silent on the substantive issues on the APEC 
agenda.  Deputy Director General Akira Miwa added that the 
extent of Latin American interest in APEC will become clearer 
when Peru chairs the forum in 2008. 
 
¶10. (U) Assistant Secretary Shannon cleared this message. 
SCHIEFFER