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C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 003105 
 
SIPDIS 
 
SIPDIS 
 
USTR FOR AUSTR CUTLER; BEEMAN 
NSC FOR COLLINS 
 
E.O. 12958: DECL: 06/05/2016 
TAGS: ECON ETRD ASEAN APEC CH KS AS IN NZ JA
SUBJECT: METI'S KITAMURA PROMOTES ASIA FTA AS DEFENSE 
AGAINST CHINA'S INFLUENCE ON ASEAN 
 
TOKYO 00003105  001.2 OF 002 
 
 
Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b/d). 
 
¶1.  (C) Summary:  METI Minister Nikai's proposal for an Asian 
FTA was an alternative to an "aggressive" Chinese push for an 
ASEAN   3 FTA, METI Trade policy DG Toshiaki Kitamura told 
visiting EAP/PDAS Kathleen Stephens on May 29.   The Chinese 
plan, which will be recommended by an ASEAN   3 expert group 
soon, would be objectionable because it would increase 
China's influence over ASEAN and would set a poor standard by 
covering only trade in goods.  Therefore, the Nikai idea 
expanded the proposed FTA to include India, Australia and New 
Zealand and to cover services, IPR and investment.  While 
Japan, and METI in particular, remained committed to 
strengthening APEC, APEC could not serve as an effective 
alternative to the Chinese proposal because it was not 
realistic to talk about an APEC FTA for decades, Kitamura 
said.   Nevertheless, he proposed the need to agree on a 
roadmap to strengthen APEC by the ministerial to be held in 
Tokyo in 2010.  Stephens said that the U.S. would be 
concerned with a pan-Asian organization that could undermine 
trans-Pacific ties and that the U.S. approach to the region 
emphasized APEC, ARF and robust bilateral FTAs, which were 
the most practical.  Both agreed to continued discussions on 
East Asian economic architecture. 
 
¶2.  (C) On related issues, Kitamura said the lack of U.S. 
cabinet-level participation in ASEAN meetings in recent 
years, the change of USTR at a critical junction in the Doha 
round, and the hold placed on Ambassador Schwab's nomination 
created a negative impact in the Region.  Stephens stressed 
that Secretary Rice was looking forward to participation in 
the ASEAN ministerial and that we expected Ambassador 
Schwab's confirmation would move forward.  Stephens also 
stressed the need to resolve the beef issue.  End Summary. 
 
¶3.  (C) Stephens opened by noting that the issue of East 
Asian economic architecture was being closely studied in 
Washington.  While the process was not complete, there were 
several areas of clear agreement:  APEC was extremely 
important and needed to be more outcome oriented; ties with 
ASEAN should be strengthened; robust FTAs should be pursued 
in the region, and it was more practical to do this on a 
bilateral basis; and, we should talk to allies about how 
these elements and others fit together.  In this context, the 
U.S. was surprised by Nikai's proposal for an Asian FTA. 
 
¶4.  (C) Kitamura explained that ASEAN, as a group, was 
becoming the "hub" of a system of FTAs.  They had concluded 
one with China and the Korea agreement will take effect in 
the middle of the year.  Japan and ASEAN had agreed to 
conclude their FTA by March 2007.  ASEAN was also negotiating 
FTAs with India and Australia and New Zealand and was aiming 
to finish those in 2007.  It was only logical that once these 
FTAs were finished that they form the basis for an Asia wide 
FTA. 
 
¶5.  (C) As if to address the "surprise" issue, Kitamura noted 
that since January of 2002 PM Koizumi had been supportive of 
an East Asian Community.  What prompted Nikai to make his 
proposal now, however, was that an ASEAN   3 expert committee 
would recommend to the ASEAN   3 summit in August that an 
ASEAN   3 FTA that covered trade in goods only be negotiated 
soon.  This was the latest in an "aggressive" push by China 
for such an FTA. Japan had initially opposed creation of the 
expert group as premature, but consented when it was 
isolated.  A Chinese scholar who was controlled by the 
government chaired the group, but the GOJ did not control 
Japanese participants.  If there were no other alternative on 
the horizon, the "Chinese" proposal would be accepted.  If 
such an FTA were concluded, it would increase Chinese 
influence in ASEAN while at the same time providing an FTA 
without several protections important to Japanese business. 
Therefore Nikai felt he had to act quickly and without 
consultation.  The proposal would fix the Chinese plan by 
adding India, New Zealand and Australia and expanding the 
scope to cover IPR, investment and trade in services. 
Kitamura admitted that so far the plan was "just a concept by 
METI".   Kitamura understood that Ambassador Schwab had said 
in Paris the previous week that the U.S. was "not excited" 
 
TOKYO 00003105  002.2 OF 002 
 
 
about the Nikai plan.  However, which would the U.S. rather 
have, the Nikai plan or the Chinese, Kitamura asked. 
 
¶6.  (C) Turning to APEC, Kitamura said METI was committed to 
APEC, which was "our brainchild".  However, an APEC wide FTA 
was decades away so the idea would not be enough to trump the 
Chinese proposal.  However, at the APEC Trade Ministerial in 
Hanoi that week, Nikai would try to talk to the U.S., 
Australia and New Zealand about strengthening APEC.  Little 
could be expected from the Hanoi and Lima APEC summits.  What 
Japan would like is a road map of how to strengthen APEC by 
the time of the Tokyo summit in 2010.  Japan's commitment to 
APEC was demonstrated by the offer to host the summit, which 
would be in a critical year for APEC, the year in which the 
trade liberalization ideals for developed countries in the 
Bogor declaration were supposed to be fulfilled.  As an 
aside, Kitamura said that the change in USTR, the hold put on 
Ambassador Schwab, and the lack of U.S. cabinet participation 
in APEC meetings in recent years created a bad impression in 
the region. 
 
¶7.  (C) In response, Stephens said that, while Japan and the 
U.S. had the same objectives, they had different approaches. 
Although the development of pan-Asian organizations was 
natural, the effect of such proposals on trans-Pacific 
relations needed to be considered.  In terms of FTAs, it was 
better to concentrate on strong bilateral FTAs than to try to 
include too many countries and end up with weak agreements. 
The U.S. commitment to the region was shown in the robust 
FTAs it was pursuing.  While the Chinese favored FTA would be 
a concern to the U.S., Nikai's plan is perhaps not he best 
alternative.  We need to consult. The U.S. is interested in 
strengthening APEC and the Australians are committed to doing 
this in the summit they will host in 2007.  We would like to 
hear more about the roadmap and we need to develop concrete 
ideas for APEC, Stephens said.  Kitamura and Stephens agreed 
on the need for Japan and the U.S. to continue to consult on 
East Asian economic architecture. 
 
¶8.  (U) PDAS Stephens has cleared this cable. 
SCHIEFFER