VZCZCXRO7951
PP RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHPB
DE RUEHKO #3161/01 1590635
ZNY CCCCC ZZH
P 080635Z JUN 06 ZDK CITE SINGAPORE SVC 1281 1630043
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 2993
INFO RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEHBR/AMEMBASSY BRASILIA 0363
RUEHNE/AMEMBASSY NEW DELHI 8043
RUEHFR/AMEMBASSY PARIS 4949
RUEHPF/AMEMBASSY PHNOM PENH 0586
RUEHGO/AMEMBASSY RANGOON 2108
RUEHVN/AMEMBASSY VIENTIANE 1505
RUEHBS/USEU BRUSSELS
RUEHGV/USMISSION GENEVA 2868

C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 003161 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS USTR FOR WCUTLER, JNEUFFER 
PARIS FOR USOECD 
GENEVA FOR U.S. MISSION TO WTO 
 
E.O. 12958: DECL: 06/07/2016 
TAGS: ECON ETRD PREL JA APECO
SUBJECT: MOFA'S ISHIKAWA CRITICIZES NIKAI EAST ASIA FTA 
PROPOSAL, ADVOCATES STRONG ASEAN PLUS 1 FTA, CLAIMS TO 
SUPPORT APEC, WAITS FOR BRAZIL TO MOVE IN WTO 
 
REF: A. TOKYO 3045 
     ¶B. TOKYO 2991 
 
TOKYO 00003161  001.3 OF 003 
 
 
Classified By: DCM Joseph Donovan for reasons 1.4 (b) & (d) 
 
¶1. (C) SUMMARY:  Japan needs WTO negotiations to move forward 
while MAFF Minister Nakagawa is still in place, MOFA Economic 
Affairs DG Ishikawa told visiting APEC Ambassador Michalak, 
but Brazil needs to move first before Nakagawa can play his 
hand.  Ishikawa cited problems with METI Minister Nikai's 
proposal for an East Asian trade agreement, adding that it 
faces opposition within the Japanese government and 
commenting that Japan would do better to aim for a good 
result in its ASEAN plus one trade negotiations, on which he 
leads for MOFA.  While claiming that MOFA supports APEC, 
Ishikawa also confirmed that MOFA's APEC senior official will 
continue to divide his time between APEC and MOFA's Latin 
America Bureau.  Ishikawa remained confident that bilateral 
beef trade would resume soon, but not before PM Koizumi 
visits the U.S.  END SUMMARY 
 
¶2. (C) U.S. Ambassador for APEC Michael Michalak called on 
MOFA Director General for Economic Affairs Kaoru Ishikawa 
June 2.  Embassy Economic Counselor Fantozzi and Economic 
Officer Ries accompanied. 
 
WTO ) now or never, but Japan can't go first 
-------------------------------------------- 
¶3. (C) Ishikawa commented that Agriculture Minister 
Nakagawa's tenure creates a window of opportunity for Japan 
to advance Doha negotiations, but he predicted that the 
window will close if Nakagawa moves on as part of a Cabinet 
shuffle when PM Koizumi steps down in September.  At the same 
time, Ishikawa suggested that because on balance Japan will 
lose from any possible Doha Development Agenda outcome, Japan 
cannot make the first move in WTO negotiations.  Those who 
will win, such as Brazil, should go first, he asserted, and 
then Nakagawa would be in a position to "play the cards he 
has in his pocket."  In addition to frustration with Brazil, 
Ishikawa expressed concern that EU Trade Commissioner 
Mandelson needs to visit EU capitals and demonstrate that he 
will be able to negotiate successfully the allocation of the 
EU's "sensitive" 8% of tariff lines among member states. 
 
¶4. (C) For Japan's part, Ishikawa expressed more concern for 
the social effects of agricultural liberalization than for 
agricultural trade interests.  Japan has 8.5 million 
households deriving income from agriculture, of which the 
majority of household heads are over 65 years of age and many 
are widows living in remote places, he observed.  While 
Japanese farmers can develop markets in Shanghai and Bangkok 
for high-end produce, Japan needs time so that "these old 
ladies can spend their final years in dignity." 
 
Focus on ASEAN plus one, not EAS 
-------------------------------- 
¶5. (C) Turning to Japan's bilateral and regional trade 
negotiations, Ishikawa said Japan is waiting for the air to 
clear following Thai elections before trying to set a new 
date to sign that agreement.  Negotiations with the 
Philippines had been set back when the GOP reopened 
everything agreed so far.  By contrast, Ishikawa 
characterized Japan's trade talks with Vietnam and Indonesia 
as proceeding on track.  Noting that he himself was leading 
only on Japan's ASEAN plus one "umbrella" negotiation, 
Ishikawa said he believed he had found a solution to the 
challenge of establishing legal consistency between that 
prospective agreement and Japan's prospective bilateral 
agreements with individual ASEAN members. 
 
¶6. (C) Ishikawa criticized the East Asian Economic 
Partnership Agreement concept being advanced by Trade 
Minister Nikai as problematic because the only way to make 
such an agreement legally consistent with the bilateral and 
ASEAN plus one agreements now being negotiated  would be to 
go to the lowest common denominator.  China, he added, lacks 
legal stability, does not respect intellectual property, and 
has an ambiguous competition policy.  Moreover, the zero 
 
TOKYO 00003161  002 OF 003 
 
 
tariff coverage of China's agreement with ASEAN  covered only 
4.9% of trade, reflecting China's contention that it is a 
developing country and therefore not bound by the same WTO 
standards as industrialized countries. 
 
¶7. (C) Asked about GOJ discussion of the Nikai proposal, 
Ishikawa remarked that while it is on the agenda of the 
Cabinet-level Council for Economic & Fiscal Policy, it also 
faces opposition from Agriculture Minister Nakagawa and 
Foreign Minister Aso.  Ishikawa said the Cabinet Office had 
summoned him and his METI and MOF counterparts to a meeting 
earlier in the week to discuss the Nikai proposal.  In that 
venue Ishikawa had urged that priority be given to Japan's 
ASEAN plus one negotiations and questioned the need for the 
Nikai proposal, which he characterized as motivated by fear 
of China.  "We should have confidence in ourselves and good 
diplomacy with our neighbors," Ishikawa said. (He said his 
position resulted in a shouting match with his METI 
counterpart.) Ishikawa acknowledged that Minister Nikai must 
be allowed to save face, but at the same time he indicated 
clearly through body language that he does not expect the 
proposal to lead to any concrete result. 
 
Where is MOFA on APEC? 
---------------------- 
¶8. (C) DG Ishikawa sidestepped Ambassador Michalak's 
questions as to whether reports were true that Japan had 
proposed holding ministerial meetings as part of the East 
Asian Summit process at a recent senior level meeting on the 
EAS and how this would fit in with Japan's support for the 
APEC process (see reftel A).  By way of affirming his support 
for APEC, Ishikawa asserted that he personally had tabled 
Japan's offer to host APEC in 2010.  Michalak welcomed 
Japan's offer to host in 2010 but he noted that 2010 is still 
four years away.  Ishikawa listened politely but made no 
commitment when Michalak expressed hope that Japan might help 
fund U.S.-proposed projects aimed at enhancing cooperation 
between APEC and ASEAN. 
 
¶9. (C) Michalak observed that many in APEC and the U.S. are 
puzzled by the fact that MOFA's APEC senior official, Satoru 
Sato, spends roughly half of his time in MOFA's Latin America 
bureau.  Ishikawa defended the arrangement as necessary 
because of civil service limits on the number of deputies DGs 
in MOFA, and he professed not to have been aware that Sato's 
division of duties had created any doubts about MOFA's 
commitment to APEC.  At the same time he made clear that 
Sato's successor, a Mr. Mizukami who is returning  to MOFA 
from a detail to the Japan International Cooperation Agency 
(JICA), would continue to split his time between MOFA's 
Economic Affairs and Latin America Bureaus. 
 
Beef Trade Opening Soon 
----------------------- 
¶10. (C) Reprising comments he made to EAP PDAS Stephens 
earlier in the week (reftel B), Ishikawa remained optimistic 
that bilateral beef trade would resume, but he predicted that 
it would not happen by the time Prime Minister Koizumi is 
scheduled to meet the President in late June.  He said that 
the GOJ would not provide a timetable but the USG could 
extrapolate one from the list of steps to be undertaken 
before the trade resumed. In order to expedite GOJ 
inspections of U.S. facilities that must accomplished before 
trade can restart, Ishikawa said that efforts were under way 
to detail MAFF experts to supplement the four experts at MHLW 
so that it would be possible to field more inspection teams. 
Ishikawa added that Japanese Ambassador Kato has been meeting 
with U.S. members of Congress in an effort to convey the 
GOJ's sincerity about reopening beef trade. 
 
No strong incentive for a U.S.-Japan FTA 
---------------------------------------- 
¶11. (C) On U.S.-Japan economic relations, Ishikawa said he 
had changed the tone of the Prime Minister's Diet Q&A on a 
possible U.S.-Japan FTA to ensure that the GOJ's hands were 
not tied, but he opined that the added value of negotiating 
such an agreement would be small because the U.S.-Japan 
economic relations are already so close. 
 
TOKYO 00003161  003 OF 003 
 
 
SCHIEFFER