VZCZCXRO5941
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DE RUEHKO #3873/01 1930047
ZNR UUUUU ZZH
P 120047Z JUL 06
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 4215
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEHKSO/AMCONSUL SAPPORO PRIORITY 8296
RUEHNAG/AMCONSUL NAGOYA PRIORITY 7034
RUEHOK/AMCONSUL OSAKA KOBE PRIORITY 0454
RUEHFK/AMCONSUL FUKUOKA PRIORITY 7154
RUEHNH/AMCONSUL NAHA PRIORITY 9753
RUEHOO/CHINA POSTS COLLECTIVE
RUEHBS/USEU BRUSSELS
RUEHGV/USMISSION GENEVA 2886

UNCLAS SECTION 01 OF 03 TOKYO 003873 
 
SIPDIS 
 
STATE FOR EAP/CM, EAP/J AND EB/IPE, E -FELSING 
USTR for China Office, Japan Office, IPR Office, 
Commerce for National Coordinator for IPR 
Enforcement - Cisrael 
LOC for Marla Poor 
USPTO for LBoland 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD WTRO CH JP
SUBJECT: Japanese Government, Industry reluctant to back WTO case 
against China on IPR 
 
REF: TOKYO 2326, TOKYO 1270 
 
TOKYO 00003873  001.2 OF 003 
 
 
¶1. (SBU) Summary Japanese officials, particularly in the Trade 
Ministry, responded coolly to USTR's request that Japan join the 
United States in an IPR case against China in the next few months, 
saying that the GOJ was still studying the issue and could not 
respond until the fall at the earliest -- probably after the new 
government is in place.  Foreign Ministry officials advised USTR 
that nothing can be done until Trade Minister Nikai leaves, and that 
the USG needs to raise its request at the political level. 
 
¶2. (SBU) Lack of support for a WTO case among Japanese business is 
adding to GOJ hesitation.  Japanese industry groups told USTR that 
most of their members did not support the proposed WTO case because 
they prefer a more "cooperative" approach towards China for now -- 
in other words, they fear a backlash from the Chinese government. 
Japanese copyright companies are more concerned about market access 
than the black market in China for now. 
End Summary. 
 
Background 
---------- 
 
¶3. (SBU) USTR's Chief Negotiator for IPR Enforcement, Stanford McCoy 
met with officials of the Ministry of Foreign Affairs (MOFA), the 
Ministry of Economy, Trade and Industry (METI), the Intellectual 
Property Strategy Headquarters (IPSH), and with private sector 
representatives at the Japan External Trade Organization (JETRO) and 
the Japan Intellectual Property Association (JIPA) in Tokyo on June 
13 and June 14.  USTR had held an earlier set of meetings in Tokyo 
with GOJ officials in late February 2006.  The proposed WTO case 
would focus on the fact that thresholds for criminal penalties in 
Chinese law are set too high to capture much of the IPR-infringing 
commercial activity in China.  For McCoy's discussions with the same 
officials on a proposed Anti-Counterfeiting Trade Agreement see 
Tokyo 2567. 
 
METI stalls 
----------- 
 
¶4. (SBU) Opening a joint METI-MOFA meeting, Shigehiro Tanaka, 
Director of METI's WTO Affairs office, stressed that Japan needed 
more time to study the issue and gather information from industry, 
and could not decide whether to join as a co-complainant before the 
fall.  They will "decide on basis of what is the most effective way 
to proceed."  Tanaka added that if the United States initiates WTO 
consulations in July, Japan was likely to be a supportive third 
party.  He said that he did not want to leave the U.S. with false 
expectations and that the GOJ was proceeding with an open mind. 
 
¶5. (SBU) In response to McCoy's question asking whether the 
political level had already looked at the issue, Tanaka responded 
that the Minister was aware of the situation and that METI needed to 
prepare a thorough analysis which would not be ready until the fall. 
 Tadaatsu Mohri, Principal Deputy Director of MOFA's International 
Trade Division, added that MOFA was in the process of preparing a 
briefing for FM Aso which would cover both the IPR and auto parts 
cases. 
 
¶6. (SBU) Tanaka noted that Trade Minister Nikai had raised the 
thresholds issue in a letter to Chinese Commerce Minister Bo, 
pointing out that as currently written the thresholds for criminal 
penalties appeared to be inconsistent with WTO rules. 
 
¶7. (SBU) Tanaka explained that METI sees some progress in its 
dealings with the Chinese government.  In recent talks with Chinese 
Supreme People's Court and the Procuratorate, the GOJ raised the 
issue of thresholds and the Chinese acknowledged that the issue is a 
problem of IPR enforcement.  However, the Chinese officials claimed 
that the issue is not just a matter of law, but more a social 
problem which needed to be dealt with through public education. 
Harsh laws would not work, they said, citing a story about the 
failure of an ancient Chinese emperor which was repeated by other 
Chinese officials, also.  Tanaka pointed out that now the National 
People's Congress also wants to insert itself into the discussion 
 
TOKYO 00003873  002.2 OF 003 
 
 
and has declared that the Chinese government must consult it when 
determining the interpretation of its laws. 
 
¶8. (SBU) Tanaka asked about the EU's position on the case and McCoy 
replied that the EU is studying the issue, and that the final 
decision will probably be a political decision taken by EU Trade 
chief Peter Mandelson. 
 
MOFA more supportive, more candid 
--------------------------------- 
 
¶9. (SBU) Before the joint meeting with METI, MOFA's Mohri forewarned 
that METI was insisting that nothing could happen with respect to 
Japan's participation as a co-complainant until fall, but offered no 
explanation to MOFA on why.  MOFA concluded that METI would not be 
able to make any decision on the proposed WTO case until Trade 
Minister Nikai leaves when the new Japanese government is chosen in 
September.  (Comment: Nikai is considered the Japanese cabinet 
minister with the best relationship with China and someone who wants 
to keep the warm Japan-China business relationship on an even keel 
despite frosty relations in some other areas.  End Comment.) 
 
¶10. (SBU) Mohri also cautioned that selling a WTO case on IPR was 
going to be even tougher within the GOJ than the WTO auto parts case 
because private industry was not on board and was more concerned 
about a Chinese backlash than the issues in the case.  (Note: Japan 
declined to join the U.S. and EU in an auto parts case against 
China, but signed on as a Third Party. End Note.) 
 
¶11. (SBU) Both METI and MOFA officials underscored that there is 
stronger support among Japanese industry for GOJ action on 
trademarks and counterfeits, and much less on copyright piracy than 
among U.S. industry.  Moreover, Japanese industry is less concerned 
about criminal thresholds and prefers to focus on administrative 
penalties, according to Tanaka.  McCoy pointed out that the 
threshold problem affects both copyright and trademark industries 
and that USTR had hoped that by working together Japan could bolster 
a joint U.S.-Japan case with information on both copyright and 
trademark infringement in China. 
 
Main obstace is lack of industry support 
---------------------------------------- 
 
¶12. (SBU) At a follow-up meeting, METI and MOFA attorneys agreed 
that the lack of industry support was the main obstacle to Japan 
joining the United States in a WTO case.  Major Japanese companies 
like Toyota and Panasonic deal with whole manufactured products, not 
parts, and are not particularly interested in the issue.  Smaller 
companies don't really understand how the legal issues affect them, 
they explained. 
 
¶13. (SBU) METI attorneys also pointed out that the Japanese 
copyright industry was just starting out in China and worried about 
getting Chinese government permissions and did not want to rock the 
boat.  As a result, the GOJ would have to convince the copyright 
industry to support a WTO case.  Further complicating the situation 
is the fact that METI does not cover the copyright industries; the 
Agency for Cultural Affairs does.  Thus, METI has no Copyright 
industry constituency coming to them with complaints. 
 
IPR Industry Group does not back WTO case 
------------------------------------------ 
 
¶14. (SBU) Japan Intellectual Property Association (JIPA) 
representatives stated clearly that they did not support a WTO case 
against China.  Taisuke Kato, Toshiba's General Manager for 
Intellectual Property, told the U.S. delegation that JIPA is working 
with Chinese officials to improve their enforcement capacity. e.g. 
training Chinese Customs officers to recognize fakes.  JIPA, which 
is working closely with METI and JETRO on IPR problems in China, 
feels that Japan has asked China to take certain measures and now 
must wait to see how the Chinese respond.  For them, it is not the 
right time to take a case against China at WTO, he asserted. 
 
¶15. (SBU) Kato also launched into a mini-lecture, stating that "Each 
 
TOKYO 00003873  003.2 OF 003 
 
 
side, each country has to take action in its own way."  "The 
Japanese style is that is it better to discuss and exchange 
information with China," he explained.  Kato said that they 
"understand that the United States thinks it needs to do something 
as soon as possible, but that Japan sees it differently."  "Japan is 
asking China to live up to its WTO obligations" and that "China has 
said they will try to improve."  Therefore JIPA and the Japanese 
government are JIPA waiting to see what the Chinese response will be 
over the next one to two years, according to Kato. 
 
No support from JETRO either 
---------------------------- 
 
¶16. (SBU) JETRO's Director-General for Economic Research Shiro Mori 
stated forthrightly that the GOJ and industry do not want to add 
more friction to an already difficult political relationship with 
China or harm Japan's business interests.  Japanese companies worry 
most about Chinese government interference and retaliation and don't 
want to risk damaging their relationship with the Chinese 
government, Mori acknowledged.  This is especially true for new 
entrants to the Chinese market.  As a result, Japan is reluctant to 
take actions that might seem confrontational and prefers to look for 
ways to cooperate and assist China to improve IPR enforcement, Mori 
explained.  He admitted that some Japanese companies do want GOJ to 
take a harder line, but many others oppose that. 
 
¶17. (SBU) For Japan's copyright industry, the Chinese market is 
still insignificant, Mori added.  Their first priority is gaining 
market access.  Mori said that he had not yet heard any complaints 
about the thresholds issue from Japanese industry.  JETRO has only 
recently started to promote Japanese content into the Chinese market 
and is not yet far enough along to be concerned about the black 
market. 
 
¶18. (SBU) Comment:  GOJ officials do not want to say no outright to 
the U.S., but seem to want to buy time before making a decision on a 
WTO case against China.  It is possible that the dynamics could 
change with a change in government in the fall, with a Trade 
Minister less personally invested in relations with China. 
High-level U.S. engagement would increase the pressure and could 
make a difference.  However, given the GOJ's current policy of 
engagement with the Chinese government on IPR issues and the lack of 
support from Japanese industry, it appears that the GOJ would have a 
hard time gathering the support internally and among Japanese 
industry for joining the United States anytime soon. 
 
¶19. (U) This cable has been cleared by Standford McCoy, USTR Chief 
Negotiator for IPR Enforcement. 
SCHIEFFER