April 11 memo, trade talks for may 7 8

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MEMOiANDI'U

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DEAt{E

U.S. -

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EINTON

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r.vtd.rl SIA'. proF..a rl.nd, ,6! tL. U,S. -Jape T{d. Dl..ur.loa. tD b. !.1d ln w.rlr!8toa on Mry 7-8, 19?r, I bclLv. th. dr t .8.!.la l. .or!.c! rld Ln lud.. tbo.. topic. tllt i.v. t .! rri.! dl.cu.iloa ty Mr. E!.il. ptti th. J.p.!... .bc. t!. H.lo.. t tll l..t JUy. I tre. told Gu. W.1.. lh.t l. .hould Drod NSC .6 thd . p.!.r o! d.t a.. pr@urmla .u b. rlv.n io 6. JrE ..!. by th. tltu of tL. I n a.

I ahtd r. .iodd coldls to pr... tl. J.pu... o!

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r.&h li!.I d..l.l.!. ia ltgLl o{ tb. Ju. ECONCOM @.t{.a. .dl t!. lo..L wl.tt w. wlU b. l!. Flltlo! to l!.!.... t!..Et. @ tb. J.p.E.. lor tutlh.t U6.!.lr!. o! l! rlElt oa ..i.|! ..p.cl. ol th. tt.d. bUl. ll lh. NSSM g.i. od th. aloErd llit i. L8 aot y.t ..Ld sy m..rt4l, v. .Lluld !.v. & e.r.1l-.c.8!to Lr tu!.r...o@6lc rt.p. top.ld J.ps by I.t .l,,r@r or .fly L[ tn.dv@. ol Edt[.t.rd t...L

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TL t..u. L. -i..4 ttr llir E.Eo t. tot htd to p!.r. ll!.

J.Fn .. fo! !..qlt. tn th. M.y E..tt!9. 3iv.r th. i@to.!.. ol rh. ndt Crbt!.r r.v.l Joht â‚ŹcoloEl. m.ctt.a. in Ju..

M, d! p&4.&oc. o! tLt i..s rot ld b. t. t..p ih. pr...ur o! durtng tli. M., E..ti.t lut lot lo cp.ci, orprt.h. l.!, .!t m.jor J.p.n... coac...toE l!.dv!... oI ih. joint C.tln.i m..at!g. I .utt..i yot lold oll o! t t.t Dollt udl D.r!. a.tr b..k .!d you h.v. hi. eie. loo.

A. to ti. .!.!ih, I ...m. iLrt, .t ce s. do not p* o. rny .. ol.o!..h to rlt. tr!.n... tn 6ur bil.t.nl El.tlo!., -.tt vc eould.rp.c! th. J.p.!..! to.dd .u.L lr.mr 1..!,, .!tid@pt!t, DISC, F.!L!p. ,h6rt-r!pp1y typ. ?&!l.D. ltl. loar).

II ti.t..!m!tton t. .orE.tr ! ... ro r.r..! .oa to.ppEv. lht. .9.!d.. lt ....nd.[, lou . rb. ,on.t oi thc l..t g.!6nl t-d. t lx. h.ld lu J.p.!.

Hinton,

Mor.l./Chron

EXSEC

OFFICE OF THE SPECIAL REPRESENTATIVE FOR TRADE NEGOTlATIONS

ErEcurvE

OFFT.E OF THE PRESDENT

," 5,

^4,/h "," 1973

.

fhe xohola!1e ceorge P. Shultz secfet-ly ot Lhe T;e.sury The Hoiorable leil1id P- Roqers Secretaly of State The Ironolable 1l6nry a. lissinger Assistaht to L\e Presioent for National Sccurity Affairs ?ie Honorable Peter M. Ilaniqan Executive Director Coucil o! Intor.ationa tr..nonic !o1ic, SUillECt:, U.S.-Japan Tra.ie Di..u.sions, iray 7-3, 19?3 During our recent talks lrith the JaDancse, the United States and Japar agreeC to neet in i\prit o. l,:ay to continue the series of discussions bet ee6 th; r,o cou.rries on tlade js:,i.s. iir. Jalac.:. i::! rdlr ::.:rr.::, rlr!-. i:. :r.,.: :,.,rc.a, to.':l'. tr..

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hassile U.s, tra(e ieiicit uith i 1972) and uhat st.ps could be t:ke! by b;lh countries ro enabte J:iri.r as st.rtc:L in ttc l:i::.n-'j,.rr1.: c.-i:niiu. oi .

-912, ta L, ... ..r.'r.'Lr, -(:.o'.os.ze./:Enna r.o. o' (...!L? t .r.propo. .o r16, .Dqn.s.jr.,u'^ r o: :.-s to aLii5ve n's obi(c'i'. h/ bo.' s\o- ..-.. .c:io..

by Jrg)h v.'h srbsLi-':c_ ir.. o:1,e e__.. s .o : .:it/ sD cl pr r s-s r^ Erc urir, o sL.ts.s, -s ret as sLsranE rr .ij-no.s to bc n-oF :r ,ho\6 sr-u.tulcI ctFncn,s ot che tioJ. se econo y Lh:cn :.p.o6 u.-. ar.. s :i u--i- ,.,. irporrs I!o:, J.Dan. r,e Lou.d rooc to -c.eive o r^spoise fror t]]. riD:res^ .n Lhe-e dis"is;ions to our p!opos;ls. (see Act.clricnt A.)

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trr. :.:th...:I. ure s&scquenr

rJ.s_-.-.:I f.i::t a:rtri.:: iirnister lrnaka ro

nashirgton, . nr".ar"^ .rr""" as to whether pe sho!1d nake a naxinun effort to acnieve aqreenen! eith rhe Japeese on these issues in the l4ay 7-6 discussions or rhetller thev sho ' l-anc '. :., ".c:Jc; c. J_ ercai n.L ... -','Jtailttes ste@inq froh the yen,sfloat and un.ertailties surlounding the Adnini s tration trade bi1l, as vell as ilonestlc political consideralions, the Japarese axe likely to want to defe! mating sone ot the hard decisiohs fo! as long as possible. Tlcy are considelirg a range of actions but will probably have to be pushed sllenuousl, to hal<e the right decisions, and l! a tlrcly fashion. l.ie should also recoqnize that if vre want to achieve as much agleenent as posstble if, tne r.rny talks, failure ro achievc such a!-reenert could scu! the ahcsDhere for tie subsequen! .Toinr Cabilet reetilg and the t^anaka visit.

I vould lecoi-r.nd thatii. a:'ke a Ej.! cfrolr to reach agreenent in tn. lia!.i:i1llr.ra so ja:.r:a tha J:ires..:.11 iD ad!:.... I r;olri ;!i-:rii:rc t.i:r .r.:rise .:rr.::1if,:.i on

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Spâ&#x201A;ŹciJl...p.esenc.tive

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The U.S,-Japan Trade Problem

The Nixon Aatmintstration has pla.eat high priolity on lts goals of leducing unehploynen! and achlevitrq plice st.lrifityr a satisfactory rato oi cconomic gxowth, and equilibrim !n the U.s. balance of payments. ?hese goals are jeolardizedr

i:5.1no?elcr, 5t ::. l::!;, r::5i:r:.:t a:d tr.::i.::l.t:i.::: anccs b..::r.: J:.::. :r,: ;i:'.rn1..: i:::::/ i:::i..:11:1: :r a:re account. the U.s.-Japan trade ilbalance nas ballooned trade to huge proportions, ith a continuing trend of increased delicits for the united states. The u.s. trade deficii ,ith Japan has incleased flom $3.2 btllion tn 19?1 to an expe.ted $4 bilrion in 1972, and culrent U.s. rreasury projectio.s suggest a videning of the deficit to s4.5 bilrion in 1973 and $5,5 billion in 1974. civen the trade deficits nov appearinq titn othe, areas (e.9. the Ec and carada), a traae deficit with Japan of this nagnitude cannot be tolcraeed. Japan has taken a nunbcr of stcps vithin the past tea:, such as yer revrluatior.and celtain Uade libcxalizatior actions, !o reduce the iiJralan.e, but thcy have not succeeded in revexsinq the trend. Japan and il. Llni'red states .tust roe consider \ihat fulther steps ea.h si--ou-r,l tekcn to enablc Japan, !s slated in th. i:ir:.. rnr.i::a cr::irf:i:..f,: ci :r.t,-.::cr l, 19r2, '.-o r.a.rc. the jfJralanc. Eo a rorc riar.ge:$i. sizc ,il:l,in a rcasonable The comunique also loted ngrec(ent beeeieer the ttro lea.lers that "it \rould re most jialuabla to holC future reer'nJs oc a high --/. Lo -, \'.r_ evolv: econoi -c relo-

.F I -c. .. . ..: .:; b" Lie !-.o. i, .o'L j .- -- ... :o1 . deficit of nole h:nagcablo prorortions, by 1975. I. oider to a3si.t jr.rc.:iil thrr.!tc.tr..,. :l:l .o:j.r'i.]. : r:.a.s ot n. .-r . \ .r- , j., -. -s -.. o.. :-. ro ^-:tarqet jointly with ihe Japane.e an annnal decline in tne def1cit on thc order of S1-5-2 billion a year for lhe ner! lro or-rh-^. y6ars, O,- ,ar^p, rs FquibriLi or . d.ric:t o- not ove! 51,2 billion by rhe end of 19751 $e would hope to hca! flon the Japanese their olrn projections ol the trade irGalance anc it: c;rpon.hts, an.i He_ao;1d t.nt to d.Le.n.ne Lle :lerenEs L\cir "f,ild lch D^Ia1Jc !roJ.,n'' rnd h ir Tapd propos-s Lo .-Ju-, rninb-.dnce in accord eith Princ :i{:.riste. ranaka,s srarenent in Hawaii.

Assunirg thailr -Exn]arar:on f;l1s s:ror: of rhos. st..s.e..:sar!. | .,, ',, ,j :, r, Japan Hith seslaDtral ime.iiare alfe.ts (prinarity special Purchases) are needed uhile ai the same time sdrst_anlial chanqes a:e {ade in those stru.tirnl elc:.its o! t|e J:.:..:.

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],IMITED

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OI!ICIII

USE

-2-

U.S. erPolts Lo, ed stinulrre U's' vhi.h iapede j"'.u.. .'..-;'.rLcru'ar .h-nse', hich c-F ;;:;;;L .;^. ro?reet- rerm in e_fects, ao,d'nclude: lrv riia! (a) sidnLugla!]:1-l!!ir:Ltl+!r--qg'_-i'rs t\hilc ve u'r.o... u .,"_ t i'cis u'co,5id- 's a ijii.,.-u, io o..c..ts, n.h/ o' rha !+ shor.d pr.-- fo. n6c:ri.rac.. ;ii";ii,-1.;;.,*,. di Lh deeper cuis 7i,iii".',"i"..-, t'.-".ard rarr tI leouclior, on itens ot qreates! inlerest to us' J.ban mintains GATT-illega I (b) 9s ! !!4E economv

.

,7 1

5l 5

. oir a nunret of items in etitive. These tnclude 1l e.luipicnt, inteqrated s, fruit lnrces ircluding thet aqrlcJlt!!aI Proddcts. \iitholt ar incraase in cted to increase u.S. exPolt .i11i... out discussions :.::e t. avbid U.i, ac.lon pro.e.lurcs of atticle xxrrr

exoort <oa:ro: '. -D.1 r's i ''' : t LCi a o\.' vortior on -e p-onLcr coi ro L .r" ra; ofto' ji l ii"l".. r,.,.1..., Lhe co...-or.' -s -j!i'n'-v cons'rr"t'1 'v ;o. i,e errectrvc :n reducLls Eh'- rrn'aIrnc.,rr!IbJr or inextend i"J".i..r tr.. pr.sent un:...at.1i,lc t:er.. sr:ltes and rl. ...!t"r.;o othor,,.;jo! c:r:!rts .., th' ur::e'1'c!l'd c-t.it Ea; ni-. ! .Iso Lc .onst' rr. ".'i. !.r:oi o' "o-.i-n t.l) ro..

invcsureaEFilFaseneiJ-c.-:aDirs.i::.t.nLr.s..r:!ort ir rhe processi!9

oppof,tunitles. rhese inctuae rcs'Jriciions a;21 !ac]:aqi.s ..el dd in the clsr::ilLiticr area, bcth lrlolesale and ;etai1, as ?e1] as tne nanuaa.ttring area. The u.s. goal should be to achieve lOO percen! capital liberalizalion bv 1975.

Jio:n..e -df,".', 'n tnc u'i'io s'.tcs, f.rticul.-'1 in'n.u l-cr-i.ies uhich cre!Le jobs, shor-d c so bc encou'dgcd. le) untied aid. some recen! prosress has beon nade by ,his i ng -id, bul .he coJ rs.pplli,o .ranan tor;-Lnr polic/ r"th', En"n on. seiecL-vc, tib^r-liz-d 9'ob. , b,sis. genuine ulying vould hetp U.s. noveient tovard significant Decen$er l9r1 revalualion and structural chahqes come into pIay, Japan could take a nube! of short tetn actions itn

qrr:L,ntia1 i;riedia're efIe.xs. rhese nctio.s could ixclf,Cc:

I,IMITED OITICIAN

USE

-3Plrchases.

Japan

increase agricultural purcnases approximi:ety 550o nitlio! over such puicha.es of t1.4 blllion in 19'72. lhis could be done in a variety and inc1r4. slch c.modities as facdqrains, \rh.at

(bl Delehsc The Fou_rh Dctcns. Build'p o sls bilrion ror rhe Prd iDBP; t;-il-ia!=;;;i-r.cs 1972-76 Deriod. Th" DBi .Ls oriented (oua-<l maai:m doFstic H: Lll li'ensed doneqLic p!oducL'on and irPd-Ls "rocireni;nr rs not reesible. loEaehlv when oo'eslic S62s DUr;h.s-s rron the irniL.d st6'es or approvirurel/ i.itrion ar- errrected, u6 b6lor eav j6r r-Dcnes- e-rinaEes the Third DcP budqet was of up to 91 billion. (ALthough Er00 on.Iv -boJL h"I! ol t'e -ou-L\ olP, "p.n ?r-cn ,__d ' . \".

Plan cprn corld s a -s !ndel l LnF united nil-ron 01 S1-1.2 billion in the United stales urd6r ihe rourth DBP, {ith increased efficiencies and considerable eosL <.vi

n

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s.

1i:ar-). !ilrile plivate .?.rri:c Nl.l.ri p.rr.r pl:.t5 in poltr co!:--i-.c plriNi...,l :<.. (llY in J-o-n, s.cn 'oJ " I L\! Por., viin ,n 'r.i ,r- rp ror-I corpanics could aqr6a to ?urchasc a s!.cificd peicentago o!

Duhber of ncv nuct.ar power ?Iants fron u.s. sonrces tnrough 19?5. This could anount to as nu.h as lour of the tive plants , .nd .'

D1.,.. .a '.' lo_., o.'

'- 'c_ 'o : i''. . :: i. ll'r. .o '. unitod gtat.s, su.i ns cor 2l:ars ara peri?h.ral equip:f.nt/ (c) qc,'ernnent !r..Lrrof,':rt

(rronrj

(d) stoc::!i1e Puichas.s. Japan cou1.i nal:. su,staf,tial additional purchas.s :ron dr. u. s. stocitpile oa stratcgic fraterialsr both for its oln s tockpiles .nd for currcn! usage.

If the slbj.ct of fu.ther ycn ,evahation arises hy heetings {ith officials, businessneD or the press, fol1ow vrhatever quidan.e lhe Treasury Departr.rt may h addition !o discussions on uays to ledlce the ir!ba1an.â&#x201A;Ź, I also plan to cove! the followinq topics

-4(a) lrultilateral rlade Neqotiations. ue will wanr to . exchange viers ,ith,the .rapabese on hov both coDntries .an ,o!k tosether in the G-\!r in preparations for hultilateral trade negotiations. IG Hould ant to kno hoe Japan is p,eparins ro! the neqotiations, what it expects to achieve, the n.qitir:i:'- :::::,ri: :r:C ::ir.i:1n: :t ..:1.1 :.tr:e on, iniliaI pleparatlonsr including in the GATT Proparatoly CoMittee for Negotiations and the OrcD Executive Comittee. (b). EC Ellarqement. fie ,i11 want to build on olr coopelative lelationship uith Japan in dealing {ith tle problems cleated by enlargement of the suropean comunities, includilg the GATT Article xxlv:5{a) ef,amination of the enlargenent treaties and the A!ti.1e XXIV:6 Degocialions. (c) u.s. rrade Leqislation, rhe rapanese ara deeply iDtelested in thirking on U.s. trade legislation, including ehatever negociating authority the President ,i11 lcquest and xevisions in our escape clause provisions. If the basic decisions hava been ma.ie by the Adninisuaaion by earl), rcbiu.rt, I ?.:i: i:ai':. ii.scriir. th.ir L':3ic olei.nts .lapar.se have poirLe.l out that, Ior purl)oses ih Japan, th.y rould rl:..rire this as najor a oi ahe lurlosc 'lrâ&#x201A;ŹEc!-,atioiral (d) Issues for EcoxcoM. I vould hoDe to discuss j.n a \' i'.y b- !-?. :or pr, 1i in ':;i. w-ftdecisi... :! aa0iicJ:r r:i.

I r:crlC .r'.i:i, :1.::, .I, :tr.3c que5ric)s \riricn arc rore prc)!r1:r .r. r:rt,.rsiL,ili,.i:s oI Secr.ta:l ln.J.r. anC se.retart SIrLLtz, r:.iu.iif.: rlain+g fo! the neeting,

suriarize, ,. r'ould hoa. to i:::.:,ro!i..s cn pl:rs f.r redu.ing tho trad. ir.b.1a:cei an issLr: to lrhi.h ttrs o:fice has given hjgl) piiority, {e ronld hope to rtrove,rJlan to suplo:t comcn objectires ir the tx.l{ic lc1icy are., and qe sould hope to ilprove coriuricatiors l.:tr.en thc txo colnlries ad to teep Japan informed as to our thinling.

To

Offico of th. special Replesentative for Trade Negotiations

IIMITED OlTICIJ\L

USE

DRAFT AG'XDA EOR

U.S..JA!AN

llay 7-3r

I.

1973

Multilatela1 lssues A. Current GITT and OECD Ilolk E. !C Erlalgenert C. u.S, Trade legistation D.

II.

DISCUSSIO],JS

PU1

P.ograms

' 'E T:' J.

Bilateral lssueg A. u. s.-Japan Trado Projections B. Japalese Inport Quotas and Tariffs c. Forcign In!!r.t::!i ri.!Lrli::.-1: i! Ja!:i,r D, Grvernnent Procu!.ii.xt in Ja!-a. ij. rapEnc. r r. special Purclascs in the Unite.l states