Aug 24 report (missing pages after 4)

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lioRr ! rorr:

c1DI,

liDvlir\l' cnotlT)

l. 'rrrr u. r'rTr Rsu I

I

\,' .Attac[cd is a ]r:iI.r t,rcp2r.d lor tl]c NsC S.nir Re!icv Cronp r,i.clirx in Strn ClL,icrrc oD rr:r ol lh.:. cltP D.nrlcrs \!,ro arr -,1 1,,.1...1-.r ,., l:,- llta :r.iior n.r.i.I C!u,ir.

Pl.as.l)a!c

any con)ncnrs 1. lrcdncsdtrr, Angusl 2t.

ri, ofii.e |y I p,m. o)

lr.s. -Ji:1,.tr \1nli:itrirl Mc.iifg (ri(iOiiCoil Ira) :, (l lI. a11.i,rn.,r{.J or ! .c.rf,nic .Li.( tjv.s vis,r-!is :rat[n r]u.,i lil t ( o!s .r 1\a, r)road,i J ( lirnA( s i,, iL. ]r.1i1i.al a,il fr) cl,.l.!jctr Tl,c Chnra jnjljari!. \is r Duj.r snrpril.Ior Jll)ar, ,i nrs atrir.r.,,)rly .auscd urc:IJ|an.sc t. ru(onsjd,,r il'.i, r,n. nr'.1,c v.rld, ros.iLlt un..r{anr.D.ul tl)e c;reni.ll,.r dcy)nl.D.. o,1tr. U.S. jn thc JLiur., ard con..ir..d abont hon arlrnra i public l,.sljlill &,Nrrn .r.Fr \iill }c r.concilcd \ilh ,{ncri.a s ac:ir( ,.r a d.teni. viil, c\n)f,.

2. 1n. Prcsi.l.nlrs Nc\. r-c.nonri. l]r.8rnri ol Aul+lsl nian) Jipa.cse apl.rcnur nrcl llris rrogrnm \ar s on. ai,r.cd a'i Orcn -ard nr r}rr :.nsc f.rn!rr:, . hortil. a(l -- raurcr l}an n fr.|rarf llrrt lYas n...s:arI 10 .lcal \iirI drr ovr I!,1131 |roLl.,n5 ol nn.rnirlot'nrcnL rtd scrionr balan.c.I pr!r..rrs.l.li.i1s jn n,i n.!.aj..ri!rin3rol) a Nat as

corgr.:s 10 sc!1tjc lcrirl,ri\'. rr)pr.ir1 ol a irad. pr.!ranri i1 i. vcr,lil<,ly lhr ille r.sdi N.n1.l Ia!. bccn rar rr..c p.rnuteni (as i, quantilatiy. r.ilri.ri.n!), a!d Ietcc lar rnorc damsrjjtg 1. U.S. l,'.,, J-, ., , o.. , gon.

1o

,r cad casc, il vas nol Fo mn{:h the.otrl.ni.l 1I..1 as did Llr ,ranrcl ol conxnu!( drjng tnorc

lr r.. apt).ir or!rly trc-o.cnfi..l rilh r.}i{:\jnf o{r ...n.,nj. .!)l.,cr\ais Nirn,lr!:n nor -- i, c. mor! |rla!.. l. a .(lili.n:\ip LI.r i:i in scrn[s il,is(:,nb.cnsilyirn.,lrclcdLril'. la}in.:c c.or..,n.{ri,:cq ljl,ririr. jnr io L. . .nli,.nri: o lor ur. i. lJ. r.quir.n 1o !jy. ]'bis, cof)rl.d ujrl) Il,c (o,,,ajo! s!!prjs.s th.r l,:,!c a1r.rd) rc..iv(!1, srill afollc. !r.ss, .ycn ],or!1i1., .orfir,. rl,. l.ctnr! or .o,n. lnir:i,.3. t)rai Yc do nor nidcrll.na L){' , rlrr v. d.,'rr r.arly.rr. .norfl,,,1,.u1 lh.D,, nnd rl,ar lc arc n.l lo Lc !ru.r.d. .Yc!, \'c nrv. scrions c..r.iii. tirolrlcnr Yilh candt(lly ard icsolrcd. J. lLc cnrr.Dl ujlicn, v!],Er:!11. nn.l arr.ic\c(t

polilnlr atrd pst.nor.!i..1 .rjmrlc ot {rniit bctorc \c.a. r.rlisii.a}ly c!i).ct 1I. Jartrr:r,. 10 bc r.sJ,..sivc i. irtina rn.0rc. sa.rLIi.cs -- io Orcir ., on.n).) rna ll,cir h. r.r rnd scll-ciiccm -- urar are nnplj.d in any L,.Ian.nrg ol our c.ononi. r.lrriorshirr. \\,lrile ve rn., not shrrc ix ils erLrirci) 1rr.Jlpf,ncie..nccprollacc,, orcy f.c1 rt!ar ve d. no!:!dcqualcly i.lre i! ink, nccon.l in olr dcarnr8 vi1n ili.)n, {lhc l,)csidcnt:i iriliarir. ir rnccling \fiih ili( lan\pcroli l.Ycvcr, is !o llc:lnp.ncs. a arar.rft: rn.l posilive gc5turc rrl)icL docs lhcir nariotr rrcar hon.r. ) 1'I.rc js als. a pr:l8nrati. rcaso. Nhy it vourd sccDr !tr]]1!ely llrtrt lurthcr ccon.mic corc.ssions $!11 Le ,,/<te br- Ja|rn !ov. thc sieniri.ani re!alL,rrion ol itre yâ&#x201A;Ź\ ,, \rrri.]l \'c rrav. rnadc ct.a! is a nraior otj.cin,. ot rhe PrcsideDt's Ncv E..notuic Pro!ram -- is lrom our standp.jnt ar incisiv., ,ai. stcpi and u1fin2r.1, in ihc Lcs! ir{crcsts oI bolr .onnirics, To lLâ&#x201A;Ź Japucse, lho Layc rcticd on ar nDd.rlalk-d yen as an irnporlrxt instrum.ni

oI c.onomi. Iolic), for blitdnrg cxpo.rs nnd rcscrvcs, rhc revntuarior is !"do\l,tedly secn .-r a trannratil- possitility viirr circ.ls on Japancs. cx!.ris and irade lalaDccs lha! are rikcly to be I.Ur bf!9 a.d nn.ertaj!: Thus, addcd ro ihc l<nrd ol lsychological and potiti.al ucerlninly ol drc drin sho.hs oI tne Clrina r!,wc and 1Ie !.c. cnt's Nc\! Economi. Prograh, iliere is tuj.r cconntc nn.e atnly oacr irre inrrai:! ofa porcnri2l rcn rcvf,luaiion ., JaPnis ccononri. rclatr.nslrip \?iin n,. u- s. and \fith the resr of ihc w.r1n

lnsis! on a hrllilareral ex.hangc .ai. realiAn cnt that docs not lcav.

Jalan's c.ono"ri. posiiio! -- vis-a-yjs the .xcni)Ec rat.s ol iis olber .ompciilors in thc r.st oI illc (orld -- seliously th!ra1cncd. sncn a rirnlrilar.ral ef,.IaDg. ratc rcaljgntucnt is nr our bcsi iii.rcsrs lor Lolll c.olonljc and totiii.al .casons. Politi.rllJ- su.h a rc isnm..t rcnror.,r soDc ol iLc otrus ol liis Lt.ina "i.Ilicted Lr_\iihc u.s. onJi][,

!a 1,. rl c

.

n.c

js a rignjficant reralL,arion, N. conrd.xp..t ihe Japancsc to arguc thai its .llccts on onr .urr.r! Lilileral .conornic dircrluitibrnm *il1L. Lrec and nncerbin, and thrt rnn. wi1l bc l.cded ro asFesr iLs .Ifc.lr. Tl,us, to crl)c.t thc .rrp.nesi 10 movc o. i}c ,s. rcvalualior lroni.nd al tl,c si,1( ti ( oal)ocL 11r.1 to $ovc vieoiorsry o. i variei].' ol ollcr..oD.,,ic lrorrjj -- su.h as nr.r.i.g.d irnrx,r! li]Jcrali,ati.n and .nr.reascd i porleiromlLeU.s. -- m1y be ro crpc.t rnorc ihrn tl1cy caD

Il

Orcre

1YI!r. d..! lriis

us?

'.a\1, '1hc i\ri'risr.)rrl r\{cr:ii|1 ('nrpi(,.1.r i) l0l ana ir). nt.i -1c!r) p.riod

iI.:r.nli.r

shouln l). oc.asion:i not

r.lailo.sliil,. 'o'r) o,. 1",

o.ly l.r ..n.nirtion bni lor r...n-

m.d io rc-e.laliljih ll)r nurlrtio,' ri i,, ,,.. . ".. ,r ty ri flrii r(i.o,,srrn.ii.. Droccss:!r.u]d invol!. r s psyctrotoEi.al :ir.r. tl,rr arc rl,.ra.icri7.d by a scnsiliYc !c..i1]rition of dre nin,!s a:ar nrrli.r i. ilc Jrp:ncrc, a villnL!.css k Li, ,..ru l.riIcomirr tl,an ,iilln h)'4 lrcei .r:r)..1rd .r ih.isc is:ucs, aDd .1.si,s !]rcse corcjli.'rory, ..nsir!cin. mov.is in \.) s lhr! can 1,. dra,naii2c.l drrc.ily to $c Jipine:. p.orl. -- uD.o \'l,on {c L LnnaLcly dcPcnd 1o c1c.r a Eovclnrlrnt i\at crn \.rh .losc1y vi'rn ns 2nd surp.ri our ini!r.sis, nr llrc U,S, -Jtrpr,,

11Ic

2. Sir.c .ddirioral r.jor ccononric con.c5sions {L.}ond rhe cla|oration oi thc 3-poiDt rrosi nnr) are nol lil,cly io b. lorihcomnrg al fiis linrc and Ni]1 add ,iorc slr.ss nr:ny .'erl, ihc l,tjnislcrjal nJe.1n,8 .an provjdc a. .xccUcnl orForh,nilr r.r revi.w ol our.cor.nric prol,lcnrs i. a lonscrrahs. sciii,,g (bnl still rcalisti.ally l)d candjillr) i. dckrni.c il $..an r1ulrally agrce on rh! goals ea.h con,lry i. slrjwir! l.r, h.r i. a.li.ve tlcn in cooDcrafi). and lrue pxrr\erslirr on a schcdnl. 1!al is ncc.pt.ble At urc }cari of our e..r.hri. prouems viil Japa, arc scls oI econornic goals

in.r.-.r.1!,l.robal;n.ohjc.tiYestnaiar. latiblc. ,l.s vill be establisbcd ]atcr if, this P.?er, ihcrc is no rqay tllc U,S. .an a.Ii.vc rr,at ii f.els are r.,asonrirlc L.la..c oI payF.!rs aDd ba).ncc .l Lr-vL l c' "r-rcd .1d..s. oh', ..\," oIl''S. !."r. .,.

This snsscsrs tlat 1hc hasi. .conomic slral.3l al1hc prcrcn! tnrc s}ould hsi( c.oruni. rotris, (21 see s'n4i be ro ()) dcjjuc ald rcriev.arh.llcris l:nrd ol agr.cmcnt can bc r.aclc{l boih on e..n r.tionrs ov.rf,1l3oars and ou. bi!aleral ...noni. r.1.lionshi!s, 3nd (3) lat oLt a progran 1,1 \hi.)r rhc'e Eoais ca. b. acnicvcd in a coopc,alivc, .onstructivc ard rim.l./ uay.

,'

r.l. qc,I1 .l y.r,.

-.',. ':, ' .an re appli.d (l)ol)r nr rI. rcrnoll ol t\. nnp.,1 surcl,.r!. and ou,cr, .ro.c fenc.a], 5an{ liors) uir .i],cr*i:a *oiLld n.i l,r'c L.cn avnilahlc, ll, al1.r a r.:isotrrLle l,.rioa ot coopcraLnc cotrl-!iciljng nnn rorrrlng tr proArrnr tur ':rcl,icvi.E th!.c !.als, pcrl,.lps 1p.ri.a .I ab.ut 90 da)s, iL..r is nor aa.9ra1. pLogr.ss Io\!..(l er..1.. cquiliLrnrn .lrpanrs 1o1al .rhrnal ccononrn, silnJttun n.d i1i bjlal(,r.1 relationslrip \jin thc ti-S., rh.. rvc cIi a! a lnicr aJrc d.dd-. r'l,i.li san.ri.,rs 2r. aplrol)riatc. This js, dj.ri!cl lr s o,.

.r.r

4

possiL)ir-r sin.r th.rc lrs I.cn a )irr.i [r;J L.!lv(:.f rtrerori. and pcrloDra,cc nr J:f.n,s l)rcrioos lnrcrnlizn|on, rnovcs.

Tltusr \yit! thc .r(:cption ol th.1..aLjt. lrolrl.rn (a spccj.) casc vtrich it n.t soncd so.n co!lil cf,sily Icnd ro qaolr r.ijstatjo! rrlr morc .l..,rrDcrirc ot u. s, -Japancse ..oronri. r.larionsl)il)s), it is litn: t)asic prcmi5. of dris patct urat lor th. irnnicdjltc !cri.d arr.rd, nr.ludiIt llrc l\,{inisrcrial lr..tnrg, ric ro.us shourd bc on ftirrir..l]j!rr

sl.! , l .,, l,4lil 1 ". .

sr,,,,

-!!!l!]lr:!r!La!!r4j{sreg_sti!1s

],

'lo

a.tivc in tl,c pro..ss oi.orlTinnrj ratrnr's srarns in thc l!:ijrq inicrnrrn,ral

g:lgniT.arjons or flrc s,ortd.

\y}ilc s.me ot thesc slctrs D)j8lrr bc .conomic jn narnrc, ftisassnhcdur:t Ior lhc largc parr rhey \yill b. Ioliti.at a..t psy.tr.nogi.at co.tcnt. Str.h occasi.Ds corld Lc uscd to reassur. tlic J.pan.sc ol otr! dcsirc ro |uilit a corshuctiyc rolartors}it, vit| JaDtrI and ro Dr.scrr trre bacrtrr.Drd oI ihc P!csidcn!rs Ncv Econonric PrograDr i. rcrrns ot flrc U. S. ot)iecrivcs of buikin,A a .tron:t and lib.rat dom.sli. and intcrM on.t econoDry, raitrcr tlar a progran .lcsignc.l to nn)lbi! itrc Jat)an.se ecoromy. On itlc cconornlc froht, 1I.lo.us should l,c to.i.iin. trr.l rcconcilc.nr murualr.f,ls and Nork on! coopcrativ., tnnely rncclFnirms lor a.licviDg refter lalan.c nr o!r bitar .. .cu,, .'.

Tllcrc is o|riously no .lcnr ljrc ol dcmar.ation n.r1yâ&#x201A;Źcr D.ti,.icat and c.o, !arfi.ularly snr.. any cconohic program, if important .no.,E,, l !. o.... po,iE dr.

nomic jritiatn cs,

th. .l.ei1y p.i ical sidej it seens ol;ions vc slotrjd dccid.Iov tor|! .o[n,! !rc r]rox)d n( on suc,; r,ratrcrs as ihc O],inar,. r.vcrsior rre.ry and hov and \y]lc! vc ,.ighl put rorvard lnc 1\dnrnristlarion's pos ton.t rhc Ilinisl.rj.I hcctxrg. .r r.lrtcd cv.r*s litre lhc ll'tri,.. lious. dnj.cr; lrrai spccial erruecnlcnts, ii any, shotrld Lc nradc to conDu.i.aL., orc impor ran.c ol tI. D,rpcror's ]ltae}. f.isir; add ionrl .omm(,i.alionj if .Dy, on .Cl:ira and rclated UN probl.Drs lna olrornuitics; er.. .Il,crc is rvidcsP.nd agrccn.nl tla! sonie oi tlcs. jssucr prcscnt Sato p li major poriti.at proLlcmg and .rill fLrrllcr strrprj2r:r .r alrpalcnr lack ot coordiu:tion villr rr,.

On

,..

jo.

l

J..

-L'-'o'

..

(3).::p.rr rcrlrrinrobi..li!c5, a)rl ('l) incrcdcd dcrcD,ic ..nnnirn,.nls ard Du'.I.,cs lro,n tLc U. S, (2)rr.dcl ,(r.li,iion, (l) Ycn IrcYrlr'.tior Frotr ftc sti,rli,.i!1 ol achicYi.c sjgDitj.anr r.du.iiot ir JaPanrs ovcrall ir:!d. an.l pi)nrc,,r:i s!rirl's.s -- nixl cor.crPotdnrq if sorc\1,al s.',11.r i, !r.!.nrctl in thc U.S. tntan..s (l).$ dirc.tly and ll,ro!!lL.it(c(e in 1l:ird-.oud,)' arr.ts) -- rcvi:ln.tion oI ll). )'.. is onr Ir.hc:t l)ri..i{y n.e.iirii)rr oLi..!iY.:. li la(1, i! is conlcmdalc.l lhal rlrc suri.x (rl1 r.n)ajn u.iil wc Lrci a saiislack,ry resolllion ol urâ&#x201A;Ź cxcha.se rarc proLl.m, 1vc esrinratc, as.urjng ec,cral rf,rc cqlilir,ri,trn, ihir a I5'11. rapri.i.l:rcr.rrili9ll,l,.L.lqr1 ih !crDrs ol ih. dollar NiIl imrrov. olr lr72 Dilat.r311radc balaf,ce b)' aLonl Sl.5 billioD or pcrlars (,2 l,il1i.n. Thus, ny ir:icll, len rcvf,luatior could t,e .ar..1ca lo trclp atlnjn aloui 201; &, 30t ol orr oycrall U. S. trade brhncc improvcr)cn! t.rg.l oi atoni S6-$3 lilljon.

.

Rcvahalion votr1d bc a poNcrlrl reDcdy, ofi.ritrg scvcral.dY2nrrg.3:

-- lt js a snrAlc to.I *ilI scv.r,iI cntlinA.dg.s, lo\'.rnrl r.ltrDs on Japa..s. .r:?.ris, rcnui:i)g .ost. ol inrjrorls, and aijc.lnrs .aniral -- lt is r.!-nis.rimiiatory -- l'oll i. r ...,-ar

an.l

non-prefcrctllal a,nong inc trading

''v ni'or

a. iil-rui.

!fjdtrnce. elc., v}cn ..nlnarcd (sl,c.iri.)

Dea:nrcs. rrad\.e and prrtjar

Lo

adminis-

-- As a .omDrclcnsnc l.,ol, jr encornpasees vari.!s rl,ird-.on'11ry I.cdLachs ann avojd5 !b. rillal) ol r.li.vnr! prcssurcs al oDc Ponr!

.

-- In lhc.cyes oI os1lladi,A iain,rs, it is prob:b1y tllc sj,Elc nrosl imp.rtrnt adjusrm.,d tn.asnrc Japan could hke, nri)llinA rrid.sfrc2d ri,.. ..-f | !.ito'r f.. rt , ,' . .

-- lt lrould s!!siarlialll str.rrihcn i\. lr.cccdcni lor !c{rluatjons' vi1!itr tl\e \rorld nronclnry systc,r,, cl.arly o{ spc.ial i.lcrcsr to .t,. 1.,..

-, lt is n d..i:,j.n rlrit c:f hc tal..n l)y urc lop poliijcal lcra.,rs lrl,ousn il Drc.cnl: lhcni yia, s( ri.rs d.nicstic pr.L1c,ns . 'c. ]'aL r\),

Itcvalualion !,,onld bavc ..rlriI.ti'.drrnLagcs, to olr'.r l.ss c.trrprclc.sir. ot)j.diycs

Lo\..v.r, rcl.iivc

-- Jl.r.y l+s..r or connt.ra.t prcssDr.s on Jnp:,r for ac..l.ratc.t rcmoyrl oI r.srri(!ion..n pi.d!.r (b!t not cal)il1r) imlorr,,2nd ol rronrii.r tcrlrigncs l.r .rp.rls, csl)c.i.1\. iJ f, tar!. rc_ valL'arnlr is 1al:o.. Also, ov.r it,. st,orr rnn, n r.yatu:.i!! ..rld hav. sone I.ry.rs. ellc{ts.

-- \1'tilc a sr'!: l.r tial )cn rrvalualion c.utd Dlatc a decisjv. diff.r.ncc in ihc inipa.t ol trp.rti on s.nrc ol.ur ljasi. u.s. sn.n as srccl and nni.rn,hjlcs __ ii is unljliclr 1o Iave a snfii.j.nt.llc.l or. rcw s?ccjtic U,S. indnsrries su.} as tcxlil.s r,l)crc Jalnn ali cady aDp..ri !o navc a suLslanrial cosi advanratc, 1.ltrrctor€, s.n,ei bu1 tcvcr u. s. do._.csii. I.Ljtical

Prolrlcrls rais.d b).Japalcsc imlorL pcnctralior nr prlricnlar sccroIs1vi11IcnrajDtoLc]]nndcd\'i.1stIpl.nrcnir cih.rr q!a.r atne r!sllicliotrs (sn.tr rs urc tsr€sntcn!,s commiimc.t on lexiil.s) or ol}er volLrrary and adjrs

tz)

g!i!!ij* To r(r,.. c.rli.5t Posiirr. rcd.val.f r.nuinjtc inrforr r,:.,rri.ti.ns, :.d to dju,r . rcr t.li.i.s and itlcltrl t!a(ti..s (.. 9., nd.rinisLrari!c qxnltrn.., eo!!rnr ,.nt Pro.nrcmer!, liigh lrrii:') so O,1i il,.y harc drc l.rsl lrorI iLl. aar.) s. irlh.n.c on j,rt,oris, and jnd.ed e!.r .!.ourn!. rj. S. n.lorls qlactri.,iu: Aner ycn rc!Jlnarj.n and g',jrnul^ri.n.I rhc d.fr.stic J.fah.rc .cononr)., this is rlc ,no.r i1rP.*f,lt ar{l .Ilc.tiv. rcrjon bilrrcral .cono,nic si!L,ath. Jnpancsâ&#x201A;Ź iion. 11,c csii.,ai. d,at rhc .lnninxtior .r .lodili..tion ol t[. varje!, ol Jalanrr rcsrli.tiv.: plr.tic.s conld r. inlt in ar nrcr.age ol a nrnrin\nn ol S200 .rillion nr tl)c lcr.l ol onr r.,rn.l cxrr..[s to iarnn (overjorrtal sros,L!) in thc r(asonably n.ar tcrnr.

TanIe ) srnrriarizcs thcte .srin,at.s l.r U.S. .rP.rls l,y .ih.!ory ol r.srriclion. It sl,ollrl, hu{ov.r, Ic c.rphasiz.d ral therc are orly tL. ron[hcrt oI .stiu,rtcs 2nd ll]:.t !l,c ini. .PcndcDcc ,.Y,!g tIc v.rjors rcs[].lilc m.ilinls risl:s notbl.-c.utin!. Ars., il * .I {oalse c}-rr.jn.]y u,liiicly 11,:!r ve \rotr1.l bc .nccessnn n) I {',, particnl.rly ulil r,hc rnccrrnjnlt ol y.n r.YalLLrion vr,s riido,.d, Tn,^Dri

L'1_rlicl'o\ U.s. ol' l-nrTryqrrl'PANDsrr rnll]oRl , RESTRL']TIONS

1]arricl

t.

2. .3.

.4.

Ln!.rl Li..nsirr lliAli 1.rlIi5

Srnna.rd r,1.lh.a ol S.ttlc:nctr -1,

Discrjmjr,.t.ry 1 .rnal i;.s 6.. Dis.ljmnLto.y Oc.rn ]rr.illlt n:1cs 1.

Go!.i.nnf .1 P, ".f rcxr.nr l'olicics co.r rol on Salcs Fr.iriri.s 8.

Cnidance

rq.

^d.\ilistral,r.

Cha.i. nr 1'xrjo,ltur11

S1:pirDrt ])r

z5' 20

l0 100 50

o!ri,ins

!-a: i-a

.5?.t,\'i5

surprus

ro.r.r

sro LitUrn

a,car ..!1(t

rcsl .I rr,. \r.rld srst.., .D(t

'.

not r.rsonrrrt),

Japarcs. l}rrlc 1i1i.rtrlizr6on J.pan.sc .\l,rrt r.sL.airn,

JarDcs. ..onorric

.,\p::nstoD

z,2ao

,

?-,1co

$e ortrer ha.d, ep2nsion or iI. U. S. dohe."ti. .cor.Dr) ard tnr.I:tizalion ol Japan.sc co.rr.1s on jnv..{n.hr, am.ngst.rhcr it.hs, \,on]d rrrk ro in.rcasc ou. l,itarcral deficii.

On

since our bilar.rat dericit tor 19?r is cstlrnar.d to tr. aD.nt

n pror.hjcnr s..nrs t.

-. ]... ],. "

sirce suclr ar

l.^:,' 6::', ..

..,

,';'::1 60-,.l'' tltl

".'at""n

r..o- :. o-,.

-Ihcr.:> e,...,: ' ". ' Ii'a',,o..1'." i,i:o jeota!dizc onr

Lr.

1j2.,1

LitlioD and

ir rlc tilll)Jrr.J p.rrnrial jln|ro!., ' ,' l lo,', ,,,o, :.

"'i,,','

',rt,.,,,

r,.

J i. ,,

,i, t,..,

...-,,..

',,

I

. . ,.,. oL.. o, , n. "

,t,o. ,,. 1,.,

..

.ountry,s libcral t4(lc lrritosophy.

-,.',

!'-.'

:'"'1 "./.

-..

I '.., Tr., , -E-r." r,,.

6tandard

.l

liYiDg

1

, ,..J ''r.r'-'""..

r

4' r"r, oi .jriz.nl

.o. r,.,i..,.....

t,\.

..r..

,,,, .... t , ", r.{t!c.d. 1,h.r.rorc,

oI boltr corntrjes lvoLrtd lje

,-""1 -, :'la,6c) b, (|,.'on,. .).n.. i. .1^l-'1,. ll--. or :ll..I s!,' rita(': ''

,..,.. :

r(,,,"i

t. ., 1,.

nn tro n..ci,ja.y iD a ljmir.d

1!l!,rll11'l-llll l.'r1 ll lrl! llllr 1lr]!!l'l- ll::c!1!lll l'14!5! "! r:,r. - crlu,!_ll{!lits

^.

Jn tl)c

I.rl.ll L.l\r!'n ro1' aDA tho Crl)nrcr-rewcl

U. S. _JaPan

discn.:ii.,r. cI ..on!)rric l,roLlt$'5,

!.:,5iLl( !irh r.r:I(.t t. thc nlr1lil't'rnl lt j:uc. r3nn(ln,J rv !r. Prcsnt'nt's

rrlliontrr .i

rhc nron.!rrY Ilont:

^rlnit

l:Llni. nr..trsii.n 'l o!r {,colonlic Prolr.nrs ..nccrljtrg tl\.ir lritl, J.Flx so 1l:il th.v vill rc nl no dorlrt latirg corrcctiw. sd'ionr..s: or lLc lnru,rlance oI Japrnrs ,)L3i,,rajn ll,\,

nranl contlrilc rho consulhtjors f,1r"dv lld'rr'av so tlral lhemcetinss .",Iir,," .r .r1"r ... r,.r. ao x"o'1 isL itr thc cabi!'rt will i. c].f,r to il)c JaPancs'ri

-- crl lanl rnc rihrali.r,

2 nro.1D! \L:1h r\ni.:.b

I.tinr"5s.o!n.i1

and La.ti.s at thc ScPrjenrhcr s Jrlarcse-Atl.,ricr!

'Iheir n,a..lire s.!lr1l,. to d.iisc s)c.Xi. r.tjon tr..rranrs or rc.onr,)cnda!j.,,:: Lo lrrc lno sol.rfr,.n{s:,,, rc!3rds:

.. .ll4!t!.1!!r1).tt91a

joinr rrrcptrrarory drc n...ilalors vonld iry i.

Dircd

on th{r

vorh ol slaJl llarr.crs f, rca.l) rtr.c)icrl.n n,rn,ally.ollJalibl. l,ilrn.. o, 1,r!yn{.lr tarq.ts llr 11,. haJ (:o{n[j.! ann .r 5t.)s llni!], ii.roula rri: rf]r.|rjtrlo ror cacli l. rnn. 1o a.l'i.\'c thi::. 1nrs.ls \riil)in sp.(ilic tin. f}r,.,:s, T. tlo.rrcni il,rr tl,. tirfcis or.rc!s prop..cd inwoll.d a.tjons L.l'ond rhc U. s. Jrna, bjla!.rrl li im.f,orl., tn. ionrt rla,nrirs scssi.ns and rhc m.cti.gs .l ll]c n.Soliai.rs voDrd Ir.frde a u, vit}lir yl)i(1, uic t\",o co!nlfjcs .onld t,r lo llort out conc.11.d approa.h.s nlnu,lillteral l.ra (.. E. , oljCD 1/.llan8 Pady ti3! E.onn,.rc P.li.y Co,ntnit!.e, Croup of 10, Iivl]r, .rc. )

TIc r.gori.to!s (o!ld I. (lirc.1{,d

(r) wolrt onl . nrutfally salislactory alrpr.in:

r^

r.o:

rrr.r^'.r

nrarn.t disrtr)ij.n pr.:)1.ms (ih.h.rnr! a8rc.d d.:tinilio.s ot vhal .onslitnrca ilirrrlJtio,. a, cnrl1' \irrir.gr' s)s!.m a.d a i.! ol principlcs accordnr! iD \1hi.L ralia ::)ar .Ilc.1n c ..rio]r ..xt.l h. l..lirn l]y.ir]].j ri L!a, ,i . r:rr r! t.:;it !t1t]r.:itrtrjng di.rrrplioii,

(2) t{..en e and rlc:.1 (ith 1.rd. rnd nrycsi)rcni .on]irlajnt. rai5ed by Lnri.css.r.n ol dre 1\!r .olniri.s as 1h., r.1"tc to our

!ilatcral r.lrlionr;

'(3) E:ar)i.c otrrcr ar.as \rh.r. i.(!!iijc;

cxisl (..Ij., dis.rimi.arory.ccen rr.jlht rat.s), rcc.mnrcn.l'naJappr.l)r,ai. acilo. and ,!,lloN-nI, ro c,rsure rcsulis on a progrrmtrcd basis, resulls 2r3inst.r a[!ccd pl nn.

.

-Q1!ll4r:!i r. lL.ir i.i.i scrsjo.s Nonld also }ii a) apPropaiaic ncclla,rlrnr nr. .x;)lo.ing rIe pr6sp..1s for .on..rr..! rosi tions and action as rcCards pr.blcrns ol

.on

on conc.,rn su.h as:

. 0) Lib.rrli231i.n.l nur.pc:!r co.).rnily lrrd. D,ni.i(:6 vc ,nijhr join'.lI .,r.orrx|. lIjs Iro.css, \2)

D.vcr(,I,r.n1 .r rL. rcrolr

.l rl. oEcD rrigh l,.y.l 1ra.l.

{3) Coordi.rtl.,i ,J Jafa,r.s. anJ (icr.l.t,irg c.unlrics.

arsi jianc. 1.

(1) G.r,rar d,rfr.:, in I cr.linn!. r.1! ll..-'ibil jL).

U.

S- p..rranr:, lor

ircrlrrin! lrcalcr

{5) D.r.1.t,,,!.!1 or a!r(,,,1 jin.r!a1n,,11 pro!:.(lnr.. r.r adju.li.airll if!!slnr.rt disi,nlcs, (.. 9., .rpr.)rirlr.r).

(6)

J,rd c.ns oi crconr.gnrg our lriwat. ;\'cslors r 'o."' Ll ,. ,|! rii.. . Li'1. ..1, "., -.

c.

117ay.,

Porr l\'r..rirt

1n orc p.s!-ni..ling pcri.d, !.,c vonh ),ccp urc sjtuaiion n.der close,crica nnd tr.par. rl,. p.siLio.s 10 }c ianrr Ly onr f(gotiaio. i. lhc.forlo\f !p rr..ri.! i. Torrlo. r, c1.ar a.d .d.quirc pro!r.rs (,crc nor hcing ,)i(!c to\yard onr largets, Ne N.ul.l !r.parc d.cisiors lor r.ti.\, corc.rrirg use ol r riIc,. s:ncli.r:i, .Ji.rli1 nd.qL,rt. frorrrci,s not bc E:a.

Nilhlr n r.:r.D:Ilj ?c.iod. \Y. r:.uld a1:. us. il,! i.ler!!r ii! innc L.-

jb mor..l)..iri. lor.r ll,an arc Do{ aynilarrlc ( dr s loDr r.ntur.,s r. iLjrd con.Li.s on ra], nraGriars, sleciri. cnviionncnlal rrrojc.ts, clc.

)

Jri.al1y, \e \ro{l(r c.niin!. lo inobili,c nrtcrhli.nJ rr.s;trr.

ro. ) 1 ,.. i', :o

,.,' ...

.t

.

'o",..

In rnnr, at rhir ntir)itrerinl r).crinA, sc fius{ strih. th. dcli.21c Mlan.. h.L{..n brnr! conciriaior}. and y.r co.ac} a s.rse oI loushncs. ..d ncrsiir..{ c ir ailaini)!t rn approrr irtc .coronric .qtrilih rnnn in onr r.lalio.slrip over a rcasonrLlc lnn. lranre.

,4re., ir rrc ar.i e, sp.1k viin a (onsisl{x( woic. at lLc i\,ri.i s1.riat nrce{ing, it vill ])c nc.cBsrry 10 (lcr.lop ?roDr ly r d.lail.,d sc.Dario 6r '.'r,orh Urc nn,d'xr;..I thc U.S- posill.n rrrr hoN ii is.to b. rr.jcnrcd.

2

Finally, underlying Tohyors clloris to dclay ycn r.valMtion is its fcar thal su.tr a ove xould hawe vidcsprcad advcrsc domcstic polili .a1 rcpcrcussions. rrany Jnpanese cxportcrs, cspcciaLly rhosc ta.ing increasire comtcliiioD lrom Less d.vclot.d c.ontries (su.h as the potitically importan! fcxrile ploducer6) hawe argued that thcir prolit m:rgins are so slih that rcralGiion vould dritc tLem .ur of businers. ln addiiion, businessm.n vhose lirms have 1a.Ac amotrnts ol dollar assets -- lor cxample, tlros; vjth ]ong-term loaDs repayable i, dollars and contlacts to build ship3 sfilrlar.d in dollars -, p.inr to thâ&#x201A;Ź largc losscs thcy !votrld sr{fe!. on rtrc otlcr hand, rcGluarion iously in Japanesc bcsiness .irc1.s. This is illusrrarcd lry rLe yen

!aJhlents cl2uses dre Japanese shipbuilding industry bcgan inscriing into contracts with lorcign customers last year :rd by largc-scale excha.se hedging since May by Japanese busincsshc..

PROPOStr]- FOR DE.'\LI.'{C I'IITC \I.AR(ET DISRUPTION

PROir-r::\1s

Jr:\'oLvi\c

.] \P.1-N

OD' objectiyes shoxld bc to get J:Fanese agrcchent to an arra.gcmcnt vtlich pernrirs !a!iC :nd eliect,r. imllencntf,tior of o.de.ly fr:tketilg arranEemcr!s $ncr nr.rket disruPtion thrcatens. A, explanation of ou! p12ns 1o cxptrn.l dontestic !iograms ior adjxstm..t assistance should thc Jaganesc tha! rve .l?.ct inport li)nltf,tions to bc tcHporary "eassuic heasu.es \!hi1e thc adiustment ?ro.€ss is elle.ted.

The lirst problem is to gct an.grecd delinir'ion oI vhat consiitlres .lisruption vhich, as a milimrm, mects the iollorritrg crite.ia:

l.

Pcrmils us to .laim disrtrption vhcn sc lelieve ve nNst.

Do.s not becomc a proteclionist c tch by which .ny irdlstiy vhich has to compcte vith J3!3n.s. nnPorts can brirg political Prct6ure to b.ar to qet rcslrici!ons ixrirossd. wc should assu.e the Japanesc of 6ur i.tcntion !o l..p tic .umDcr of proL1..1 proilncts to a bar. mili-

2.

.A.other lcy lact.r to bear in nird is that a lilateral arr3ngcmcnt vilh Japan h:s onlr li.rit.c.!nli.rii.n rnd .ilccti'cnc5e. ln lrany ca5.:, othc! .o!ntri.s $i1t h:-'e io bc b.oughr inio snch arrangcnren!s. Thcrcany .rrrllcmcni vc \$rli ou! w!\ ll'c JaPancsc tollC have 10 be vicwcd as a ste! tovard ihe corstr!ction oi a mullitatcial orderly nar-

Iore,

w'e corld propose thc cstablistmcnt of I joinl g.S. -Japan ordcrly malk.ling Consultztlwc Orolp rhich vorld: a) dclixe disru?!lon i. tcrms ot critcria rry shich to jxdgc the \ali.iity oI a pf,Iticnlar indls!ry's !eed Ior tempor.ry piot.ction vh c co,nestic adj)shrc)t la!:cs 913cci b) vork olt g.neral r!1cs lor orCcrly.rarlretin! arr:n!cmcnts which could be tailor.d to lit thc ncc{ls.i e2.h individual ?rod!ct.!ea.as.; c) monito! th€ imp1.rn.hlation ol cxi.ting air.rgchcnts; d) consult on a tin.ly basis a!cut poiential Cisrtrplion problcms .ignalled hy an agrccd 'early

CONFIDENTlAL

.2-

CONF1DENTLAL l.

Critc,i. for d.liri,:r Disru.tlox .,d anrl.{ 1{trrnini Svsi.m.

lhc !etcction sholld bc maae on thc basis ol flenbre ra!h.r rhan ritid critcria, obfiously, identic.t clitc:ia c"nn.! be apDii.d ro nu industrics or producrs. In selectinS indusrri.s or products tor dis@ssioD by the Croup, lv. vould !c.d to exf,mire such faciors as: .

a) b, c) d, .) {) g) h) j) k)

lewcls ol import p.nctraiion (impo!r/.onsn prioD ratios), grovth rates 6f import p.i.rration, rates o( absolutc in:po4 sro\irh, r2res of gro\\th or i.clire domest!. production capacity and sll.s r.hne :nd ih. r.latio!ship oa borh to 3losth o( imporrs, consumplion trcnds,

labor displa.emcnt, industry protit nl.r4ins r.lafiwe to irwcstln.n! nnd 6alcs a,d trends, domcstic unil prodlction .osr t!ends,

capilar,.!esrr--.r -.cds i.r ic.|no1oai.:l .h!irotrnc.iaI Nr.os.s, comnulity so.io ccononic cir.cts, cxceprio.ar cascs ot loa prcs.rt inDort brt wery

ana

high arricipatcd gro\ah rate. bascd on kno!6 iaplncse

'

," ,

t)

plice r.vels oI nrportecl vs. domestic

2.

Consultrtion P. o..

.hL

r

e

goods.

s.

The U.S. vo\I.l cr?lain in cach .ase its reasons fo.6elieviD! thar a prodn.t was b.coning import sensitiwe ard, if th. t.cnd of imports .ontinlcs, coutd rcsuli ir eilorts by thc u.s. irdustry ro obtain rclicf through impori r.stri.tion. Thc J:pancsc vould bc as\ed for an asscsshcrt of their nrdnsrryls producrlon nnd g:port ,rarkct]ng ptrns. 1l ir t6c. appear.d rhai th. proLlem vls lilcly ro rcach )e poirt of mzrtrct disruptior, Nc solld discuss ard hore to rcach agreemcnr wit[ rhe Jaiancsâ&#x201A;Ź on possiblc lvays or prevcrri,g this trom oc.!rring, such as diwcrtilg somc ol tn.ir cxpccred cryort6 to othe! ma!I.ts or rcducnrg thcir planncd cxporr Fro\.th if bcccisa.y. For those ibdus:rics or !rod!cts aboui vhi.h ih.rc is soxr! qucsinrD as tc fututc d.w.loD.r.!rs, rnc)' r.xli h. ar2?ai or n lrat.h tiiL rn.l )i.i,t urd.r :rrvci]].hre {5r

f"" ''" C"'

d"''

'

,33.

l,cvcl. ol R.strrint-

The 1eve1 of r.straint *'ill waiy depeding !?on the grodh of rh: domcstic ,nrrLei lor th. Drod!ct inyo1,.d. Obviou.ly, lhe grcatcr the Eroqth ol ih. domcstic mark.t, thc morc ]ib.ral thc rcttraint level .atr bc. The early \'2rning syst.m obviolsly \wiU takc time to lcgotiatc and implcncnr and is no solttion to immedille serious import problc-s oi national conc.rd.

4. Ihllenert.tion o! R.sEtiql.

The a!langemcnt vorld bc limited i! timc, Providc lor orderty gro(th in trad. dNring thc ptrio.l 3rd noi rcqrirc offscliinq com_ pensaljon or .onccssion \!itlYlrar'f,1. Il an agrccd arian(.menL .ould lot bc \eorkcd olt \'ithir : icatonablc ?criod ol tnnc (tay sia honths rron thc d:tc thc Consultatirc Group tas tirst sci:cd vith

thâ&#x201A;Ź jssnc), $e $ould bc trce to tair. srch a.rion as *'e d..med ne.essary. ln such cas.! wc No)ld havc to gnc cohPcnsntion or face .o!ccssjon {ithdrn\enl. H.\'.n.r, tc voL,ld not lr. obliEcd to fix a tinit on tirc llnc pcriod during \eliich iinporrs 1v.!e to be .oltr.llcd, nor r!uid N. na!" '- ,.-':.i. iu, 4ry Ll-ile i:.. a1] fa.tor. Su.h action ProL.blI vo!]d r.qnirc U. S, 1.!isl.hor on eitl:er an ad hoc or c.rtiiqc!cy tf,ris, .]!houlli llcr. mtry bc cascs i! \,liich aciior conld be t.ircn ud.r .xisting lcg:l f,uthorfy on par1.i.u1ar prodncts lroft Jap.r.

5.

II any violaiion sas ohselved dnring the time thc airangemc.t {as in cllcct, vc lvontd f,sh 1he Japanctc (through !he Consnlt.titc GrouP) to ]cdrcss thc sitlatio!. 1l action had no! b..n takcn s'ithin a liicd timc pcriod (say 60 days), .xc solld bc irce ro ralc a.tio! ourscl'cs, ilcluding a Lan on in?.!ts oi th. prodnct .orc.r,ed nntil thc agrc!d anNal ratc h3(l been restorcd. :ahc arraEE.n.nl !outd a15o !. extcld.d beyond its orienr.lly :gr..d .rAiration datc, cithcr by thc lelgth ol tim. ol th. violation (ircltding .estorltion to aSrccd ]elels) or by tllc addilioa ol a pcla1ry tinc lactor (say tvlce tlc ahoYe lelgih

coNalDa\TL\L

6. q-!-]}:Lr lrji ! \

-4-

!i-g!:.

Eiur.r parly would bc tlee to sn.escst chanqcs in a., acreed arrangement afte. it had b..a in eti.ct iir, say, at lcasr on. year. The Grorp (ould hare a r.asonar,le time to coniid.. such sr!g.stiols and ag!ee to .nangcs if approprirtc (sry th,ec ncnths). Il agre.m.cn. vere not rcachcn, thc arrsr..menr coLld Le rerminrtcd .lrcr r ccrrain !.riod (say sis llonth3) :!rd tb. acrio)-compelsaiion proccss oxdi,ed in (-1) abovâ&#x201A;Ź qould be,!nd.rLakci.

surrlA:Y o! :.r-:Tr,.ic or ,ioir;: .rA? i-u.s. :ca:ior':l:c coa::c::, oN

Jre!::-u.s.

i:(tcu:ivtr cota{ifTa:s

r

nrvrsc:11 coi,licrr

:40::or.1rc :E:A?:o:is

l

I. Se. ai:acned fists.

t!:l!! ?:ie fofloL{lng b:oad agcnd; ii:eis rele discussed by

t]lc :?o del.Ealiois: n. PlesiCeni: N!xo!r. ne, ecoio:1c policy.

B. Japai's xighi:-Poii: Plograi.

C. ncco:,nendalio:s on 5i1a:cra1 and nnltilateral trade and capitai p:oblers.

Recoiicnda:ions or U.S. and Ja-Daiesc relations vrith t:re nuropean ecoionic .or.iunity.

Reco:neiCaiiois on enviro.ienial ald polf ution

?lesiC.ni N:ronts recenaly annouf,ced policy cou:i.a vith rapa.'s a-:icti.s as to lhe efject. o.1 t::c,. .'r!.' oj Ll.c Fo1':., o.;-::-.,.sc ., J;r:re.di.,r:.i t.ic .: u.J..1.1 .:.,i .4hdoF a-, s deleJ"te' .. dtt(uu(dvr'cr6lr \,rayr to iEl.?*

l

I I

iat.ral ?ay.r:its a:a tr:d. sYstci.

_-

i-, .- "-., ,.:,r:'_ : i

rN i:rj

jr(,ri

cr-ir!i

I

T!e!e !/as a clear uic.:staidlng on boih sldes of thc tablc about the seriorsie.s oi the prolleis and oi lhe iturediatc speed {iili H-",icir lney iusi: be resolved.

Bolh d.ieEa!:ous .:e scacrluLed :o :epora on this

seeting to tirel! ,eslDclive cailiol coif:iriees. Tie o.s. :*.cut:ve coiri:t:e lrill rcet l,iih :he u s c:5inel coisi::ee !i l".asn::g:c: o: scpte:r:er 2. ?he ia?an Exccut:ve co::ai::ce \'1li ieei $:i::r Jagai.sâ&#x201A;Ź,i:nis!9ers

in To;lyo oi i.ugus: 2?. In adcl:ici, i,Il. rNasa, c;airiri o: thc Ja?:i :t.cu:iv. co:.iittce/ siil neer !:it,11 Prihe }]iriste: S::o :o dis.nss sltir iiin tne nali Poin:s .: !:_ -_'ti"0:i DIscLssr0:l e b.io\r is a Ci9es: of tlrc !rlnci!1e Po:nts I r).re discuss!:d:Y lhe tNo Ex.cutive Comi tlees)

n.o:onic 9o1icv a*-(, At the f,cquesi oa tll. Jataic.e delegation, t.he u.s. side soug;t io cxPfain the ini.nt of thc Policy \?it! paxticular rc:ere.ct as to hoN Japan

.

Nerr

. .

sh6-ir :cs-oic. :t rhc;ii;i, st of L:.:.nrr i' r'5!, nenbers of the U.S. council sc:t to the U S' lrecutivc corftiltee in r:\rail cables respondirq to thcjc td, fci.tl, [h? o?Lles aâ&#x201A;Ź ae!ith"-1' (L"era!,(" irl) ?lr.sn: cabl4r r4!l<.1 a con.ediv(su??orting the ir;.:i!ie..rs

..ai.:

aiiii L:,_r'it :(3

-3-

lo !c\r:u. t..e y n Dyiiig.::rlc.1- E"ojr: and io speed u? rhe teroval oi Ja?an's rest'iciions on ttaCe and capital (ove:re.is. The U.s_ side s.r's-. i .'1d: ::.' \:P is -i: .c :L r'v-ts1.r. 4 detcrio.a:i:E doies'ric eco:oi:c sitia:ion as well as alteviating iiie:;atioial ec..oriY ?i"snros on tle u.s. Tne u.S. side e:lha3ized tie non_ discrininatory :calues o: ::re 901icv eiplasisinq that ii is no: sole:lr aiied aa Ja"!a; bu: *it al1 court:ies. ?ie ij.s. sice c.:oaraor exatipie, u1e. painiul effocls t5e ?olicv \ri1l iave on Aiet:ca's

Jdpr.1

also poiitcA oLa lla: tie \x: till hetp i' obviate the introduciioi oi trarle lesltic:ive leqistatioi i! th. U,s. co:gress. flre Japaiesc deleqa!'s {ere advisee to e}"..c: an 6:c,gctic inlle:ientatioi of the P:ogtan iully Daclad !Y lire Ahcrican irusiness comDiillY. as evraef,ee of this, tho U_s sida pointed out tlat e{t:ttr:.-:i:5-râ&#x201A;Źs-i-et:ii4C-ii ezJ'pl:oij

to.^ e":,.!'-' i.:'i ihlolts f;on Dlitain o: nolts noyce enginesl;''':6'':l r_iiv-jD' Des:rite renarks i_!on ihe Jalanese side abou: the fi'u1it sh..k .J:iarz' l?'r i'va l{r h'r rceaivc'\ a: {

!.srlr or !i'

r'r:''ri;t:_'

er'Prce3e'i

-4ad,aiiation fo: ihc botdiess oJ,aid raridi"v vith alich) tle Il? .s :o!iuiai!d, aniounceC ::i iapai.se c.lcgaie3 raisâ&#x201A;Źd into iotion. "hc quâ&#x201A;Źsrions coic:r:iig i:ie tia?: In vielr o: u s'

orgaiizc.i 1a5oi o:rlosition !o thc '\i:?, si11 tire freeze o: ua9.5 a:d -.riccs !:oirce ta;Eib1e t's!113? witl Coigrass usc the 10 as a lalnchrn! -rJLl for nore fts:rrciive PrcsiCent )iixof, iis:uaie

U.

o: :ie Japan..e celega'rioi, It' rvasa' indicatcd hijpla:: rc !e,!ort to ?,i:ie Ministe! satoi thal PrcsiiLeil Xixoiris firnly Ceietrincd to ir'!leien'' the Nn?i that as a total lackage i! is an unprececen:cd aipioach,' ihe 15? has strons U.s. bnsiross' conqless ald public suplo:l)ilspiie o: the fact tba'- the

The chairnan

hajority of !.s. uliois o?!o'e thc iroLicYis Pt'

visro.:;

rhe Nea

lrill

nz

s P'i'ful r'r t

.ii vill {.t cihtl .o(ntrre.,'{hat 1! 15 ncl

raDan's :resrors. !o tho r..c, !l.c:.:ic

lne Japanesr and i-ietlcan deiegiies laiEe ol rrc;s!te xhlcl ia?aD shoulC unde::a:re t.o :6d:es. iis :.ade aid i.balance vitn i:1e u.s. A sd;Gty by both .ide5 :o1lo(s: I. Ja.anrs:i.!t ?.i:r: !ro.r.r The JaPan.se ieleqation pr.scited a tnirtvninute slide ?iescntai:ion on ha! the 'igit Poiit ?rogran ."eJs. the presenta-uior also descri5cd is c:laxt ao:n tne liberalizatiotr neasulcs ii iro:a tlalie aad capital slrich Japan has a:i plais to in?ieneit' n corPila:ion o; ihcse cra::s ," ..""",,5::: l,ll ,."'-- --delegatioi stressc. *tt ut"ott" t"t "t' econonic lolicv, tle tish! !oin! Pros'an qoula be fully inPi.ienacd. Tlre JaPanese delogatior quant:ifiae 1n ao11at5 tnc 'r!'cted results frnil

the Eight Poiit Prosrd in i:he short te! ' (They poiitcd olt that :he N:1P akes i! dlfficult

.

!o forecas'; efiecrs for 1975 o! 1940) ' a. using as a basc 'rap'nrs eighty qlota lcstrict:oisr the renovi:t o: ihe firsi] forlv is expecced io ir:c!'ase in?otts bv i'llars':lcducins quota 2OO to 250 iiilioi z t,',at'"i! 'l;:11,. (..;@iiinq f''rLY 1t'iir is e::.:cr!d i:. proauc. nr ai'i'tioial 140 io 160 nillion dolL;ts lrolth oI inporls

I -6b. Tle exr:ensior by Japan of pre:erenrial tarifis to !Dc's is expected ao iaclease inlorts by I4o to 160 miilion dol1a:s. c. The teducrion oi iilo.i duties is expec:ed !o increase i;Porls by 30 to 100 hillion .t. Orderly na:neting Fechan:isns a,e eipec'ed to r.dxce iapants exlolts bY 60 to 100 nillion dollars and ir.rease inpo!ts into Japar by 30 !o 10 nillion do11ars. e. Incleases i! -!ub1ic invesihcnt (reflatiot) is exlected io rcduce Ja..a!'s itade sur?lus by 1.2 to 1.4 biltioi do11ar5. total ejiec: oi ilese r'easures on Japan's gtobal traie balance is ex!"L'd ,to iangc i:oi 1.3 to 2.2 billioi dollels' sublraciinE i.on th:s ioaal tlle eiiecr of plefaren',iat tari:is a:d cividlns !l]is to:a1 by 30 !crcen', (rapan's t:ad. uitl tte u s )/ the ler e::eet of thes.-ieaslres on tile U's' i. estihatec at beivaer 5OO io 6C0 n:11io: The

2.

.uulativ.

D'.a.c--

o:

10

?c..aat t:tor: sur.a:i!!

-7tr;lLe1eztL

-a. 1970 L.s. 1i9u:c- s: '\r tr 'j__j "j:'': oa 1.2 bi:1ioi dolla:s. u? :o iuIY l97i tre ae'::c:r -i)-..:(i to 2 6 bil:ior '6:l:::' b. vJi-.i i]:e 10 ?e:c.r:i ii:-.o!: su!''lra:g'' the Ja?ar,â&#x201A;Źsc :oleaasica i:at ;o: ure ;alaice JF h'1ttus ' bY 6rr lr7: ::,-:!i:::o::i-.:,'::-- -'J:_ie

ni1lio; do:]a:s. -1cco.i:ng i:o Japairs esti:Gr.s, ::-is \rou:li equai a 70n rililio! dol1a! :rallr 5i::i:s fo, e-a?an ;Y u_s' aigu:es. ::e 10 9c:'e': slrc;a:ge noul': i'a: a 1.5 :11:io. io:la, sx:Plis :or ;a?an' c. it,:-t't2t\.--.-.:' :..'-':t s':_'c:"_:!! ' t;'a: _ 2 -! .r:o. r. 'o lrc_:1' "/ a'l'0 ii11io: :: i.silti:g 1.a b:iiior io1_ra!., 1:] t.:ie 'na{t-* d. By 19?5/::. ;...tntt t":tt"" a oie 5i]l:oi dolla! ';::ce c.ilc:: :o; "-apan (Pith i:le coiai;!ia::o: o: i:: iii/e!-q sr:'::a!9') ' -:'-"ur _' a !:o ec' : Ti:- _.'-:::. dn1:a! ;]ii:te'al t:ade/ ' /4?t 21 sill!.; :""" ., -.:. l--- - :1 .. r..-i'":':""-"' o' J'::r"5 '::roii:_r o: :ir. :O -:.:c._--i i::'i:;:t' st::'3s" to t:1e 1".i. 1:,. ij s "lcg'ti'a ,': "1 '-l:-l r..: - i(:.: :. i" "':cl'_,.' dor

-,1r/

i,!

.-,r,

J rrl di"'r!

I-

,iir

'

],

.:r:r,..r..i

,,

::r;-1.'.

3,

Fo:eidr pi:.ct Iiv.5ii:.nt the Ja"ran.5e ieleta'.ioi sta:'c tha! Japa:'s ?,:,.! qoal is 1OO Perceia libcralizatio : ., n..1. c-r, . .. -: l:., -. ! \+.. ,: cu-r. .D!,,\ll,|/ uil1 !cqn::. casc' br: case ap9:ovaI

^ri:ee corditlo:s ius; bc rct: a. If ai lrdu.t.v has g::al :utule st'a:egic b. If the:e is a tleat c- I! ai inv.sine.t does exi!aorci:a!!'dr*aqe to snalf sizcd. firns in rapa:.

and i.oi!n_

j '.lio 1:.' . -r:'

. -_...-'i r-:'r --.t.. :l-::.:Japal: In ""he coi?uler lndls"rv' Itsili has foreign oil 45 parcent o: r':- ;tpt"iratLtt; tefiri,g conpalies occupy 50 pcrceit ot 'iie oxa-"i1e5,,'':r1c'r

caPaalna:Let'

the Ja?aiese 'icLeE;tes " not exlect a itit atlt* tnL'JA.

'

changa

\in J'P'n'";isrl''L]o; investnenl;;),':3 't 2"r- " ccorfl/3 i!!ci ':'!':' Ihe Japanese delcg:tes tta:ed that in 1970 ilaPan's ou:flov 6f capital amountea to tNo billjon 'lorlars in the s:'iie year thcre s:s ' cifrri{ L^rnJ)frl'' tor . ir n',,]ntl.,.,,rilar,.(' r'oI1:r i';ii::i ir c;..:c: a i.-^;riI!.i '. crlitil .,c.orii: aii is qra!'ro s3

-9Dy \r'14 ,

?:e .r;,-:-:c1-,:-1:s resoLvea.o tl:. ie.c

lc;iel tlai J.!ia':s :.va1Ne. ?ie kcy

r;,b!, lid, iu.r (ahrv P..ac: 3 io 10 ::e: (:Jo:i.ais i)Y rrli_S.!tei::rc!) , a:d ho\r cai ce.:a:n l:.aijr::.s a:a okin'rra b::: ncl." _r(.. -:',_: ::._ ' seatei :..-- ..: ... . -':.r . o" s _l- ': i '' ' z..e'r4611+ -. -:;. .?j:oJ.!jiq ro six io :--... sev.i bil:lo: (ioll.rr, rtvaln;iioi in ti:s ilstaice vronle c:ea'.. a 5ig loss' lri:i :es:r'c-' to ok:', t'", -: .' i ". -. -- i: " ' l:...c s 1:.'rrr...r1,, o:'l-: _)' "'::'o: do1lals ii ci.cnlii:io). r,i:lci1 ia?an is c':iil!'!' t. -,':r- li 3io ,.: t- .: do': '_ ( ': ' okina\r. case obvioislv i5 :ar Ies:,ihan ii:i of the sili?)u!:ie:s) .

Th. U,s. del.tit:o: srres3cd i,!n! i:hc ven should .. .cvalL.d a5 so,- :5 po'sible in 19.,1 b7 i5 .o 2) . -. ' ..:. -i:i "s ::1" '''t '' _' rhr-'-"" rh,'.:1 . ^.,."- JL.io;''1'l'Ji' ta(. ti,e rnriratlv! i" "!d!uc- btio:E-if'_ --

.1

ll

-.

'-',

,10-

bencfits in the

U.

S.

The Japanese delegates appea,

to prefe!

!O pelcent levaluation

a

-- so e believinq thdL LL,e,:r{u l0 pe!"enE -i:ojL su!.horg!.iJ c sigr-:'iio -;i. r..-jc- rf,c o:ouiL by vricn raPan should rcvalue tle !,en. .A! analysis p.epaled bY:he Japaiese oi tie effacts of the 10 pcrcent:evalua:ion is atlacqe.. (-jn:, ?r./ one theory acvanced ii thc iecting bv l1.ssrs.

Nakayaia aid:io:ikoshi predicts tha: a 10 percent revaiuation vou:.1 decraase ihlorls into Japan by 1o pcr.en! and in.rease Japar's trade s!rp1!s b:' ,150 niilioi col;.rs. lhj il;i/: r rnl L' ; :r-j ' + !J o-Drn:oi^rnar r,si+.ii-*'l!-{.:!..E.! ta;,. would !1ace Japa! in a deep !ecessior/,',; weatening denard for iipo:is.

The Japaiese ieleg.tes siress.d ti\?'. yer revalla'eloi \rou1d hale to be achreved i: : nultira:exaI flde\rork Tlev .xP;ess th.ir pre:crcnce :or del.r:ng revaluation o: :\' yen uitil t\e Eu/o:eais nai: tle fi:st no!c.

The U.S, siee :c-ci:hasizc(i tbc pol:iica: .:e psycholo!-ica1 ben.iits Ja?:r rould !cap a:or r'.. :<r!._: .1: ..i:.i.:.ri i^r , ]

l:]

,., ,:

,, ,,.

:

-,:

-11-

si!.sJ>!ie :_o:ianc. o: t,]]e u.s. b.iiE nindiul to .j:pi:'s lol:tic:tr a:ri e.oior::r io Ioilox .i:,: :ot :o lâ&#x201A;Źai.

5. rr.rr:. i::: ':'::. l.r o.C.-' -_c" .:.i L.S. .o co.l'i:,. - i...:^..:...u :s-u:r.-._-.! 11: 'c Jr-i. -.1: ,o -.:' il,. tr:!) :,. i.... c J ...'o..r i. -si:5:r..c-, ure u.s. c.leE:t:oi ci2::as:z.li :hai: t::e Ij.s. r.u5r l':\'::o-_: \i."_. .:-i s-i-.1-.. -i, ,.'assri -his coa:.r:., ..,- L.r, c:..t.r.::i-Ir.s. ir:ir ins: :ro balanccd -.r.:e:;:iy :,a !r72,trr: at le.si t:,trr__.:...,r, :o. f,. .,1.-,". ..,..-,-,:r.

6. ?Ie U,s, delega::oi sr:.ssce tiar Jarai's el..ei

b

..il'..1,11' .-'-l'J

li.-.

corl!

.o:

-..-'- j:,):r '.-s:

be to-..-:.-

tiueii:e . ?. Tho U.S. de:.gitioi !:.:ro...i a iiultilat.rifiritiaiive :ei.:rl by J::r:i, tae u.s., aii the tic to ov.r:itL tlr! C-':1 o. :ros::bly !.Lrtrce ile G!-T: u:::. a r..\r iitc:::i.iioia1 iraie &C. thJ.!r$fnE or.;nnit.ri0^ !',h.i,. FrrF.a? 1!1d. r'_ td hclrr derd:loP ftoa. i4115.r1 uo,lltr'rdo c."n. in f!a-s

^

;..q :.r -- -. .:

.:,..i.

-12-

U.s. ii.legates urged ;apan io increase lts nu!.i l-Ee:aI .io e::o,L 5j

The

the U.s. delcsalion protosed furlhe! joint JaPan;:"rL'i'r' U.s. veltutes in the iields of ae:ospace' pollu:ion. iaiu:ai resortce develo-lient in t;o*'ii:ii> e conn:riesi ii!, o*t:z Fii-L>t ' u.s. celegaies utqcd i:ie1'the u's rH:)tt'r "he industrial develo.! nore eiiective trad"'ti

9.

ddjus'.. '.1: : .:.a:5rs

-1-"L:;.:.l-lii..]]l

j:J,^^,,,

..:.*"v

Y,,i J]:1,:a c:1e: e :ne

,orld ecoionic coiditio:s' 11. The 11.s. dclega-":on sr:lessee ile noec fo' JaPai and tle u.s. to fiid nore effect:ve s'!s of doinq busiloss with cach othar' rhe ilicric:'s _stlcssed lhat yen levaluation is rol eiough Lh;r rapan r-.'- o' i u.' ir" "o"o"v bt !'_-ov''1c its aeiirts::ative and oiher bai'icrs' 12.

.

ielegales ctcouraqeg*e Jalancse r:o plrctrase mole loods fron tlre ri's in olccr to hel? -P.lress rlc (_a'' 1:r'1aI connectioi, thc g s sice sugges'len r:i' ciâ&#x201A;Źation in Japan of r cor'r:iei:ee oi irp'ovinlJ thc 5a1'n'c of trade v7i'-:1 the u.s. !'hich !'o!ld carigaign vigolously on bahali o: ini:orts iron th' ri'

The Lr.s.

:1.,i:.

Lt-r.*.

I

C. lleasure. to be xi(je:aa]iei 5! U'S' ln !e-pon"e rol c-esrl b-';L s' c_lesrLjon 'or rap'nes views oi neasures :Lilt Ja?ni vould like to see t5e

U,s. t.!:e, t.L' :o11o!:rg \i. r. :-o'os'ol 1. coit.ol i.:la:io:.. the u-apatese ;;:je rne reccssiiy :oi the U S' to res:o:e the cradibiLiiy of tho doilar' Thev cited the seventY biilion do]]ar o!tfIo!, o: .n?ita1 flor the u s' as cause of i:ifa:ion h_:_:t-:;s^ and aslied ii the u.s. vroulC !c prepared:o cux)r this capitai

opi:ion txa: ''ie u'S' "le ly' ptoducti!'j i!s should ircrca:.

3. Tre Japaicse delc'Jaies 'nEgest'd that "ie U S' shoulil io:. ef:c.iivcl)' !roio';' i:s ')r-iorts)

2.

T)re Japa:cse cnp:cssed

inctuCinq iorc .ea1jst1c :larket slrveYs as to

iipaiese :e1t that rijY U S goois " s i" Lo :: could Dc so'o 1. '-: nout a nor. coordiia:'d 'n'1 dYn'iic exlort etc,

The

Messrs. i{i)ra(iia Io: !i' Ja'5 Coricil aid Gcrsi:acll'r for tllc U.s. colncil .ii5cus3!ri brieilv

-':q:li-j:!-';-

'

JOlriT [XECL[lltr

u. s. Arlrsorr

cor:ncrr, /.ItrE:!1I9q

Co]rlTlai ]rrrTlNC

{!

llq.i!L!!lr }i:rfirr)ic.

:-_---_--'.--'-'-_ N. E. E.1abr, CttlINL{x Pan

&crtcan !or1d Atr3ys, Inc-

Carl A. Gcrsi-ck.r, Ch.irn.n of !h. $oxrd Tte Dou cli. ical corp:ny Ccorae

c. Ilcchce, VlcE cll,\lL_nll for 1nt.rn.rid.:1 !nd.rstrdtDg r

Ro, L. lel'

l,itto: lndL::rrics, In.. lustn.ss InLcrn.tioMr cortoration Chairnan

of tn.

Tr);.s lnstnrcnts, Inc.

Or3t!,.n or ehc xo.rd Cl]ryslcr corDoration

r-. card,,r1r, ExLcu'Ltv! stainif/!\Y Starf ]\ssocir.c

John

ah-,r.. "r."---.

.r rr. ndJrri sr ri<

nLiqnsr

21.

197r

JOTIiT FXECI]T'fi

.

CO

.'A?tr.sE a!-!I!!!rl lqulicIr. i!l:!l:D,1]:qE

Iost'izanc lwnsa, cllllrJ:r-'j chairoe. ol thc Bo.rd .nd PresidcnL Th( Iull B,nk, L ' tr.d

'

Xazur- . xi\"".J. , L0 ci\lR.Uir Ch:irn.n, Tokro Er.ctric Shtg.o Nasanc, co-cr.\IrrN

Rcprcscnta!i!. Dirc.tor :iJ Chrir'rn ot tl'e loard or Dir.ctors Ni!!on stcel co.porJtion NorishiSc il.sc3..!

P!esidcnL

Suniroro che.i:al Co., Ltd.

chair :r of ihc Hitsubirhi lrcaq, Irlusiri.s,

LLd.

Clairnax ol ih. L.a:d.f Dircators

rhc rndustri.r Irark of ia;3n, r-td.

:,ITIi'

ll

ITETI}C

1!0i!1ri!!rr

!E!rI!- 1!-,!!

21, l9zi