TRANSCRIPT: BARSHEFSKY 11/13 BRIEFING ON APEC TRADE ISSUES
(Token participation by world's second-largest economy doesn't cut it)
Kuala Lumpur -- U.S. Trade Representative (USTR) Charlene Barshefsky rejected a suggestion that Japan could avoid full commitment to all nine sectors of APEC's Early Voluntary Sectoral Liberalization (EVSL) initiative by making token moves in the two sectors where it does not want to participate -- forest products and fisheries.
The key to the initiative's success, Barshefsky said during a press briefing following meetings with other Asia-Pacific Economic Cooperation (APEC) trade ministers November 13, is achieving a critical mass of economies operating on essentially similar terms -- a formula that worked with the Information Technology Agreement (ITA). "So token participation at the end of the day by the world's second-largest economy doesn't cut it," she said.
"What I would like to see happen," Barshefsky said, "is the initiative moves to the WTO where the complexion tends to change somewhat, the trade-offs tend to change somewhat, and where I think we can make further progress with other countries, with APEC countries and with Japan."
Barshefsky noted that Japan's current position is that it does not wish to move the nine sectors to the WTO.
"Japan," she said, "has gone around the region offering assistance in the form of money to countries willing to back away from the initiative. This is remarkable to say that Japan is actively discouraging countries from liberalizing who are fully involved in these initiatives. That is terribly disturbing and destructive."
Barshefsky dismissed the notion that Japan's actions were designed to restore growth to the region. "For Japan to restore growth to the region, three things have to happen," she said:
"Number one, sustain and enlarge fiscal stimulus to restore domestic demand-led growth;
"Number two, cleaning up the banking system and recapitalizing insolvent banks that are in trouble;
"Number three, further market opening and deregulation."
"Those are the three key elements to help restore growth to this region," Barshefsky said. "Suggesting to countries that they not open their markets because Japan may have an internal political problem with its market is hardly the way in which growth is going to be restored to the Asia-Pacific region."
Following is a transcript of the briefing:
(begin transcript)
Briefing by Ambassador Charlene Barshefsky
U.S. Trade Representative
New World Hotel
Kuala Lumpur, MalaysiaNovember 13, 1998
AMB. BARSHEFSKY: I'll make a couple of general remarks, and then you can ask questions. So let me start by saying that I think it's fair to say that APEC has become an important catalyst for the global trade agenda. Certainly APEC has evolved from merely a talk-shop, which really was its status prior to 1994, to a can-do forum that pulls together a number of diverse agendas among its member economies.
The trade initiative we've been working on this past year in APEC, covering $1.5 trillion in global trade, is I think the latest example of APEC's ability to put important market-opening measures on the global radar screen. I think that APEC's record as a trade forum is increasingly impressive. Of course, you're familiar with the Bogor objectives, which is to establish fair and open trade in the region by 2010 and 2020, depending on your state of development. As APEC seeks to meet that timetable, we've put very tangible market-opening initiatives on the agenda in 1995 and 1996. This of course was the Information Technology Agreement. Without APEC's impetus for that agreement there would be no ITA today.
The sectoral package being looked at this year is actually far more complex and multi-faceted than the ITA was. But, here again, we're seeking to build on an ITA-type model. Which is to say, the aim here -- as with ITA -- is to emerge with a package with broad participation by APEC members, take that to the WTO to build a critical mass of other countries joining in to ensure that there are no free-riders, and then begin implementation. I say that the initiative this time around is much more complicated than ITA because with ITA you had essentially one product line that followed a fairly logical stream. The goal was, whatever is connected to the information superhighway should go to zero tariffs. And so you had semiconductors, capacitors, integrated circuits, the cabling, phone, fax, digital displays, monitors. It's a pretty logical flow.
Here you have nine sectors, each having nothing to do with the other. Energy, fish, environmental goods and services, chemicals, gems and jewelry, telecom. So what you're doing is like a mini-ITA exercise with each sector. You've got to follow what the chain of products is. And in something like energy or environment, this actually very, very complicated. And of course the volume of trade and value of trade is about three times that in these nine sectors as it was in ITA. So this is quite a bit more complex.
I think, given the impact of the economic crisis in the region, we know there are at least four countries that will see GDP contraction of seven percent or more in the region. I think it is a real testament to the strength of APEC that the initiative is where it is today. Which is to say, very much alive and very actively in discussion. It also shows, I think, that, increasingly, APEC members are seeing market-opening measures and trade expansion as part of the solution to current financial instability, not part of the problem. And I think, to underscore that point, it is very significant that the ASEAN countries have accelerated their AFTA commitments to reduce tariffs on an accelerated timetable. That again, I think, demonstrates that, increasingly, market-opening initiatives are viewed as part of the solution, not part of the problem. And that of course is also why this current undertaking is important.
So let me just say that the issue here is what is good for APEC, what is good for the global economy, and we think that this initiative can contribute significantly to both.
That's my riff, and with that I'm happy to take questions.
Q: Are you concerned that APEC is going to be seen as increasingly irrelevant if you're unable to seal a deal on these nine sectors if Japan is perceived as being able to scuttle the deal?
AMB. BARSHEFSKY: I don't think APEC will ever be seen as irrelevant. Think about this. This is a forum in which the leaders of over half of global GDP get together once a year and discuss serious matters. That could never be irrelevant. And likewise, on the trade ministers' side, it's a forum that already has produced, I think, a very forward-leaning agenda with the Bogor Declaration; ITA would not exist but for the impetus given to it by the Asia region, which then challenged Europe to move forward on the initiative; and I think this initiative is further testament to APEC's continuing importance.
Obviously, we are concerned about the effect of Japan's actions on the desire of APEC to move forward. But I think it would be entirely wrong to suggest that APEC itself as a forum would in any way become irrelevant were this initiative not to come into being. Certainly it would be an unfortunate outcome. It would be an outcome quite plainly attributable to Japan. But I don't think it impugns the integrity of APEC as a forum for serious policy discussion or trade liberalization.
Q: That's just the opposite, I think, of what Howard said a couple of months ago. He said this is the test for APEC.
AMB. BARSHEFSKY: Well, it's certainly a test of Japan.
Q: Well, he said a test of APEC, to show whether it's irrelevant. That may not be his word, but that was certainly the thrust of his --
AMB. BARSHEFSKY: I would say that's probably a little on the harsh side. But I do think that Japan's commitment to further market opening and deregulation will be put to the test.
Q: Are you as optimistic as you were a week ago in Washington that an agreement on all nine sectors with a timetable you want can be reached? Or are you increasingly coming to the conclusion since being here that for EVSL to move forward you may have to move forward with fewer than the nine sectors at a slower than the expected pace?
AMB. BARSHEFSKY: I think that we've already made pretty significant progress at Kuching in terms of end rates and end dates and so on. We've been struggling with issues of flexibility, extended staging possibilities, and so on. We had the same struggle with ITA, which is why after we left Manila ITA took another eight months. I mean, these are not easy issues -- including for the U.S., which got extended staging in some areas on ITA.
So I would say that, as I said before, we would like to be able to leave APEC with the initiative and the work that's been done, move over to the WTO -- which would put us a step ahead of where we were on ITA, where we didn't have nearly so many parameters worked out. Then for further discussion and negotiation, including within APEC, just as we did ITA -- there were lots of changes in the package as it went forward in Geneva -- and then bringing in other countries and interesting other countries (inaudible) Europe, but other countries as well, potentially, in the initiative. That's how we'd like to see this come out. And I still think it may be possible to come out that way.
Q: If Japan continues to refuse to sign on for forestry and fisheries, is there a risk that the package could unravel, that other countries -- Rafidah Aziz said today it wasn't just Japan, but Mexico and Chile were --
AMB. BARSHEFSKY: But they've never been in it. And they weren't in ITA and have never been in ITA.
Q: There are other countries that seem to be sheltering behind Japan on this issue. I mean, are you concerned about the issue of unraveling?
AMB. BARSHEFSKY: Certainly we're concerned about the issue of unraveling. I think it's completely fair to say that if there is an unraveling, the catalyst for it will have been Japan. I think there's no question about it. Chile and Mexico have said from the beginning, consistent with what they said in ITA, that they would not participate for varying reasons. Each economy is slightly different. And in ITA that was accepted by the APEC members, and here again this was accepted by the APEC members. There isn't any particular concern in any of these sectors about Mexico's or Chile's non-participation. In ITA, likewise, there was not any particular concern -- for all sorts of reasons.
Q: So your position is still all sixteen in on the nine or nothing at all?
AMB. BARSHEFSKY: Say it again?
Q: Your position remains all sixteen in on the nine sectors or the package doesn't go forward?
AMB. BARSHEFSKY: No. Well, the position has always been, you want a critical mass coming out of APEC -- ITA, we had eight countries coming out of APEC, eight of the eighteen. We want a critical mass of countries coming out of APEC, moving the initiative to the WTO to attract the full critical mass, and then implement it. It's exactly the ITA model.
Q: The Malaysian trade minister suggested tonight there might be one possible compromise might be to get Japan to do a token number of products in wood and fisheries. Would that be acceptable?
AMB. BARSHEFSKY: The key to the initiative at the end of the day is a critical mass operating on essentially similar terms -- again, the ITA model. And that will be the key at the end of the day. So token participation at the end of the day by the world's second-largest economy doesn't cut it.
Q: But if you don't get this, then what happens? Do you come back again next year or you start for something else next year?
AMB. BARSHEFSKY: Well, what I would like to see happen is the initiative move to the WTO, where the complexion tends to change somewhat, the trade-offs tend to change somewhat, and where I think we can make further progress with other countries, with APEC countries and with Japan. If I could use ITA as an example, you had a number of countries in APEC when we left Manila saying they would not participate in ITA, full-stop. They're all in ITA now. Things change when you move the site toward a multilateral forum and other countries begin to join in. That changes the mix; that changes the complexion; it changes countries' assessments of whether they should proceed, even if previously they thought they wouldn't proceed. And I think we have to leave open that possibility.
Q: Could we move to the WTO then without Japan having done more than a token contribution on these two sectors? (Inaudible)
AMB. BARSHEFSKY: I think we have to consider all possibilities. Certainly, Japan's position currently is that it does not wish to move the nine sectors to the WTO.
Q: It wasn't so long ago that APEC was part of a new world order, post-Cold War, democracy, new market system. A lot has changed in the past year or so -- the Asian financial crisis. This meeting is just starting and there is already an awful lot of attention on various proposals to deal with the crisis which, at least from my perspective, would seem to run the risk of drawing momentum away from APEC's long-term goal of free trade, not to mention some things going on in Malaysia too that are also distracting attention. What do you think about what's going on right now? Is it a setback?
AMB. BARSHEFSKY: No. You're looking at the worst financial crisis, as the President has said, in at least 50 years. That underscores the unique atmosphere in which these meetings are being held. And when you have a crisis of that magnitude, then certainly focus may tend to shift, discussions may become more or less heated, more or less intense, consensus on issues may be harder to reach. But that's logical. You would expect that to happen.
Longer term, I think APEC will remain an extremely important piece of the overall financial architecture and the overall trade, economic, and political architecture of the region. I think there's no question about that. Every country is quite committed to APEC as a process, as an outcome-oriented institution, and as creating an architecture for interaction in Asia that had never before existed. You didn't have a NATO in Asia. You didn't have the kinds of institutions we have in the West here in Asia. So I think that remains. I think inevitably there are bumps along the way. You know the Atlantic alliance has been strained from time to time, but no one would suggest that its demise was remotely contemplated by any of the parties. And I think you have a similar situation here. I think APEC as an organization or institution is here for the long term. I think the leaders want it. I think the ministerial-level players want it, and I think global conditions underscore its need.
Q: Are you further ahead -- the position where we are going into the Ministerial meeting tomorrow -- in the process where you thought we would be going into tomorrow, or are you disappointed in what's happened over the past two days, or is it more positive than we anticipated?
AMB. BARSHEFSKY: No, we are exactly where I thought we would be. I think what the senior officials have done this past year, in terms of working out these parameters of the nine sectors and trying to think through the flexibility problems, which took us so long in ITA., is remarkable. Think about this for a minute. You have the worst financial crisis in 50 years, you've Asia hardest hit, and every country has remained focused on this initiative. Every country has remained focused on this initiative. That is, in and of itself, remarkable -- and wholly unpredictable, wholly unpredictable. In terms of Japan's recent position, this has been known. And so we are exactly where I thought we would be.
Q: Can I ask a question related to an earlier question? We've been led to believe that President Clinton is going to come here and ask Asian countries to limit exports to the U.S. because of the rising trade deficit --
AMB. BARSHEFSKY: Absolutely not. Absolutely not. Absolutely not. No. I'm telling you, ABSOLUTELY -- underscored, all caps, bold -- NOT. Absolutely not.
What he has said is, first of all, that this administration is an open trade administration. Second, the trade, however, has to be fairly conducted and we will vigorously enforce our unfair trade laws. And third, he has expressed particular concern with respect to Japan, most especially in the matter of steel.
And that's it.
Q: My question was that Prime Minister Mahathir, who is going to host the meeting today, said that one way for Asia to get out of the crisis is to export more to countries like the United States...
AMB. BARSHEFSKY: Which we fully expect. I think that the President, Bob Rubin and I have all been saying quite consistently -- and I have said this in virtually every speech for the last six months -- we should expect imports to increase. We should expect our exports to decrease, because a number of the countries to which we export are in deep recession. This, we do not believe, is a long-term phenomenon, but it will be with us for some period of time. However, we must act as an engine of growth.
We have also said very clearly that we cannot be the market of only resort in the world. Europe must do its part to absorb more imports, and Japan -- most particularly as the world's second-largest economy -- must do more to gets its own house in order first, but also to absorb more imports. If you look at imports for the last eight months, imports from the Asia region to the U.S. are up about 10 percent. Imports from the Asia region to Japan are down 20 percent. That's a mighty big gap for the difference between the world's largest and second-largest economies.
So we want to see Europe and Japan bear their fair share, but certainly the United States will take its fair share and, indeed, as you know from our trade deficit figures, we will probably take more than our fair share. And we're prepared for that, provided the trade is fair.
Q: What would the absolute minimum from Japan be to be acceptable to the United States on EVSL in order to get this critical mass that you want?
AMB. BARSHEFSKY: I don't want to opine. I think the question is not what does the U.S. have to have. You have most of the APEC economies substantially disappointed with Japan's position. And you have most of the APEC economies who want to see Japan move forward. The United States is among that group, and the group is large.
So I'll just leave it at that. We would like to see Japan move forward. We would like to see these sectors move as a package to the WTO, meaning all the sectors.
Q: Would you mind saying a word about the three new member economies that are joining and what your expectations and hopes are in terms of trade with those countries?
AMB. BARSHEFSKY: Well we have Peru joining and, of course, Russia and Vietnam. They are all very different. We welcome them all. I think it will take a while for each to get fully integrated into the APEC process. It took Chile several years after entry.
Of course, there's such substantial economic turmoil in Russia that it may take more than several years for Russia to get fully integrated.
But all three countries are very excited about this.
Vietnam's participation in APEC, I think, it aided by its participation within ASEAN. In addition, as you know, we have been in the process of negotiating a comprehensive trade agreement with Vietnam, as to which we've made some good progress. There's a real interest there on the part of Vietnam.
Peru, as well, there's a very substantial interest there, including their involvement in FTAA negotiations. There's real familiarity with some of the market-opening concepts, the economic and technical cooperation, all of that.
On the Russia side, of course, I think that its involvement in APEC will be certainly very positive for Russia, as well as for APEC. This is a very important economy, a very important country to bring in. But I think, particularly as we are working with Russia on WTO, to have it in APEC is an additional reinforcement of the direction in which we hope Russia would move, which is a more market-oriented, trade-liberalizing direction.
Q: The three new members are not (inaudible) in the EVSL discussions?
AMB. BARSHEFSKY: No.
Q: Could you clarify something? It's been reported that China, Malaysia, and Thailand all support Japan in the position it's taken. When you say most of the countries support --
AMB. BARSHEFSKY: I think our perception is that these -- Well, first of all, all of the countries you mentioned are participating in all of the sectors. That's point one. Point two is that Japan has gone around the region offering assistance in the form of money to countries willing to back away from the initiative. This is remarkable. That is to say, Japan is actively discouraging countries from liberalizing who are fully involved in these initiatives. That is terribly disturbing and destructive. But all of the economies that you mentioned have put forward proposals, some of which are very, very good, including Indonesia's for example. To the extent countries alter their views, it will not have been because they were not participating fully.
Q: You say that Japan has gone around offering money to countries that are willing to back away. Couldn't you also interpret their actions as just trying to restore growth to the region, which is what we all want?
AMB. BARSHEFSKY: For Japan to restore growth to the region three things have to happen, and we've said this pretty consistently :
Number one, sustained and enlarged fiscal stimulus to restore domestic demand-led growth. Number two, cleaning up the banking system and recapitalizing solvent -- but banks that are in trouble. Number three, further market opening and deregulation.
Those are the three key elements to help restore growth to this region. Suggesting to countries that they not open their markets because Japan may have an internal political problem with its market is hardly the way in which growth is going to be restored to the Asia-Pacific region.
Q: How many of the 21 economies are in on this nine sector EVSL? My understanding is six to eight. Is that correct? (Inaudible)
AMB. BARSHEFSKY: Well, eighteen are actively in. Russia, Peru, Vietnam don't enter until now. They're not in. So of the eighteen, not Mexico and not Chile. And China is in partially. Now remember, China is not a WTO member. They're a little bit in a different situation. But the rest have put forward offers in all nine sectors.
Q: And China in some of them?
AMB. BARSHEFSKY: Correct.
Q: The three member countries that are joining, are they observing these talks? Should we talk about the eighteen countries or the twenty-one?
AMB. BARSHEFSKY: No, it's eighteen. They've not been observers. They enter APEC in this meeting, and in the Leaders' Meeting they're formally welcomed in. They observed, I think, at the last meeting at the Minister meeting, I don't believe at the Leader meeting, and then they formally enter this year. And so they've not been part of this initiative at all. No one ever suggested that they be. The key is, let's bring them in first, integrate them into APEC. That's step one, not this.
(end transcript)
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