TRANSCRIPT: BARSHEFSKY BRIEFING ON U.S.-JAPAN REGULATORY PLAN
(U.S. expects tangible results)

Denver -- The U.S.-Japan deregulation initiative stems from a commitment between President Clinton and Prime Minister Hashimoto to utilize Japan's deregulatory process not just to make the Japanese market more competitive, but specifically for the purpose of increasing U.S. and foreign market access into Japan, according to U.S. Trade Representative Charlene Barshefsky.

In a June 19 briefing following the announcement of the initiative in Denver just prior to the Summit of the Eight, Barshefsky detailed the initiative, which aims to increase foreign access into the Japanese market of telecommunication goods, medical devices and pharmaceutical products, housing and construction products and financial services, and called it "very, very exciting."

"It's the first time we've been able to tap into their own deregulatory and legislative process in this way -- again, looking at tangible, concrete outcomes with respect to market access in these areas," she said.

Following is the official transcript of the briefing:

(begin transcript)

THE WHITE HOUSE

Office of the Press Secretary
(Denver, Colorado)

For Immediate Release June 19, 1997

PRESS BRIEFING BY AMBASSADOR BARSHEFSKY

National Digital Television Center
(Littleton, Colorado)

AMBASSADOR BARSHEFSKY: (In progress) -- initiative in total stems from a commitment between President Clinton and Prime Minister Hashimoto that we should be able to utilize Japan's deregulatory process not just to make the Japanese market more competitive, but specifically for the purpose of increasing U.S. and foreign market access into Japan.

So this is very, very exciting. And it's the first time we've been able to tap into their own deregulatory and legislative process in this way -- again, looking at tangible, concrete outcomes with respect to market access in these areas.

Q: What's in it for the Japanese?

AMBASSADOR BARSHEFSKY: What's in it for the Japanese is greater competition within their own market, including an improvement in their own competitiveness. If you look at the telecommunications sector, for example, Japan has fallen far behind, in part because of NPT's massive regulatory control over telecommunications, including areas like inter-connection, cable television, direct-to-home satellite broadcast -- all of which will be brought within the ambit of this initiative for discussion and deregulation. So Japan has something to gain to enhance its own competitiveness -- increased consumer choice, lower prices.

The U.S. obviously has much to gain because in each of the sectors we've designated, the U.S. is the world leader. Of course, you've seen recent trade deficit numbers. It's critical that our market opening efforts with respect to Japan continue in as aggressive a manner as during the President's first term. This is a new avenue -- one which we have really never previously had available -- in order to greater affect market access into Japan.

Q: How soon will we see results?

Q: Why isn't it reciprocal?

AMBASSADOR BARSHEFSKY: We will see results -- the first major meeting and report back to the leaders is within a year. But we will start in meetings this summer so that we can feed into Japan's legislative process over the coming six or eight months.

Q: Why wouldn't the U.S. allow for reciprocity in this process and allow Japanese to engage in -- or be part of the deregulation process to open markets here?

AMBASSADOR BARSHEFSKY: The sticking point with respect to this deregulatory exercise had been Japan's demand that if it had to implement deregulatory measures in these sectors, the U.S. must implement deregulatory measures in these sectors. First, the U.S. is the world's most open major economy. Second, Japan is running a substantial surplus with the United States, not the other way around. And third, the whole point of the framework and the point of this new initiative with respect to deregulation is to open Japan's market to foreign goods and services.

By Japan suggesting that this initiative be reciprocal, it would simply take time to deflect attention from the real problem, which is Japan's market access barriers. That's where the focus must be. We were very insistent that this effort not devolve into a series of discussions to no meaningful end from the point of view of market access into Japan. And we won on that point.

Q: How much trade is involved here?

AMBASSADOR BARSHEFSKY: The total volume of trade is very substantial. Japan is one of the world's largest markets with respect to telecommunications. With respect to medical and pharmaceutical -- given the aging character of Japan's population -- it is the second largest market in that area. With respect to housing, Japan's rules and regulations have prohibited performance-based standards, disadvantaging U.S. building materials and U.S. forms of construction. Because housing is a major initiative of Prime Minister Hashimoto, this also should lead to increased dollars for the United States. And of course, with respect to financial services, the U.S. is the world leader. Japan still heavily regulates fund management as well as mutual funds.

So all of these areas are areas that follow from a policy that we put into place about a year ago, which is to focus on those sectors where the U.S. is a world competitor, where our barriers to entry are very low but other barriers to entry are high. That was the rationale for the information technology agreement, for the global telecom agreement, for the U.S.-E.U. mutual recognition agreements -- which Leon Brittan and I will sign tomorrow -- for these deregulatory initiatives on the specific sectors cited. It is the reason that we and our trading partners have agreed to pursue an ITA II -- a second phase of the information technology agreement to be begun this October. We need market access and the best way to pursue that is to go after those areas where we are a world leader and we can recoup the greatest benefit from that market opening.

Q: When did you actually come to closure on this?

AMBASSADOR BARSHEFSKY: About 4:00 a.m. this morning.

Q: Did Japan agree just to throw the U.S. a bone on the eve of the talks, Madam Ambassador?

AMBASSADOR BARSHEFSKY: No, I think that we have to look at this actually somewhat less cynically than your question implies. (Laughter.) Prime Minister Hashimoto made a very big point to President Clinton in saying that he was absolutely committed to deregulation. On the basis of that pitch, we concluded about six months ago, as you know, a major insurance agreement with Japan -- basically calling Japan's bluff -- saying, if you're interested in deregulation, then deregulate the world's second largest insurance market. The agreement we entered into, which is very comprehensive -- covering all the major forms of non-life insurance -- has done and will continue to do just that.

Well, we've gone back to Japan again and said, again, if deregulation is your Prime Minister's major focus, let's look at sectors where deregulation would be most meaningful for us and most meaningful for you and let's negotiate new measures in these areas.

So I think Japan is making good on the Prime Minister's view that deregulation is critical to the competitiveness of the Japanese economy and also to the creation of domestic-demand-led growth. That, of course, is our most critical objective with respect to not only to market access but with respect to Japan's current account surplus.

Q: How do you interpret those trade numbers that came out yesterday? Is that just a blip or a major deterioration in the trade balance again?

AMBASSADOR BARSHEFSKY: I think it's a little early to tell. We have to look at this a little bit over the medium term, but we are very concerned that this portends a trend moving Japan's current account surplus in obviously the wrong direction. That's why the market access initiatives must be undertaken. This is why we're looking for every avenue available, including their own internal regulatory process, to effect change.

Q: What's the upside for the Japanese of having Americans in these sessions? You've described the upside of deregulation in general. What's the upside of having the Americans there?

AMBASSADOR BARSHEFSKY: You know, I think the Japanese recognize that substantial trade imbalances work to their long-term detriment in many respects -- their long-term detriment with respect to competitiveness, but also to their detriment with respect to the relations between it and its major trading partners. And I think this factors into Japan's view that the U.S. should be involved in this effort.

Q: You said the agreement was made at 4:00 a.m.

AMBASSADOR BARSHEFSKY: Finalized. We've been working on this for some time. The hangup has been this issue of reciprocity, which we have refused to accept and on which we ultimately prevailed.

Q: I mean, how was it made at 4:00 a.m.?

AMBASSADOR BARSHEFSKY: It was simply finally concluded. That's all I can tell you.

Q: Was it the trade number that --

AMBASSADOR BARSHEFSKY: Certainly the trade numbers played well into the negotiating strategy.

THE PRESS: Thank you.

AMBASSADOR BARSHEFSKY: Thank you so much.

(end transcript)