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                  Office of the Press Secretary
                         (Naples, Italy) 

                       BACKGROUND BRIEFING

July 9, 1994

The Briefing Room

3:20 P.M. EDT

SENIOR ADMINISTRATION OFFICIAL: I have the honor of being a senior administration official, to which I'm deeply grateful. I'm happy to take your questions on anything dealing with this morning, either the bilaterals I engaged in -- our trade ministers informal lunch and meeting or, of course, anything else involving trade or other economic matters that are connected to the G-7.

Q Could you explain to us why the President dropped his trade initiative and if he's going to submit it next year? What's going to happen now?

SENIOR ADMINISTRATION OFFICIAL: The question is, can I explain why the President "dropped," I think the word you used, his trade initiative is what I think -- I'm going to come back -- it really wasn't a trade initiative, but at least I will -- that's your question, and you had a second -- I'm sorry, I didn't hear the --

Q What's going to happen now? I mean, is it over, or --

SENIOR ADMINISTRATION OFFICIAL: What's going to happen now. Fine, thank you very much. The President withdrew his suggestion this morning, noting that the ratification of the Uruguay Round is the most important item on any of our agendas over the next few months. This agenda item, which we hope everyone will ratify before January '95, was worked on for over seven years by all of the G-7. This President vowed when he came into office to complete the Uruguay Round in ten and a half months, and of course he was able to achieve that.

If the French or any other of our G-7 partners feel that our suggestion or proposal could complicate or jeopardize their ratification of the Round, obviously given the importance of the Uruguay Round to all of our economies, we take this very seriously.

We have support from the G-7 on the notion of expanding on the success of the Uruguay Round, and our goal after its successful ratification will be to continue to press for the liberalization. I'd like to note in Paragraph 2 under "trade" in the communique, the sentence reads, "We are resolved to continue the momentum of trade liberalization." I think that should be noted very carefully.

In our meeting at lunch, the informal meeting, it was suggested that the Quad*, which you know is a creature of the G-7, at their next meeting which is chaired by the United States, take up the President's suggestion and would begin to address the issues not only what was left pending at the end of the Round, but new concerns in terms of liberalizing trade. And as the Japanese MITI minister put it, to build a foundation for the next century.

Q I take it the fact that the President made the proposal originally indicated that he and the administration didn't think it would complicate completion of the Uruguay Round in the United States. Is that right?

SENIOR ADMINISTRATION OFFICIAL: The question is, when the President made his proposal in a letter, I think 10 days ago, if I'm not mistaken -- I can be corrected on that -- which was part of a larger letter to the G-7 leaders reviewing the agenda for the meeting, and the President's suggestions, he believed that this suggestion obviously would not cause any concern.

Obviously, in the last nine or ten days as the French checked their various sources and parties which were involved in the ratification of the Round, they came to the conclusion it would complicate their process. Obviously, we do not want to complicate anyone's process. It's too important to all of us to ratify the Round in 1994 so we can begin the Round and the WTO on January 1, 1995.

Q What were the French sectors that caused the problem?

SENIOR ADMINISTRATION OFFICIAL: You'll have to ask the French, I have no idea. They were quite concerned, although the first reaction from their trade minister was positive nine or ten days ago. They have concerns and they were quite sincere. And obviously the President did not want to put them in any position where they would have these concerns and in any way could jeopardize the ratification of the Round.

Q So this came as a complete surprise -- the French position came as a complete surprise? Didn't the President at least try to vet it before he put it in his letter?

SENIOR ADMINISTRATION OFFICIAL: It was vetted with all the governments, and there were a number of discussions. In fact, it would be safe to say that all the governments of the G- 7s supported this, except the French. And the French concern was one of their own politics in the ratification process.

So it was, of course, vetted -- quite thoroughly, in fact. But, given the nine days, obviously, things tend to change.

Q [name deleted], as late as early this morning after the dinner, a senior official told the pool that we still expect this thing to be in the communique.

SENIOR ADMINISTRATION OFFICIAL: More or less senior than me? (Laughter.)

Q I can only identify him as senior.

SENIOR ADMINISTRATION OFFICIAL: It's hard to answer the questions then -- no, go ahead.

Q But, my question is, if the thing would still go at 1:00 a.m. this morning, when did the red light finally come?

SENIOR ADMINISTRATION OFFICIAL: The red light came at the meeting this morning and the leaders when -- the French delegation, led by President Mitterrand, indicated their political concerns.

The fact is, there was very strong support for this suggestion, including from the Japanese government. I met with and I have been talking to Minister Hashimoto, and the Japanese government were quite strong in their support for this and for this process. That's why we have in the informal meeting of the trade ministers who constitute the Quad, frankly. They urged me as the host of the next Quad meeting to put this number one on the agenda.

Q Don't you find it a bit surprising that the first time the French brought up objections was this morning? Why not at the dinner last night? Why not in the last three days? I mean, you people --

SENIOR ADMINISTRATION OFFICIAL: I think last night in the informal process, the sherpa process, I think there were questions raised then. I think that's correct at that point.

Q Because you guys, at that point, still thought you were rolling ahead.

SENIOR ADMINISTRATION OFFICIAL: Were they men and women involved. I don't want to say "you guys."

Q You guys and gals still thought you'd be rolling ahead, though.

SENIOR ADMINISTRATION OFFICIAL: I don't understand the question. Before the President had a suggestion, it's a good one. It obviously has wide support. If you look at paragraph 2, as I read to you, that we're resolved to continue the momentum of trade liberalization, obviously the Quad is a creature of the G- 7, the quad will take this up at their next meeting. The Quad, as we did in market access, reports to the G-7. Therefore, I think the momentum continues and just the way the President wanted it to continue.

Q With all due respect, the point has been made that the two big trade successes of the administration, NAFTA and the Uruguay Round, were kind of carried on from Republican beginnings. And I'm wondering if, does this mean that the Clinton administration and President Clinton defining his trade goals is going to have to wait until January? Is that what this adds up to?

SENIOR ADMINISTRATION OFFICIAL: Well, it's fascinating. The question is the two biggest trade successes of this administration were -- I think it was characterized as Republican initiatives, some might disagree but I'm only repeating the question -- and, therefore, are we going to have to wait until January to begin our trade agenda. The fact is, our trade agenda began January, 1993.

I know it's hard to recall, but in January, '93 we brought sanctions against the European Union for discriminating against United States supplied heavy electrical equipment and telecommunications. The heavy electrical equipment had been virtually banned from Europe since the Marshall Plan. As you know, we were able to open up that sector given the discussions and the final settlement with the Europeans and then made it permanent this year in the largest single government procurement agreement in history.

We reached eight trade agreements with the Japanese over the course of the last 13 months. We've been able, of course, to begin discussions in terms of extending market openings and expanded trade into Latin America. The President for the first time gathered all the APEC leaders together in Seattle and that is more than just generally conceded to be a great success. And, of course, he'll be attending the APEC meeting in Indonesia in November.

The Summit of the Americas, although not exclusively committed to trade, trade is one part of the agenda. So, if you look at this administration's emphasis and what it's done, frankly, it's had great successes on its own and has done what no two other Republican administrations couldn't do, brought the Uruguay Round to conclusion in only 10 and a half months.

I think the record is quite clear in this regard.

Q What does this do to your timetable? You wanted to report on these various sectors by next year's meeting. Do you still think that by beginning this thing in earnest in January or whenever you will at your next Quad meeting, that you're still going to be able to --

SENIOR ADMINISTRATION OFFICIAL: The Quad meeting, by the way, we'll be this fall. And so it will be on the agenda. Again, let me just say that the Quad is a creature of the G-7. We will report to the G-7 as to not only this but other agenda items that might be raised. Sir Leon Brittan of the European Union said to today that, of course, if I didn't make it the first thing on the agenda, he would.

So, therefore, I think there is some reason to believe it will continue this momentum that the President has begun here in Naples.

Q Since the French parliamentary system and the majority is such that it can sail through with ratification without any problem whatsoever, the idea of this complicating the ratification process is not credible in France. Therefore, are you saying that this is another reason? I mean, what is the reason the French torpedoed the President's initiative, in your view?

SENIOR ADMINISTRATION OFFICIAL: I think you've got to ask the French that. No, the other question -- what is the reason why the French --

Q Do you believe it's related to domestic French politics?

SENIOR ADMINISTRATION OFFICIAL: All I can tell you is the French raise this as a domestic political issue that would complicate their ratification process, and the President was very sensitive to that. I can only tell you what the French said.

Q Just to get back to the senior administration officials last night, a senior official last night said that the French were isolated. The French today seem to be suggesting that, to some extent, the U.S. was pushed into a corner on this issue. Could you just characterize what the different countries -- what they said during the meeting?

SENIOR ADMINISTRATION OFFICIAL: First of all, there is a much bigger issue here than who pushed who into a corner; this is not the World Cup or the American League Penant Race. The fact is that the communique is quite clear about continuing the effort to trade liberalization, and we will. The trade ministers today were quite clear about using the Quad process to push this forward, not only in the future, but also those things that were left over. I can't, and I won't characterize the French position; they can do that for themselves, obviously.

But I think it's fair to say that the other G-7 countries were quite comfortable with this suggestion.

Q If I could switch the subject briefly. Could you give us an update on your talks counterpart in Japan, Mr. Hashimoto, and any signs of progress -- movement on the framework talks that you could report?

SENIOR ADMINISTRATION OFFICIAL: The question is, could I give you an update on my talks with Minister Hashimoto today, which lasted about an hour and a half, and especially with regard to the framework talks; I think that was the question. In our hour-and-a-half meeting, we covered a lot of ground, including the ratification of the Uruguay Round, APEC, some of how APEC and the trade and investment framework is going to work and what we would do in October in November -- our trade ministers meeting in October in Indonesia, and then the leaders meeting in November in Indonesia.

And then, of course, we addressed the framework issues. It's safe to say that, one, this was not a negotiation; that, two, we both strongly stated our positions; and number three, we reached no agreements, but number four, we did agree, of course, to continue our discussions in each of the priority areas as well as the new areas we've taken up -- intellectual property rights and so on, in order to pursue the framework agenda.

Q Are you getting any sense from the new government that they're a little bit more receptive than the prior government on the --

SENIOR ADMINISTRATION OFFICIAL: Sorry, I have to repeat these questions -- and I hope I'm being faithful to them. Did I get any impression they would be more receptive than the prior government to the framework and the Japanese living up to their framework obligations, I think is the sense of your question.

I think it would be unfortunate and unwise for me to characterize the Japanese position, they're quite able to do that themselves. I would only say that the discussion was very thorough, detailed, complete, comprehensive and instructive.

Now, I don't want anyone to take from that that we made progress -- we didn't intend to, it wasn't a negotiation. We, in fact, talked about this before the meeting, that we would not negotiate it with the framework. But I was impressed with both the depth and level of knowledge of Minister Hashimoto and his willingness to engage in a very free exchange with me.

Q Regarding U.S. and Canada wheat, yesterday the ITC recommended that there be restrictions on Canadian wheat imports into the United States, and there is also a move by Senator Baucus to have a meeting between Rubin, Kantor and Espy before July 15th --

SENIOR ADMINISTRATION OFFICIAL: -- departments want to come or just the three of us get together?

Q No, not here. But, yes, he wants to have a meeting with you all. So I wanted to know what your position is on that. Would you be in favor of limiting wheat imports into the United States from Canada?

SENIOR ADMINISTRATION OFFICIAL: I think my position has been clear since January 19, 1993. I indicated at the time that the Canadians had used the Western Grain Transportation Act, their import licensing requirements and the monopolistic practices of the Canadian Wheat Board to adversely affect our wheat market here in the United States. There has been an exponential growth in the imports of Canadian wheat into the United States, especially durum wheat.

We have been in intense negotiations with the Canadians attempting to look at this on both a short and longterm basis. We met in Chicago on January 27th, our officials talked twice by phone last week and I talked to Roy MacLaren, the trade minister, yesterday. He was in Alberta, I think, in a hotel room in Alberta, if I'm not mistaken, if I'm not giving away any secrets.

I think it's safe to say that we've not reached an agreement. I am, of course, gratified that the International Trade Commission upheld the President and our position that there had been a material interference with the U.S. agricultural programs.

Q Will you meet with Baucus and the senators? Would you be willing to meet with them?

SENIOR ADMINISTRATION OFFICIAL: Will I meet with -- will Bob Rubin, my guess be myself, and whoever else -- obviously we'll meet with Senator Baucus, Senator Dornan, Senator Conrad, Senator Burns, Senator Exon and Senator Craig. Let's see, and Representative Pomeroy, Representative Williams -- whoever else wishes to come to the meeting, we're always open, it's an open administration. We enjoy these meetings, they're quite productive and I'm sure they look forward to it, as well. In fact, they probably would wish to fly over here, but we're going back.

Q Two parts. One, do you think -- first part, if the French hadn't opposed, do you think the proposal would have gone through and, second, given the history of acrimony on the trade front between the U.S. and France, which seemed to be getting better recently, do you expect that this will have any lasting effects?

SENIOR ADMINISTRATION OFFICIAL: The question is if the French hadn't opposed, would this suggestion have been adopted by the G-7. And, second, given the recent warming of relations between France and the United States on trade, where we have cooperated and been quite successful, frankly, in a number of fronts, am I concerned that this may be a step backwards, I think is the sense of your question.

On the first, I assume so but I'm not going to assume anything. The fact is that the French have posed a suggestion, the suggestion was withdrawn by the President for good and sufficient reason, as he should have.

Second, this is not an issue that is going to harm our relations with France. We have really built a very good rapport with our French counterparts on a number of issues. As you know, we have a number of discussions going in the audiovisual area in discussing labor rights and other matters as well. We have cooperated with the French as they have with us on a number of trade issues. When we had a problem over fish, as you recall, they were quite cooperative and that was ended quickly and in a way that favored the United States. So, I don't believe this will have an adverse effect upon our relationship.

I believe that the French were quite serious and sincere about the question of ratification and that this would have an adverse effect. But, again, I can't and won't speak for them, that's not my job.

Q I understand, sir, that there's a symbolic summit of the seven poorest happening across town. And I wonder, on trade issues, whether you'd have any messages from the discussions that you've had for the poorer countries of the world.

SENIOR ADMINISTRATION OFFICIAL: The question is, there's a symbolic meeting, as I understand it, of the seven poorest nations in the world somewhere here in Naples and would I have any message for them as a Senior Administration Official, maybe not as senior as one who's been talking earlier -- I'm really upset about that -- for them.

In all seriousness the message is, open markets, expanded trade, raising standards of living is what enhances us all. As the G-7 represent over 50 percent of the gross product meet and attempt to provide leadership for more open trade, it is in the best interest of the entire world that that occur.

The Uruguay Round is the single undertaking that is important to every nation in the world, not just the richest nations.

Q Would the agenda or the new initiatives that the President was wanting to explore with the G-7 and the things that will be brought up with the Quad now, would that cover labor rights?

SENIOR ADMINISTRATION OFFICIAL: In our meeting, two or three of the ministers, in fact not me, raised the issue of the environment and labor, but only as an example of literally there were 11 different issues raised during that meeting as we discussed it. I would think, given the advent of the trade environment, the committee of the WTO and the discussion in the preparatory committee of the WTO on labor rights, that it might not be timely for those issues to be taken up by the Quad. We would leave that to the WTO who has jurisdiction right now over those issues.

Q Do you expect the Uruguay Round to be ratified by your Quad meeting? And if not, how, then, would things change to have the Open Markets initiative at the top of the agenda -- because you would basically be dealing with the same situation you have now?

SENIOR ADMINISTRATION OFFICIAL: I would expect a large number of countries would have ratified by then, number one. Number two, the fact that trade ministers get together and discuss these issues probably doesn't have as much currency as the seven leaders getting together. It probably has less political impact. I'm saying that being very delicate. Obviously, it does. So therefore it doesn't cause the kinds of concerns that, of course, the seven leaders getting together and adopting this kind of suggestion. And I think that really was the sentiment among the group.

Q A number of the officials from some of the other countries have suggested that the market opening initiative was introduced to them sort of on short notice, they're calling in last-minute and saying that they were somewhat surprised. Can you address that a little bit and tell us -- these things are traditionally done with a little more advanced notice, are they not? A month in advance, two months in advance with more kind of multilateral back and forth?

SENIOR ADMINISTRATION OFFICIAL: The question is, was this suggestion introduced too late, is it not traditional to have a full year of a sherpas to review and examine delicately and critically every issue that comes before the G-7.

Q A couple of months.

SENIOR ADMINISTRATION OFFICIAL: And so therefore -- well, it goes on for a year -- was this something that should have been done on a more timely basis.

Frankly, the President has pushed, as you know, and was somewhat successful this Uruguay Round and it was able to achieve it in APEC, to have more informal sessions. And I think each of the leaders would support the President's position, they were much more productive as informal sessions where the leaders exchanged ideas without having all of us feeding in a lot of our own ideas and so homogenizing them that they have no impact by the time you get to the communique.

It was the President's view that any leader could raise an issue at any time, including last night or this morning. And so his letter 10 days ago certainly was in that spirit.

I don't think it's so -- given the statement by the OECD in June which talked about continuing the work toward further trade liberalization, proper functioning in market mechanisms and deregulation, this is hardly a surprise to anyone. Each of the countries here adopted that language, that the language that was put forth by the United States at the President's suggestion was fully consistent with the language. It was adopted by everyone in June.

Q In past G-7 summits --

SENIOR ADMINISTRATION OFFICIAL: I think you're talking to other senior administration officials?

? Q Yes, sir. In past G-7 summits when the French have opposed other delegations'initiatives, they have often used a jurisdictional argument, namely that the G-7 is not the proper forum to do something. Did they, in addition to worry about ratification also questioned whether the G-7 was the proper place to start this.

SENIOR ADMINISTRATION OFFICIAL: The question is, was the question raised whether the G-7 was the proper forum for this suggestion and would it be better placed in another forum.

Frankly, I don't know if that was raised. I just don't know the answer to your question. I know the question of ratification in the French politics was raised. I don't know if I don't know the answer to your question. I know the question of ratification and the French politics was raised. I don't know if that was raised. I just don't know the answer to your question, I'm sorry.

Q Is there anything new you can tell us on how the lost tariff revenues from GATT are going to be financed? And is the amount of revenue -- amount of offsets you need continuing to drop, and where is it now?

SENIOR ADMINISTRATION OFFICIAL: I didn't hear the last part of the question.

Q The amount of offsets that you need to --


Q has continued to drop. Where is it now?

SENIOR ADMINISTRATION OFFICIAL: The question is, how are we going to meet the pay-go requirements of the 1990 Budget Act with regard to the lost tariffs involved in the Uruguay Round. I won't go through again and say we'll collect three dollars in total revenue for every dollar that it has lost tariffs; or that with a dynamic budgeting system, we would not have this problem at all; I won't say that.

But what I will say is this: Director Panetta/Chief of Staff Panetta and I talked just before I left. We'll be meeting with Republicans and Democrats on the Hill next week. Director Panetta has a plan that he'll be discussing with Republicans and Democrats which we believe will satisfy everyone's needs and concerns.

Q What's the amount?

SENIOR ADMINISTRATION OFFICIAL: The last amount, including one year renewal of a general system of preference and one year on the Caribbean Basin Initiative with regard to NAFTA is $12.1 billion. But when that's subtracted from the normal lessening of need for certain agricultural subsidies because of greater agricultural revenue, it's really $10.4 billion.

THE PRESS: Thank you.

END3:52 P.M. (L)