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                  Office of the Press Secretary
                       (Jakarta, Indonesia)
For Immediate Release                        November 17, 1994

                       BACKGROUND BRIEFING

November 15, 1994

                         Jakarta Hilton
                       Jakarta, Indonesia

8:15 P.M. (L)

SENIOR ADMINISTRATION OFFICIAL: Let me take five minutes to kind of go through what some of the key points that were made today at the meeting. As you know, the leaders met alone in the palace, but there was one representative from each country that was in a separate room watching this on television and listening to the audio.

The first thing I'd say is that I think there was a real sense that this was an historic step that they were taking. A number of the leaders referred to it in those terms, and I think generally the mood of the meeting was one of seriousness and one which I think they all realized they were making an irreversible step.

Prime Minister Bolger from New Zealand said that this was an historic mission that 18 countries of such diversity should undertake to lower barriers to trade together. And he called it a great ambition.

So I think there was a sense of the importance of what was happening. Second, there was a number of references during the discussion to the fact that this process really began last year in Seattle, the Blake Island convocation of this group invested the leaders in this organization for the first time, and there were a number of leaders that expressed their gratitude to President Clinton for having begun this process.

Prime Minister Keating said there's nothing inevitable -- there was nothing inevitable that we should be at this point embarking on this journey. Third, there was a very clear consensus, both for having target dates and for having the two target dates. I think the clear purpose of the dates themselves was to establish a firm goal. One of the leaders said without such a firm goal, we'll tend to slide backward. We need a date to coalesce this activity and this process forward.

The idea of the two dates reflects the different stages of development of the countries in that room, a wide variety of stages of development. But I Think the President also made clear in his comments that we will proceed here on the basis of opportunity and benefit going hand in hand; that while some countries may reach the destination of free trade later than others, there will be reciprocity of this process as it proceeds.

There was a discussion -- throughout the discussion, I think, a clear sense of why these countries were embarking on this. The President has explained it from our perspective. Obviously opening, lowering trade barriers in this market -- in this vast Asian market, is extraordinarily important to the United States. But from the perspective of the other leaders, I think many of them recognize that trade expansion is important for them to sustain the kind of growth that they have had over the past decade; that they need not only expanded trade, they need the technology and skills that come with trade.

At one point, in response to a point that Prime Minister Mahathir made about expressing some reservations about setting a date and going too quickly for small countries, Prime Minister Bolger said, speaking for a small country, New Zealand, that if we don't move towards open trade, the world will pass us by, we will be left behind; speaking of the reason why the smaller countries can rise to this challenge.

In terms of how we get to this point, the President described in some detail -- there was a charter given to the ministers to work over the next year on an action agenda, on a blueprint, which will be ready for the leaders to look at in 1995 at the meeting in Osaka. Many of the leaders talked about the need for a phased, organized approach, a step-by-step approach. We in the United States describe this as a building-block approach in which one agreement gets added to another. But clearly, the next step here will be in Osaka.

Finally, as the President mentioned, most of the leaders expressed the extreme importance of having a GATT agreement as part of this process, both as an organizing principle, and second to assure that as regional trade cooperation proceeds, it does so not as separate trade blocks, but within the context of a multilateral trading system.

Let me stop there and we can -- try to respond to your questions.

Q Can you speak a little bit more about Prime Minister Mahathir's reservations about this?

SENIOR ADMINISTRATION OFFICIAL: Prime Minister Mahathir, who ultimately endorsed the communique, but with his own reservations, expressed concern about whether -- two concerns. One was a concern about whether he ought to bind a future generation to an arrangement that is arrived at today, not being able to see into the future.

President Clinton later, in a sense, responded to that. He cited President Kennedy's having established a goal of sending a man to the moon in a decade not knowing at that time whether or not that goal could be achieved, but the goal itself propelling the effort. So one could concern that Mahathir expressed was this notion of not wanting to decide now what things might be like in 2010 and 2020.

And I think the second concern he expressed was the ability of small countries to compete in an open-market situation with large countries; that in an open trading environment, the resources of the large countries will make it difficult for -- he cited, for example, for telecommunications companies in this country to survive.

It was at that point that Prime Minister Bolger responded by saying that it is particularly the small countries who have to join in this effort, because to not be part of this kind of open and expanding system is to be left behind.

Q Did he urge any change in the language of the --

SENIOR ADMINISTRATION OFFICIAL: No, he did not, but he expressed a series of reservations which he wanted to be a part of the official record of the meeting, but which were not explicitly embodied in the document.

Q May I follow-up? Are these reservations --were these reservations first presented as amendments to the action of the document?

SENIOR ADMINISTRATION OFFICIAL: No. He started off by saying that he would go along with the consensus, but that he -- and he had reservations; he believed that they were consistent in spirit with the direction of the document, but he wanted those reservations to be his own reservations and that of his country to be known.

I would say that Malaysia was the only country that expressed, I think, serious reservations about the direction. But, as I say, he began his presentation by indicating that he would be part of the consensus.

Q The U.S. has signed NAFTA and has got a date to open the Pacific market. But it's not done much to do something similar with Europe. Can you explain if there is something in the making to create a unified market across the Atlantic, and if there isn't, why.

SENIOR ADMINISTRATION OFFICIAL: Well, if you look at the degree of integration now between the United States and Europe, these are, in essence, the most integrated large markets in the world. There are tariff boundaries between the two -- in between North America and between the United States and between Europe long ago began to decline precipitously. Investment flows are substantial. They are already highly integrated and highly harmonized. The concern that we have had with respect both to Asia and to the rest of the Americas is to begin to open those markets so that the degree of integration, the degree of trade liberalization begins to be equivalent to that that exists between the United States and Europe.

Q Could you explain what seems to me to be the tension here between the reciprocity implied by the President when he said no give-ups, and the other hand, the two stages -- the two-track approach -- because the developed countries are, in effect, being asked to give up first, before the developing countries --

SENIOR ADMINISTRATION OFFICIAL: Not really. There are two models for how this will occur, and in fact, there will be a blend.

The -- think first of tariffs and think of the automobile example that the President referred to -- that even after GATT, the tariffs in Indonesia, Malaysia, the Philippines, Thailand, on automobiles ranges between 30 and 60 percent. The tariff in the United States on automobiles is 2.5 percent.

What will happen in those countries, of those four that are not industrialized -- and that will be -- get determined as the blueprint is put together and as time goes on -- would be that the track through which -- by which a final low level, whatever that number is, is reached will be different for the industrialized -- for the developing countries than for the industrialized countries. But from the perspective, let's say, of the United States, the changes are overwhelmingly in the favor of the United States.

And it has been a long time, actually it's been since the Kennedy round, at which there was an actual one-for-one equivalence, because it was long-recognized that there was no basis for agreement -- that what one looks at in tariff changes is bundles and equivalences.

The second model is going to be what my colleague was calling a modular approach, which is going to be -- which would be agreements that get laid in, in essence, on top of each other -- an investment agreement, a sector agreement, an increasingly common intellectual property regime. Those are all notational because they have to be agreed on over the next year. Those will be much more on the basis of those countries that agree with the -- that join the agreement get the benefits, and those that don't don't. So there will be operating in this two models. And what will inevitably occur will be a blend.

SENIOR ADMINISTRATION OFFICIAL: Let me just add on maybe-self-evident point -- the fact that the endpoint may be different doesn't mean the starting point is different. I think that's the key here. That is, developing and industrialized countries can begin this process together, particularly since the developing countries have much higher barriers in many cases than we do. If they're coming down over a longer period of time, they're still coming down off a higher base. We benefit substantially right from the beginning by the fact that those barriers are coming down.

So they may get to the end point at a different point, but the reduction of barriers begins -- could begin right away.

SENIOR ADMINISTRATION OFFICIAL: The thing to remember is that, in terms both of tariffs and of basic nontrade barriers or lack of them, the United States is the most open economy in the world. Therefore, agreements of this kind always benefit us.

Q Can you interpret Mahathir's list of reservations that he attached to the -- that sort of semiattached to the draft agreement. He didn't stand in the way of the consensus of the draft communique, but he did produce a list of reservations he had, one being that he doesn't view 2010 and 2020 as binding, only as indicative. Can you sort of -- what's your cut on this? I mean, is this -- is he holding the U.S. you as hostage until the Malaysia summit or is this --

SENIOR ADMINISTRATION OFFICIAL: No, I think he raised a lot of issues that will have to get resolved in designing this blueprint. And, you know, the President's made it clear that we're not going to enter into agreements that don't have equivalent opportunities. So, that will be our criteria of what agreements are good agreements.

It may be that next year that Malaysia decides not to be part of this process or only part of this process. To the extent it's part of the process, it has to accept the obligations of everyone else. I think he was not blocking a consensus of moving forward, but I think we'll see next year whether or not Malaysia -- the extent to which it actually participates in this enterprise.

Q guess, I mean --

SENIOR ADMINISTRATION OFFICIAL: I don't know. I think -- he wasn't there last year, and he was here this year. So we're making progress.

Q Did you feel you got a little blindsided by South Korea today?

SENIOR ADMINISTRATION OFFICIAL: No. The question here of having a 2020, 2010 has been on the table for sometime. I think those of you who have -- at briefings that my colleague and I have done in Washington over the past three or four weeks, in all of those briefings, we have said that the outside will be 2020, and there is quite conceivably -- quite likely, I think we said -- would be an interim target for the developed nations.

South Korea has, I think, a particular problem with the way in which the draft was worded and the use of the term "new industrialized economies." I think the change that was made does not change the substance in any significant way.

Q You had hope that there would be more supportive -- (inaudible) -- of 2010 date, weren't you, going into this this morning?

SENIOR ADMINISTRATION OFFICIAL: No. I think -- no. Again, the briefings we've done over the last two or three weeks have said that the goal here was an outside date of 2020, and probably an interim date for developed countries of 2010.

Q These are all very competitive economies -- I mean, South Korea and China and Taiwan -- doesn't it seem a little bit distressing that they couldn't sign onto open up their markets sooner?

SENIOR ADMINISTRATION OFFICIAL: No. You know, this is slightly off point, but I'll come to the point. While my colleague was whiling his way in a non-air conditioned room in Bogor, I gave a talk here to a business group. And part of the talk had to do with the investment principles of the ministerial meeting. And I expected us to be critiqued a bit on the nonbinding nature and the relatively vaguely worded nature of some of the principles. That wasn't the case at all.

What the businesspeople said almost universally was that this is the first time that phrases like "right of national establishment, national treatment" had ever been seriously mentioned and treated in Asia by all of these nations. The exact same thing holds here, is that what is absolutely phenomenal here for anyone who has done business or worked in and around Asia over the course of the last 15 years is the enormous step forward that 18 nations have taken simultaneously.

SENIOR ADMINISTRATION OFFICIAL: I wanted to make sure -- I think it was very clearly the expectation of the leaders in the room that Korea would meet the goal of 2010. And while -- as the President indicated, the process of defining developing and industrialized will have to take place over the year; I think that was clearly the expectation in the room.

Q This Japan has not demonstrated notable leadership in trade liberalization and also has got difficult political circumstances. How do you see them acting as hosts to bring about this difficult blueprint over the next year?

SENIOR ADMINISTRATION OFFICIAL: They'll have to step up to it. But they have indicated, both publicly and privately, a desire to play the same role with respect to the development of the blueprint that the United States did with respect to the bringing together the leaders to the commitment to the notion of a community, and that Indonesia did to the bringing together of the leaders to a focus on a clear direction for free and open trade.

This next year, it's the responsibility of the government of Japan to carry that burden. They signed on quite willingly to the declaration, and they clearly understand what their process responsibilities are over the next year.

SENIOR ADMINISTRATION OFFICIAL: Let me just add one thing, and that is, clearly, in the meeting today, a number of leaders -- Prime Minister Chuan of Thailand, Prime Minister Keating, Prime Minister Goh -- several, a very large number of leaders in a sense gave Japan an implicit mandate. They said, we want to have a work plan developed over this year, presented back to the leaders in Osaka, and it's very important that this now be translated into concrete steps.

So I think Japan now has an obligation that is undertaken and has been charged with very explicitly by other APEC leaders.

SENIOR ADMINISTRATION OFFICIAL: In a kind of an indirect agreement with, or implicit agreement with the question you asked, we regard this as a test and a challenge to the government of Japan.

Q Could you explain how China responded to this timetable --

SENIOR ADMINISTRATION OFFICIAL: I was not in the room, and my colleague was.

SENIOR ADMINISTRATION OFFICIAL: China was supportive. President Jiang spoke at length about this and indicated that trade liberalization is a path on which China has embarked and on which the region has to be committed to. And there were no reservations expressed by him to this direction.

SENIOR ADMINISTRATION OFFICIAL: During the bilateral with China yesterday, when the President underlined his support both for the direction that we'd be -- of the declaration in Bogor and for the Uruguay Round, there was -- the same point was made, so that it wasn't -- by that point, or by today, it wasn't a surprise to us that that was the reaction of China.

Q The United States has a $100 billion trade deficit with East Asia. Are you concerned that if newly industrialized countries are not held to this 2010 deadline that the American public will react negatively to this agreement?

SENIOR ADMINISTRATION OFFICIAL: No. First of all, remember that the U.S. -- it's a point that we've both tried to make a couple of times is that the U.S. is the most open economy in the world. The goods that flow into the United States -- that are going to flow into the United States flow there now.

We have also, in the course of the last decade, become the most competitive economy in the world again. The full range of goods that we manufacture and services that we provide are now, in industry after industry, the most competitively priced and the highest in quality in the world. What we need are open markets to be able to sell into. And we need, in particular, markets that are open to the kinds of goods that we provide, which are high-quality, sophisticated in technology, frequently capital equipment, most useful for infrastructure and infrastructure development. So it is in the absence of agreements like this that a trade deficit of that kind will persist.

The second point is the one that my colleague made earlier in answer to another question. Remember that this is not -- there's not a cliff effect here. It's not that no movement is made by some set of countries until the year 2019, and then they do it all at once. Those are endpoints -- is that the movement begins after the blueprint is agreed on by both sides and by both sets of countries. And so you will, in effect, have countries that have been, until quite recently, among the more closed countries economically, among the more statused countries, and the country that we're most concerned about --the United States, that has been for a very long time the most open country on earth, both changing. But the rate of change will be far greater in terms of those countries that have been further back.

SENIOR ADMINISTRATION OFFICIAL: There's a false premise in your question and I really want to address it because the premise, or at least the implicit premise was that somehow the newly-industrialized countries as we know them slipped into a 2020 time frame today. That's not what happened. There was a full expectation of everybody in that room that Hong Kong and Singapore and the other countries we would normally describe as newly-industrialized countries would be a part of a 2010 group; that changing this terminology did not change the effect of where countries would fall in this process.

Q Then can I just follow up -- could you then run down who the countries are that would be considered industrialized nations --

SENIOR ADMINISTRATION OFFICIAL: No, because that is a process that will take place over the next year. But my point is, the countries that are developed and that are commonly thought of as newly-industrialized -- those phrases were collapsed into one phrase called "industrialized," and those countries will start out, embark on this process on a 2010 time frame. And the developing countries -- Thailand and others -- will embark on a longer course. But nothing that happened today, in changing that terminology, changed the expectation that the countries that are commonly referred to as newly industrialized countries, would be subject to the 2010 deadline.

Q Could you just compare the mood between the leader meeting in Bogor and in Seattle. Is there some -- one is different or --

SENIOR ADMINISTRATION OFFICIAL: There was a very cordial atmosphere in both Blake Island and in Bogor. I did get a distinct sense today, though, that the leaders felt that what they were doing was something historic. It was referred to as the equivalent of Bretton Woods. At one point, one of the prime ministers said, "Probably the only leader who will still be here in 2020 is the Sultan of Brunei, but I hope that he will remember what we've done here." And so I would say that there was a strong sense in that room today that this was a serious, irreversible, important step that had been taken.

SENIOR ADMINISTRATION OFFICIAL: If I could just put the finish on that. We both rode out with the President to Bogor and to make the contrast there -- which is, from our point of view, obviously the most relevant -- that his view was that when we began the process in Seattle by asking the leaders to the meeting, that while we hoped there would be a movement and development of this kind, there was really no way that we could be certain of that. And, therefore, Seattle, while an extremely hopeful start, was just that, a start. I know that what the President felt was that this was a very important achievement and milestone. And so he felt quite differently about what happened in both places.

Thank you.

THE PRESS: Thank you.

END8:46 P.M. (L)