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                      Office of the Press Secretary
                             (Tokyo, Japan)
For Immediate Release                                  November 20, 1998
                           PRESS BRIEFING BY 
                          Akasaka Prince Hotel
                              Tokyo, Japan    

11:17 A.M. (L)

MR. LEAVY: All right, now for the real news of the day, we have a briefing for you -- the Director of the National Economic Council, Gene Sperling, and Senior Director for Asian Affairs at the National Security Council, Ken Lieberthal. Gene will talk about the economic piece, and then Ken will give a preview of the day, of the bilats with Prime Minister Obuchi. And then they will take your questions.


MR. SPERLING: The President clearly is speaking to the Japanese people and to Prime Minister Obuchi at a very critical time for Japan in terms of their economic choices. He, as you know, did the town hall meeting yesterday. He just spoke to the AmCham, and then has time with Prime Minister Obuchi both during lunch and then during the bilaterals.

Clearly, one of the opportunities that the President had in this trip was a chance to speak directly to the Japanese people in the speech today, but probably most directly through the town hall meeting. And the President, as he does in these situations, took very seriously how he wanted to communicate and what messages he wanted to deliver.

And I think those of you saw the town hall meeting yesterday, heard his speech, one issue, firstly, he's making clear, that the United States very much wants a strong Japanese economy. In both of our countries, there are people who -- in each of our countries -- who still believe that somehow this is a zero-sum game. If the Yankees are stronger, the Red Sox must be weaker.

But as opposed to a situation which has never been more clear, which is that the world economy needs a strong Japan and a strong United States, and that both countries, as well as Asia and the rest of the world, are benefited from our strength. And I think that is am important message for the President to directly make clear, that the United States wants a strong Japanese economy and believes it is in the interests of the region and the world, particularly at this sensitive time.

Secondly, the President spoke and is continuing to speak on the notion that structural change, that opening markets, that having a more market-based allocation of credit, that these decisions and movements, while difficult, pay off for a great people in terms of higher-paying jobs and a stronger future, and that in the United States we have gone through difficult political choices, but that they have paid off.

And the President referred to issues in the deregulation area like telecom and airlines, where the United States has gone through deregulation that has ended up being positive in terms of job creation. And, in fact, in telecommunications, the United States has had job growth by over 17 percent since deregulation, while Japan had only 3.3 percent increase during that time. That is to stress simply that deregulation and opening markets and having a more market-based system, however threatening change can at times seem, has been positive and can and should be positive.

The third point, which is very important, reflects the conflict or the balance between savings and growth for societies that are concerned about an aging population. Japan clearly has even a more serious situation than we do. At the moment, both of us have about 20 percent of people over 65, compared to those between 24 and 65, the working population. By 2050, Japan may have as many as 50 to 60 percent of their population over 65, compared to those between 20 and 64. Only Italy has as serious a situation.

But the message that the President was very much delivering, both in his AmCham speech and in the town hall meeting was that strong growth and strong productivity growth is also essential to having the resources for dealing with an aging society; and that while high savings rates is important, so is a strong and growing economy; and that Japan needs to have a stronger debate, the Japanese people, about what is the right balance -- even as we in the United States have had to have that debate in somewhat the other direction, increasing our savings rate at times to deal with an aging society.

Fourth, the President talked very directly about the fact that the United States has, itself, lessons that we have learned in terms of dealing with the banking crisis. It is estimated by people who studied the S&L crisis that the eventual cost to the United States in fixing the S&L system was five times greater than it would have been if we had acted more directly and quickly, that the cost went from $20 billion to over $125 billion because of the delay, and that the United States can say that we have erred in our dealing with banking in the past and that there are lessons one can learn from our mistakes.

And, certainly, here the President has been complimentary of Prime Minister Obuchi for the amount of funds that have been set aside for banking legislation, $60 trillion yen, $500 billion; but that the essential element of whether that legislation will work does go to the issues of how prompt the corrective action is, how much you're able to get assets back into the market, back being sold, back available for creative opportunities and that with strong injections of public capital must come the conditions that will make the banking system work in the future.

And, finally, the President spoke on the issue of trade and I think has spoken in three areas as to the critical role the U.S. and Japan play at trade right now -- that we right now face a critical time in the world economy where there will be temptations by countries to pull in that could lead to a cycle of protectionism and that it's critical for the world's leading economies to play a leadership role in furthering market liberalization. And the President has spoken about that in terms of Japan in three contexts.

One is our efforts in terms of multilateral trade liberalization. And there's no question that we were frustrated that Japan did not play a more constructive role in APEC Internet liberalization of the nine sectors in the EVSL. But the important thing we're stressing now is that Japan share with us a leadership role in getting resolution on those nine areas in the WTO next year and that we have leadership together in other efforts going forward.

Second, that we need to have progress in the areas where we have agreements, areas that range from flat glass to insurance where we do not feel the implementation of those agreements has been strong enough, that it is important at this time for the United States to show that there has been progress; and that, finally, where we have areas -- the President has mentioned steel, where they've had 114 percent increase in overall steel from Japan, 550 percent in hot-rolled steel -- that it's important if the United States is to keep its markets open and resist protectionism that the American people have confidence that there is fair trade dealings with us and that the notion of leadership on multilateral, on progress and implementing and ensuring in areas where there are surges that there has not been unfair trade practices are critical for all of us maintaining our confidence in open markets.

And the President mentioned specifically the impact that the combination of market opening and demand has on the region. And the statistic he used was that during this year the United States has taken in $5 billion more in imports from the key struggling Asian countries. But at the same time, there's been $13 billion less in exports from those countries to Japan. And so Japan's market opening and their stronger demand is critical in this very tangible way, as in others, to the strength of the region.

With that, let me turn to Ken Lieberthal, who will just make clear the events of the day and go through the national security side.

MR. LIEBERTHAL: Thank you, Gene. Let me begin with a brief overview of the schedule for the day. The President gave a speech at AmCham that wound up just about a half hour ago. He's now over at the U.S. Embassy, meeting and greeting embassy personnel.

From there, he'll have lunch at a restaurant. This is with the Prime Minister and several others, but it is characterized as a social occasion, not as a working lunch. I believe he'll take a short stroll after lunch and see something of street life in Japan.

Then they begin the bilateral meetings. There will be two of them, one right after the other. The first will focus on international security issues and the second will take up economic issues. Those together will run for a little bit shy of two hours. There will then be a brief meeting with the press. Each leader will make a short press statement and then there will be an opportunity for just a few questions afterwards. Then the President gets on the plane and departs for Seoul.

Let me give you an overview of some of the, I think, most important national security issues that are going to be discussed. On the global side, I think clearly the most important issue on the agenda concerns North Korea. There the President will want to explain our views about difficulties with North Korea. He's talking to a man who leads a country that had the indignity of watching the North Korean missile over-fly its territory without any advance notice on August 31. So there will be an attempt to get our thinking together about how best to deal with North Korea.

The issue here, let me stress, is not one of changing policy. The issue is one of how you take the agreed framework, the framework that we have for our policy toward North Korea, and strengthen it; create the incentives for North Korea actually to abide fully by its commitments; and that working in terms of their commitments is important for maintaining the necessary political support, I think in the United States and Japan, in order to keep North Korean policy on track.

So that part of what the President is doing here -- and let me say also when he goes to the ROK from here -- is to get a basic mutual understanding as to what the nature of the challenges in North Korea and how we can best handle that challenge over the coming years. It's an issue for our friends and allies in the region.

I would expect that several other international issues will come up, although more briefly -- among those would certainly be an update of Iraq, I think potentially Japanese support for the Middle East peace process. Prime Minister Obuchi just came from a visit to Russia; next week he'll host the first visit ever by a Chinese head of state to Japan. I'm sure the President will want to hear about his views on Russia and discuss with him a bit the upcoming visit from Jiang Zemin of China.

And then, finally, there are some bilateral security issues. These are well known. I won't take time, let me just mention them. The defense guidelines legislation and discussion of when they are likely to be submitted and adopted by the Diet; the implementation of what's called the Saco agreement, basically the agreement for changing the footprint of our armed forces in Okinawa. And then, finally, I think the two men will want to highlight the common democratic values that we share.

One of the points that the President made in his speech this morning to AmCham was the compatibility as he understands it between democratic systems of government and success in market economies in the information-based society that we all are facing in the 21st century. And I think that they'll have some remarks about that that they'll also want to make.

So that's a brief overview. Both of us are open to questions on any of these topics.

Q When you were talking about the increase in hot-rolled steel, are you talking about over a year or over some other period of time?

MR. SPERLING: The increase in hot-rolled steel looks at, I believe it's the first eight months of this year, and compares it to the first eight months of the previous year. And during that time I believe it -- I can check this for you -- but I believe it's gone from 200,000 metric tons to 1.3 million, during that same time period, which is a, obviously, more than fivefold increase.

Q Both in Kuala Lumpur, Vice President Gore, and here, President Clinton has indicated there is like some limit to the flood of Asian imports. Can you quantify sort of when you'll cry uncle?

MR. SPERLING: I don't -- there are many different reasons that you can have a change in imports or trade deficits. At times in the last few years we've taken in more simply because our economy was growing so much stronger and that reflected the strength of our economy.

I think what the President is saying is that this is a difficult time in the world economy and that it's important that countries like the United States -- the leaders, United States and Japan -- retain their commitment to open markets, recognizing that with change and flows that could come from falling currencies, it becomes that much more important for a leader such as the President to be able to assure the people in our country that we're operating by a rule-based system, where people are operating under the trade laws. And so what we're looking at is not so much a particular quantity, but when the President mentions and area like hot-rolled steel, we aren't going to make a judgment on that because there is currently an anti-dumping case going on against Japan, Russia and Brazil on hot-rolled steel right now.

But we do think it's fair to say to countries, Japan and others, that it's important right now that we both take efforts to open markets, but that we also ensure that we're operating by a rule-based system because it is a sensitive time. And if people believe that the excess in imports reflects unfair trade practices, that will, as the President said, likely lead to political pressures for retaliation which could lead to a cycle of protectionism, which is exactly what the world economy does not need at this time.

Q But doesn't the anti-dumping case indicate that you believe that they are not operating by a set of rule-based systems?

MR. SPERLING: Well, the private industry filed the anti-dumping case.

Q But do you agree with them?

MR. SPERLING: I think what the President suggests is that that dramatic of an increase is -- something has to be looked at closely. I do not think that we right now -- that it's right for us to prejudge something that is going through effectively a quasi-judicial process, but I think it's fair for us to tell countries that they need to make sure that they have their house in order in terms of trading relations with us, both in terms of opening markets and in terms of not allowing unfair trade practices or unfair dumping to occur. That's a general message that we would have.

Q For either gentlemen, why do you think the Japanese will change their policy on trade liberalization when it's moved to a WTO forum? What's the President going to say to the Prime Minister to encourage that, and doesn't that whole dispute undercut your argument that in a democratic system you can deal with all these issues because specifically those democratic pressures that are making it very difficult for the Japanese to deal with this --

MR. SPERLING: Well, in our conversations with Japanese officials prior to APEC many actually suggested that they wanted this to be dealt with more in a WTO context. We were disappointed that there was not more progress made at APEC. Nonetheless, 16 countries did put forward offers of some form; that is twice as many countries as was used to leverage an agreement -- an information technology agreement. We want to follow that same model. What we're suggesting is, we know that there are difficult pressures on all countries, but the important thing is that if we can move forward in this broader context, we feel very strongly that Japan should share with us a leadership role in doing that.

I won't start on -- we could have a lengthy discussion-debate on democracy and tough economic choices, but there is --but the point I'd make is every country has to deal with tough political pressures in doing the right things. Trade is one area, but as you know, deficit reduction for us was that type of area.

So the democratic system is one in which democratic leaders have to try to engage in positive long-term economic areas that look out for the long-term benefit of all of their people, and obviously have to make tradeoff between being politically realistic; you have to make tradeoffs between intense political pressures that you get from one area versus what you think is the long-term benefits for the working people of your country at large.

We believe that the working people of each country at large benefit from an open and ruled-based trade system. We understand each country has to put up with or try to deal with intense pressures at times in doing that, but we believe that the long-term benefit for the people -- the overall people of each country are benefitted by an open system. And the President mentioned particular areas where we have gone through more opening or deregulation, whereas actually in the long-term led to more job creation and high-wage job creation at that.

MR. LIEBERTHAL: Let me give you just a slightly different cut on the democracy issue because the way we've argued it, and we're quite serious about it, is that if you look at the attributes of a country that has good governance, good democratic governance, you have room for individual choice, you have a law-based system with good property rights, you have freedom of information flows, you have a government that is more accountable to its people and, therefore, more legitimate and also potentially more adaptable.

Those are qualities that in a fast-paced, information-based global economy are likely to enable you to perform better over the long run. That certainly is not to indicate that democracies don't have their own pressures and find certain things difficult at different times. Obviously, they do. So this is a more fundamental and long-range kind of argument.

Q The President said in his speech today that he was convinced the security partnership cannot be maintained unless our economies are strong. Does he mean to suggest in some way that the security partnership is not lasting or is in some way conditional?

MR. LIEBERTHAL: No, I don't think he was trying to indicate it was conditional. I think he's talking about an overall partnership between the American people and the Japanese people. Part of that is a security alliance; part of it is a high level of economic interdependence and a shared set of responsibilities for economic leadership; and part of it diplomatic.

And I think he was indicating that if you want to have that overall relationship work well, each part of it has to work well. And so no one should think that we would think in terms of a security alliance, but in fact want a weak Japanese economy. Quite the opposite. We want the Japanese economy to perform at the same time that we want them to be good alliance partners.

Q When heads of state visit the United States it would be rare or almost unheard of for them to give advice or lectures on U.S. fiscal policy. Aren't you worried the Japanese are going to resent this even if it is offered in the spirit of friendly advise?

MR. SPERLING: The President spent significant time preparing for this, thinking about exactly what is the right way and the best way to communicate with the Japanese people. And I think that if you look at the way he spoke at the town hall meeting, I think it was one of a leader of a country sharing the lessons that one economic superpower has had, speaking directly with the people of another economic superpower. And what he was, I believe, doing was praising the Japanese people as a people that have overcome as much significant challenges as any people over the last 50 years, and talking about the ability to overcome them in these situations.

And in the banking situation, the President does not come and preach; he comes and talks about problems and challenges that we had in our S&L crisis and what lessons might be learned.

On the stimulus and growth side, I think the President was very aware and respectful of the fact that Japan does have a significant aging problem and in fact one greater than ours by the middle of the next century, and that we as a country have needed to perhaps go in somewhat the other direction, to go better in higher national savings.

But what he suggested is that the Japanese people, like us, need to think of what the right balance is. And the balance of having strong growth, and the importance of that, for preparing for an aging society too.

So I think that the President -- I think if you look at the town hall meeting that he had, he certainly, I think, tried to speak in a way that was offering some of the lessons we have. But I also do think that there is no question that we are at a very sensitive time in the world economy, and I think in fairness, other countries were quite critical of the United States in 1993. And I think when we first came into office, when we went to forums, we were often harshly criticized that our deficit was a drag on the rest of the world.

So I do think it is fair for other countries to talk frankly and candidly about what the inter-relationships are to the world economy and the need for each country to do its part in creating economic growth. And I think that's a positive message and was put forward in a positive way.

Q -- the President said something like some people here think he might have gone further, there might have been more to it. What is he going to say to Obuchi about the specific package that was announced --

MR. SPERLING: I think the President recognized in the town hall meeting and today that the Prime Minister is trying to take a positive step forward in a stimulus plan. I think that it is also the case that most top economic analysts have not projected that that in itself would lead to meaningful growth next year. So I think that our view is simply reflecting what is, I believe, the widespread view of the top Japanese and international economists and forecasters.

And I think that the President's message would simply be one that Prime Minister Obuchi would share, that there should be an aspiration to higher economic growth and that there should be constant effort until that is achieved. So I think that they will obviously be able to talk more openly about that in private, but again, I do not believe that we have a view on this that is different than what most economic forecasters have been saying. In fact, we have met with several of them while we have been here.

MR. LOCKHART: Can we take one more for Gene, please.

Q So far the Japanese haven't been listening terribly hard about the idea of keeping markets open, the whole point of APEC. Their disagreement on these nine key sectors is one example. Do you have any indication that they're going to listen at this point, the message will sink in?

MR. SPERLING: Well, I think the message the President is bringing is that it's critical for the two countries to move forward and that more than ever right now there needs to be signs of increased opening and cooperation if we are going to be able to maintain the political support in the United States for the open market orientation that we think has been good for the United States and good for the world.

So you'll have to ask their leaders -- we think the important thing is that the President communicate that message and do so directly to the Japanese people as well as to Prime Minister Obuchi. There's no question that we were frustrated at APEC, and we have not hit that. We would like to also point to positive things we could do. For example, one of the goals that we will have is to have enough progress so that there can be a further announcement of progress on the enhanced deregulatory initiative by the next time the President and Prime Minister Obuchi meet.

Q Joe, just one more for Gene? Is there an administration reaction to this possible tax consumption cut that -- and Obuchi have talked about? And will they discuss it today, do you expect, the President and Obuchi?

MR. SPERLING: I don't think that we want to be in the position right now looking at any particular element in the sense offering kind of a micromanaging type of advice. I think the point that we have made is that we think it is extremely important for the region and for the Japanese people ultimately for growth to emerge, and that there should be a constant effort to go forward until it's clear that there will be sustainable economic growth.

So the President's message will not be to try -- both privately and publicly, will not be to try to pull or push in any direction on any specific micropolicy, but to encourage the Prime Minister to not be satisfied with anything less than all efforts that are necessary to achieve sustainable economic growth, and that his efforts, while positive and deserving of commendation for moving in the right direction, have so far, not from our view but from the market's view, not been seen as going as far as necessary.

Thank you.

END 11:35 A.M. (L)