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No. 38 — October 11, 1996

Feature Article

THE COMMON AGENDA OR A HIDDEN AGENDA?
AMERICA AND JAPAN EXPLORE GLOBAL COOPERATION

Pat Murdo

Summary

Although U.S.-Japan interactions in trade and other economic spheres generate headlines routinely — particularly during disputes — joint efforts to address problems that have a less immediate impact barely gain a mention. The news of the two most powerful economies in the world collaborating on positive attempts to tackle global problems of disease and environmental degradation, among other issues, may seem too Pollyana-like to attract much attention. Cynics are even likely to see only a hidden motive behind such actions. Similarly, good channels for government-to-government communications seem to be an obvious tool to improve relations, so that the development of exchanges between countries appears not to be news at all. Yet if someone were to discover a duplication of efforts in world aid programs, such a waste of money would make news. Few people would ask whether the communications channels existed to prevent such duplication. Apparently such reasons as these explain why the Common Agenda, the nontrade-related arm of the July 1993 U.S.-Japan Framework for a New Economic Partnership, gets little notice, even though officials in both governments find much to praise.

Does some of the lack of interest about the more precisely named Common Agenda for Cooperation in Global Perspective stem from the "good news is not news" syndrome? On the grand scale the effort is intended to address ways that the two countries not only can avoid duplicative efforts but produce a synergy that yields more than each country's programs could produce singly — as well as to improve overall relations and offset the damaging images inflicted by repeated transpacific trade disputes. Perhaps people are suspicious that the agenda masquerades as a philanthropic collaboration when they believe that in reality each country is more or less promoting its own self-interest by expanding its prestige and hoping to gain insight into the other's aid or technology know-how. Without a doubt some in the private sector hope to profit from the humanitarian-style aid projects under the one part of the Common Agenda. The complex subject that is the Common Agenda mixes a little of all the above components, with a not surprising mixed bag of results.

Among the various projects and coordinated discussions under the Common Agenda neither partner has lost its identity or superimposed its own way of operating as they have worked together. Although some projects — such as eradication of polio worldwide — have moved forward fairly quickly with support from both countries and existing international programs, other projects have advanced more slowly, reflecting each nation's own policies and brand of assistance. As a result, implementation over the Common Agenda's three-year history has varied in the particular areas of cooperation.

One potential problem on the horizon includes Japanese concerns that U.S. cutbacks in funding could leave Tokyo holding the bag for jointly developed projects. Officials involved in Common Agenda issues also worry that bilateral problems could develop if businesses in either country give short shrift to the humanitarian or the idealistic purposes of the initiatives in favor of profit motives. Cynicism, too, is something of a problem. Those who believe that the Common Agenda does not do much more than repackage existing positive bilateral efforts are likely to ignore the gains available even in these areas from increased political support and because more channels of communication have opened as a result. One other concern is that the Common Agenda is growing too large — that too much of a good thing could be hazardous to the health of existing efforts.

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Weekly Review

JAPANESE PARTIES ENCIRCLE TAXES AS AN ELECTION ISSUE
--- by Barbara Wanner

With their loudspeaker-equipped trucks blaring "vote for me," Japanese politicians officially hit the campaign trail October 8 for lower house elections 12 days later, promising voters that they would work to downsize the government bureaucracy and approach the increase of the 3 percent consumption tax in a responsible and humane manner. Despite pundits' expectations that the new electoral system to be inaugurated with the upcoming elections would produce more issues-oriented campaigns, Japanese voters are finding that the promises being trumpeted throughout their neighborhoods are not that dissimilar. The top six parties feature as central planks of their platforms plans to reduce the number of government ministries, to move more jobs from the central government to local governments and to further ease various regulations. In addition, the main parties (with the exception of the Japan Communist Party) basically concur that the consumption tax should be hiked at some point, although they differ on the timing and the amount of the increase as well as on the question of whether special consideration should be given to lower-income households or to certain types of products. The parties diverge significantly on certain foreign policy questions, however, and this could complicate formation of what generally is expected to be a necessary coalition government. Recognizing the vote-getting power of pocketbook issues as well as the citizenry's general ambivalence about foreign affairs, political pros are coming at the tax issue from all sides rather than squaring off on diplomacy in an effort to tap the swelling ranks of Japan's uncommitted voters.

ERRATIC DATA POINT TO NEED FOR NEW STATISTICAL PROCEDURES
--- by Douglas Ostrom

Few analysts believe that Japan's economy surged in any meaningful way by 12.2 percent on an annual basis in the first quarter of this year only to fall back to a 2.9 percent annualized contraction during the succeeding three months. That yo-yo movement represents the Economic Planning Agency's latest official reckoning of inflation and seasonally adjusted gross domestic product. Nor do many analysts regard as realistic the finding that the output of Japan's factories dropped a seasonally adjusted, annualized 20.6 percent from July to August, as the Ministry of International Trade and Industry reported in late September. The Bank of Japan appears as skeptical of these results as many foreign analysts and recently has begun a campaign to do something about the data calculations on which they are based.

CONGRESS ADJOURNS, LEAVING FOREIGN AFFAIRS AGENDA UNFINISHED
--- by Christopher B. Johnstone

The 104th Congress adjourned October 4, bringing to a relatively quiet end one of the most tempestuous two-year legislative sessions in recent memory. Guided by the 10-point Contract with America, the Republican-controlled Congress — the first of its kind since 1954 — adopted an overwhelmingly domestic focus. In pursuing their agenda GOP lawmakers achieved a mixed record. They notched victories on proposals to reform the welfare system and to restrict the federal government's ability to impose new financial burdens on state governments but fell well short in efforts to establish term limits for members of Congress and pass a constitutional amendment requiring a balanced budget. Foreign economic policy issues received little prominence throughout the session, a fact that gave rise to accusations that both houses of Congress — and particularly newer GOP lawmakers — were developing increasingly isolationist tendencies. A look at some of the foreign and trade policy accomplishments — and nonaccomplishments — of the 104th Congress' second year suggests, however, that black-and-white characterizations remain impossible.

NOTES

Japan's appeal of a World Trade Organization ruling has been rejected, according to a Ministry of Finance announcement October 4; that forces MOF officials to begin considering how to amend the country's system of taxing alcoholic beverages. After years of seeking reforms to a Japanese tax system considered to discriminate against foreign liquor, the governments of the United States, the European Union and Canada last year took their complaints to the WTO where a dispute resolution panel subsequently ruled in their favor (see JEI Report, No. 32B, August 23, 1996). Although Tokyo asked the WTO's appellate panel to review the decision, that panel, too, according to MOF, agreed that Japan's current system of taxing alcoholic beverages discriminates against imported products and, accordingly, violates WTO rules.

White House disuse has robbed the annual Super 301 process, colloquially known as unfair trader labeling, of its power to persuade this country's big trading partners to undertake on their own U.S.-sought market-opening changes. Nonetheless, the procedural requirements of the souped-up version of Section 301 of the 1974 Trade Act, reinstated by President Clinton in 1994 for a two-year run and extended last year for 1996 and 1997 (see JEI Report, No. 37B, October 6, 1995), have the built-in potential to send messages — both to economic policymakers overseas and, especially in a presidential election year, to American voters. An administration clearly focused on returning Mr. Clinton to office made the most of this capability in announcing October 1 the 1996 results of the Super 301-mandated review of U.S. trade priorities.

The Clinton administration is losing patience with Japan's refusal to approve for import new varieties of U.S. fruits covered by phytosanitary protocols unless it is proved that treatments judged effective against pests that can attack allowed varieties work just as well for other types. In a September 28 letter Acting U.S. Trade Representative Charlene Barshefsky and Secretary of Agriculture Dan Glickman sought an explanation of the Ministry of Agriculture, Forestry and Fisheries' demand for variety-by-variety data proving the efficacy of a treatment for codling moth disease for Washington state-grown Gala, Fuji, Braeburn and Granny Smith apples, given that the same procedure already has been sanctioned for Japan-bound red and golden Delicious apples from the Pacific Northwest. Pointedly noting that the Uruguay Round's Agreement on the Application of Sanitary and Phytosanitary Measures specifies that a signatory country's food safety and plant protection requirements must be scientifically grounded, the two cabinet members asserted that no such foundation exists for expensive, duplicative varietal testing. In the U.S. view, they added, the codling moth treatment for apples " should be evaluated on the basis of its effectiveness against the pest. The variety of the product should be irrelevant."

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