No. 19 — May 12, 2000


Weekly Review

--- by Barbara Wanner

Wrapping up a whirlwind nine-day tour of the Group of Seven industrial nations plus Russia, Prime Minister Yoshiro Mori met with President Clinton May 5 at the White House. Their visit of a little more than an hour was long on formality and short on content despite pressing bilateral trade and security-related issues. Nevertheless, Japanese officials seemed satisfied with the meeting. They pointed out that the purpose of the prime minister's hastily arranged diplomatic mission was to enable Mr. Mori — catapulted to the premiership April 5 to succeed Keizo Obuchi, who had been felled by a stroke three days earlier (see JEI Report No. 15B, April 14, 2000) — to become personally acquainted with his counterparts and, in so doing, lay the groundwork for a productive 2000 G-8 summit, which Japan will host July 21 to July 23 on Okinawa.

The fact that Mr. Mori may not even be the person who greets these new friends two months from now seemed to contribute to the pro forma nature of his meetings. Depending on the outcome of the upcoming elections for the powerful lower house of the Diet, which most political analysts say will be held June 25, the head of the ruling Liberal Democratic Party either may be reelected as prime minister or forced to step down. Some LDP strategists evidently had hoped that Mr. Mori's G-8 tour would boost his domestic standing by demonstrating to constituents that the novice prime minister could hold his own with some of the world's most powerful men.

However, various Japanese news sources may have undermined these potential public relations benefits by reporting that certain of the leaders of Canada, France, Germany, Great Britain, Italy, the United States and Russia greeted Mr. Mori as a politician facing a general election rather than as a head of government who was about to chair the July gathering of G-8 countries. This perception, combined with obvious gaps between the positions of Mr. Mori and Mr. Clinton on key economic and security matters, suggests that the road to the Okinawan summit may be bumpy for the Japanese leader as well as for working-level negotiators on both sides of the Pacific.

Concerning Japan's still-fragile economic turnaround, Mr. Mori assured his American host that he would continue the aggressive fiscal stimulus and easy monetary policies of his predecessor. "I told President Clinton that I will proceed with bold reforms of the economy," the prime minister reported to the press. While conveying his "good impression" of Tokyo's efforts to date to realize a sustained, domestic demand-led recovery, Mr. Clinton reiterated the importance of structural reforms to achieve growth — a refrain of top U.S. economic officials that has become standard in meetings with their Japanese counterparts over the past few years.

Although the two leaders pledged to work toward a resolution of the dispute over access to Japan's communications market (see Notes in this issue), it was clear even before they sat down that the United States and Japan still have a long way to go to bridge their differences over the interconnection fees that Nippon Telegraph and Telephone Corp.'s two regional units charge other carriers to access their lines. At the last minute, Tokyo canceled the high-level talks in Washington on this issue that had been scheduled for the days leading up to the Clinton-Mori meeting. Japan has offered a 22.5 percent decrease in NTT interconnection fees over four years. The United States is demanding a 41.1 percent cut, which the White House wants by the end of 2000, although its latest proposal is flexible on the timing (see JEI Report No. 14B, April 7, 2000).

Indicative of the distance that still exists between the two governments on this issue, Mr. Clinton welcomed Mr. Mori's "personal concern" about the dispute. However, the president noted the U.S. negotiating team's primary theme: that the Japanese economy stands to benefit from lower interconnection fees. For example, such a move would introduce greater competition into the Internet services market and, thus, enable the nation to ride the wave of the future. Critics claim that internationally high access charges have put Japan three years behind the United States and Europe in terms of the development and the use of Internet technologies.

Messrs. Clinton and Mori also revealed the gap between their two governments concerning the agenda for the next round of World Trade Organization market-opening negotiations. The president stressed that priority should be given to liberalizing trade in specific sectors, particularly agriculture and services. Japan and Europe have demanded that the talks focus as well on the alleged misuse of the U.S. antidumping regime and investment protection, among other matters.

Finally, the two leaders danced around another sticking point — the relocation of a U.S. Marine Corps heliport on Okinawa. Washington regards the task of finding an alternative site for the heliport, situated at the crowded Futenma Air Station, to be the centerpiece of a December 1996 accord aimed at consolidating the American base presence in the southernmost prefecture. Mr. Clinton has indicated that he does not want this disagreement hanging over the G-8 summit.

The Okinawan prefectural government has proposed moving the heliport to a dual-purpose airport that will be constructed near Nago on the northern end of the main Okinawan island — which, not coincidentally, will be the site of the G-8 summit. The Pentagon does not have any problem with that plan. But American defense planners have objected strongly to a proviso that would limit the U.S. military's use of the facility to 15 years. They emphasize that bilateral security needs should be determined by circumstances, not by "artificial limitations."

Japanese defense officials counter, however, that the time limitation was critical to winning local support for the new airport. For more than 50 years, Okinawans have borne the lion's share of the burden of hosting U.S. troops on Japanese soil and have grown weary of this responsibility (see JEI Report No. 4A, January 28, 2000).

Unnamed Clinton administration sources are quoted as saying that the heliport dispute in all likelihood will not be resolved before the G-8 gathering. This prospect undoubtedly is of grave concern to summit planners in Tokyo. They have been developing elaborate security precautions to ensure that the Okinawan discussions do not attract demonstrations like the ones staged at last November's WTO meetings in Seattle and at the mid-April International Monetary Fund and World Bank sessions in Washington. Now, however, it seems that the potential rabble-rousers not only may be homegrown, but also may live within walking distance of the Nago meeting site.

About the only matter on which Mr. Clinton and Mr. Mori did not talk past each other concerned the focus of the G-8 summit. The agenda will include global health issues, education, poverty and information technology. Tokyo has made the last issue, in particular, a crusade to end the "digital divide" between the technology haves and have-nots of the world. Mr. Mori reportedly outlined the government's plan to use official development assistance, among other measures, to help close this gap. Mr. Clinton was said to have promised full U.S. support for this objective at the July meetings.

While Mr. Mori survived his exhausting maiden voyage into the seas of global diplomacy, it remains to be seen whether voters and the LDP will reward him for this initiative. The people who go to the polls in June and the political powers-that-be could further complicate Tokyo's efforts to ensure a successful G-8 summit.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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