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### Viewing cable 06TOKYO3105, METI'S KITAMURA PROMOTES ASIA FTA AS DEFENSE

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06TOKYO3105 | 2006-06-06 08:18 | 2011-04-28 00:00 | CONFIDENTIAL | Embassy Tokyo

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    VZCZCXRO8918
    PP RUEHCHI RUEHDT RUEHHM RUEHNH
    DE RUEHKO #3105/01 1570818
    ZNY CCCCC ZZH
    P 060818Z JUN 06
    FM AMEMBASSY TOKYO
    TO RUEHC/SECSTATE WASHDC PRIORITY 2904
    INFO RUCNASE/ASEAN MEMBER COLLECTIVE
    RUEHBJ/AMEMBASSY BEIJING 2652
    RUEHBY/AMEMBASSY CANBERRA 1669
    RUEHNE/AMEMBASSY NEW DELHI 8040
    RUEHUL/AMEMBASSY SEOUL 8825
    RUEHWL/AMEMBASSY WELLINGTON 0893
    RUEHFK/AMCONSUL FUKUOKA 6584
    RUEHNH/AMCONSUL NAHA 9203
    RUEHOK/AMCONSUL OSAKA KOBE 9814
    RUEHKSO/AMCONSUL SAPPORO 7736

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    C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 003105

    SIPDIS

    SIPDIS

    USTR FOR AUSTR CUTLER; BEEMAN
    NSC FOR COLLINS

    E.O. 12958: DECL: 06/05/2016
    TAGS: ECON ETRD ASEAN APEC CH KS AS IN NZ JA
    SUBJECT: METI'S KITAMURA PROMOTES ASIA FTA AS DEFENSE
    AGAINST CHINA'S INFLUENCE ON ASEAN

    TOKYO 00003105  001.2 OF 002

    Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b/d).

    ¶1.  (C) Summary:  METI Minister Nikai's proposal for an Asian
    FTA was an alternative to an "aggressive" Chinese push for an
    ASEAN   3 FTA, METI Trade policy DG Toshiaki Kitamura told
    visiting EAP/PDAS Kathleen Stephens on May 29.   The Chinese
    plan, which will be recommended by an ASEAN   3 expert group
    soon, would be objectionable because it would increase
    China's influence over ASEAN and would set a poor standard by
    covering only trade in goods.  Therefore, the Nikai idea
    expanded the proposed FTA to include India, Australia and New
    Zealand and to cover services, IPR and investment.  While
    Japan, and METI in particular, remained committed to
    strengthening APEC, APEC could not serve as an effective
    alternative to the Chinese proposal because it was not
    realistic to talk about an APEC FTA for decades, Kitamura
    said.   Nevertheless, he proposed the need to agree on a
    roadmap to strengthen APEC by the ministerial to be held in
    Tokyo in 2010.  Stephens said that the U.S. would be
    concerned with a pan-Asian organization that could undermine
    trans-Pacific ties and that the U.S. approach to the region
    emphasized APEC, ARF and robust bilateral FTAs, which were
    the most practical.  Both agreed to continued discussions on
    East Asian economic architecture.

    ¶2.  (C) On related issues, Kitamura said the lack of U.S.
    cabinet-level participation in ASEAN meetings in recent
    years, the change of USTR at a critical junction in the Doha
    round, and the hold placed on Ambassador Schwab's nomination
    created a negative impact in the Region.  Stephens stressed
    that Secretary Rice was looking forward to participation in
    the ASEAN ministerial and that we expected Ambassador
    Schwab's confirmation would move forward.  Stephens also
    stressed the need to resolve the beef issue.  End Summary.

    ¶3.  (C) Stephens opened by noting that the issue of East
    Asian economic architecture was being closely studied in
    Washington.  While the process was not complete, there were
    several areas of clear agreement:  APEC was extremely
    important and needed to be more outcome oriented; ties with
    ASEAN should be strengthened; robust FTAs should be pursued
    in the region, and it was more practical to do this on a
    bilateral basis; and, we should talk to allies about how
    these elements and others fit together.  In this context, the
    U.S. was surprised by Nikai's proposal for an Asian FTA.

    ¶4.  (C) Kitamura explained that ASEAN, as a group, was
    becoming the "hub" of a system of FTAs.  They had concluded
    one with China and the Korea agreement will take effect in
    the middle of the year.  Japan and ASEAN had agreed to
    conclude their FTA by March 2007.  ASEAN was also negotiating
    FTAs with India and Australia and New Zealand and was aiming
    to finish those in 2007.  It was only logical that once these
    FTAs were finished that they form the basis for an Asia wide
    FTA.

    ¶5.  (C) As if to address the "surprise" issue, Kitamura noted
    that since January of 2002 PM Koizumi had been supportive of
    an East Asian Community.  What prompted Nikai to make his
    proposal now, however, was that an ASEAN   3 expert committee
    would recommend to the ASEAN   3 summit in August that an
    ASEAN   3 FTA that covered trade in goods only be negotiated
    soon.  This was the latest in an "aggressive" push by China
    for such an FTA. Japan had initially opposed creation of the
    expert group as premature, but consented when it was
    isolated.  A Chinese scholar who was controlled by the
    government chaired the group, but the GOJ did not control
    Japanese participants.  If there were no other alternative on
    the horizon, the "Chinese" proposal would be accepted.  If
    such an FTA were concluded, it would increase Chinese
    influence in ASEAN while at the same time providing an FTA
    without several protections important to Japanese business.
    Therefore Nikai felt he had to act quickly and without
    consultation.  The proposal would fix the Chinese plan by
    adding India, New Zealand and Australia and expanding the
    scope to cover IPR, investment and trade in services.
    Kitamura admitted that so far the plan was "just a concept by
    METI".   Kitamura understood that Ambassador Schwab had said
    in Paris the previous week that the U.S. was "not excited"

    TOKYO 00003105  002.2 OF 002

    about the Nikai plan.  However, which would the U.S. rather
    have, the Nikai plan or the Chinese, Kitamura asked.

    ¶6.  (C) Turning to APEC, Kitamura said METI was committed to
    APEC, which was "our brainchild".  However, an APEC wide FTA
    was decades away so the idea would not be enough to trump the
    Chinese proposal.  However, at the APEC Trade Ministerial in
    Hanoi that week, Nikai would try to talk to the U.S.,
    Australia and New Zealand about strengthening APEC.  Little
    could be expected from the Hanoi and Lima APEC summits.  What
    Japan would like is a road map of how to strengthen APEC by
    the time of the Tokyo summit in 2010.  Japan's commitment to
    APEC was demonstrated by the offer to host the summit, which
    would be in a critical year for APEC, the year in which the
    trade liberalization ideals for developed countries in the
    Bogor declaration were supposed to be fulfilled.  As an
    aside, Kitamura said that the change in USTR, the hold put on
    Ambassador Schwab, and the lack of U.S. cabinet participation
    in APEC meetings in recent years created a bad impression in
    the region.

    ¶7.  (C) In response, Stephens said that, while Japan and the
    U.S. had the same objectives, they had different approaches.
    Although the development of pan-Asian organizations was
    natural, the effect of such proposals on trans-Pacific
    relations needed to be considered.  In terms of FTAs, it was
    better to concentrate on strong bilateral FTAs than to try to
    include too many countries and end up with weak agreements.
    The U.S. commitment to the region was shown in the robust
    FTAs it was pursuing.  While the Chinese favored FTA would be
    a concern to the U.S., Nikai's plan is perhaps not he best
    alternative.  We need to consult. The U.S. is interested in
    strengthening APEC and the Australians are committed to doing
    this in the summit they will host in 2007.  We would like to
    hear more about the roadmap and we need to develop concrete
    ideas for APEC, Stephens said.  Kitamura and Stephens agreed
    on the need for Japan and the U.S. to continue to consult on
    East Asian economic architecture.

    ¶8.  (U) PDAS Stephens has cleared this cable.
    SCHIEFFER

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