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United States-Japan trade, commercial, and economic relations : hearing before the Subcommittee on Trade of the Committee on Ways and Means, House of Representatives, One Hundred Third Congress, first session, July 13, 1993 online

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Online LibraryUnited States. Congress. House. Committee on WaysUnited States-Japan trade, commercial, and economic relations : hearing before the Subcommittee on Trade of the Committee on Ways and Means, House of Representatives, One Hundred Third Congress, first session, July 13, 1993 → online text (page 1 of 21)
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UNITED STATES JAPAN TRADE, COMMERCIAL,
AND ECONOMIC REUTIONS



Y 4. W 36: 103-35

Uiited Stites-Japan Trade/ Connerci...

HEARING

BEFORE THE

SUBCOMMITTEE ON TRADE

OF THE

COMMITTEE ON WAYS AND MEANS
HOUSE OP REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

FIRST SESSION



JULY 13, 1993



Serial 103-35



Printed for the use of the Committee on Ways and Means




■ ^>.5.



^^'^ / / 1?^,



U.S. GOVERNMENT PRINTING OFFICE
73-345 CC WASHINGTON : 1993

For s;ilc by ihc U.S. Gi)vcrnmcnl Printing Olticc
SuperiniL-ndcni ol Documents, Congressional Sales Office, Washingttm. DC 20402
ISBN 0-16-041810-0



UNITED STATES -JAPAN TRADE, COMMERCIAL,
AND ECONOMIC REUTIONS



Y 4. W 36: 103-35

Uiited States-Japan Trade, Connerci...

HEARING

BEFORE THE

SUBCOMMITTEE ON TRADE

OF THE

COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

FIRST SESSION



JULY 13, 1993



Serial 103-35



Printed for the use of the Committee on Ways and Means




JAU f J ^,.



U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1993



For sale by the U.S. Govemnienl Printing Office
Supcrinlendenl of Documents. Congressional Sales Office, Washington, DC 20402
ISBN 0-16-041810-0



COMMITTEE ON WAYS AND MEANS
DAN ROSTENKOWSKI, Illinois, Chairman



SAM M. GIBBONS, Florida
J.J. PICKLE, Texas
CHARLES B. RANGEL, New York
FORTNEY PETE STARK, California
ANDY JACOBS, JR., Indiana
HAROLD E. FORD, Tennessee
ROBERT T. MATSUI, California
BARBARA B. KENNELLY, Connecticut
WILLIAM J. COYNE, Pennsylvania
MICHAEL A. ANDREWS, Texas
SANDER M. LEVIN, Michigan
BENJAMIN L. CARDIN, Maryland
JIM McDERMOTT, Washington
GERALD D. KLECZKA, Wisconsin
JOHN LEWIS, Georgia
L.F. PAYNE, Virginia
RICHARD E. NEAL, Massachusette
PETER HOAGLAND, Nebraska
MICHAEL R. McNULTY, New York
MIKE KOPETSKI, Oregon
WILLIAM J. JEFFERSON, Louisiana
BILL K. BREWSTER, Oklahoma
MEL REYNOLDS, Illinois



BILL ARCHER, Texas
PHILIP M. CRANE, Illinois
BILL THOMAS, California
E. CLAY SHAW, Jr., Florida
DON SUNDQUIST, Tennessee
NANCY L. JOHNSON, Connecticut
JIM BUNNING, Kentucky
FRED GRANDY, Iowa
AMO HOUGHTON, New York
WALLY HERGER, Cahfomia
JIM McCRERY, Louisiana
MEL HANCOCK, Missouri
RICK SANTORUM, Pennsylvania
DAVE CAMP, Michigan



Janice Mays, Chief Counsel and Staff Director
Charles M. Brain, Assistant Staff Director
Philup D. MOSELEY, Minority Chief of Staff



Subcommittee on Trade



SAM M. GIBBONS,
DAN ROSTENKOWSKI, Illinois
ROBERT T. MATSUI, Cahfomia
BARBARA B. KENNELLY, Connecticut
WILLIAM J. COYNE, Pennsylvania
L.F. PAYNE, Vir^nia
RICHARD E. NEAL, Massachusetts
PETER HOAGLAND, Nebraska
MICHAEL R. McNULTY. New York



Florida, Chairman
PHILIP M. CRANE, Ilhnois
BILL THOMAS, California
E. CLAY SHAW, Jr., Florida
DON SUNDQUIST, Tennessee
NANCY L. JOHNSON, Connecticut



(II)



CONTENTS



Page

Press release of Wednesday, June 30, 1993, announcing the hearing 2

WITNESSES

Hon. Michael Kantor, U.S. Trade Representative 6

American Electronics Association, Arnold Brenner, Motorola, Inc 115

American Insurance Association, Joseph A. Morein, the Chubb Corp 140

Automotive Parts & Accessories Association, Lee Kadrich 148

Dreier, Hon. David, a Representative in Congress from the State of Califor-
nia 36

Institute for International Economics, C. Fred Bergsten 93

Semiconductor Industry Association, Alan Wm. Wolff 128

SUBMISSIONS FOR THE RECORD

American International Automobile Dealers Association, statement and at-
tachment 156

Association of International Automobile Manufacturers, Inc., statement 162

Japan Automobile Manufacturers Association, Inc., William C. Duncan, letter

and attachment 168

National Foreign Trade Council, Inc., Robert H. Green, letter 182

Nissan North America, Inc., statement 185

(in)



UNITED STATES-JAPAN TRADE, COMMERCIAL,
AND ECONOMIC RELATIONS



TUESDAY, JULY 13, 1993

House of Representatives,
Committee on Ways and Means,

Subcommittee on Trade,

Washington, D.C.
The subcommittee met, pursuant to call, at 10 a.m., in room
1100, Longworth House Office Building, Hon. Sam M. Gibbons
(chairman of the subcommittee) presiding.

[The press release announcing the hearing follows:]



(1)



FOR IMMEDIATE RELEASE
WEDKESDAY, JUNE 30, 1993



SUBCOMMITTEE ON TRADE #12

COMMITTEE ON WAYS AND MEANS

U.S. HOUSE OF REPRESENTATIVES

1102 LONGWORTH HOUSE OFFICE BUILDING

WASHINGTON, D.C. 20515

TELEPHONE: (202) 225-1721



THE HONORABLE SAM M. GIBBONS (D. , FLA.), CHAIRMAN,

SUBCOMMITTEE ON TRADE, COMMITTEE ON WAYS AND MEANS,

U.S. HOUSE OF REPRESENTATIVES, ANNOUNCES A PUBLIC HEARING

ON UNITED STATES-JAPAN TRADE, COMMERCIAL, AND ECONOMIC RELATIONS



The Honorable Sam M. Gibbons (D. , Fla.), Chairman of the Subcommittee
on Trade, Committee on Ways and Means, U.S. House of Representatives,
today announced that the Subcommittee will hold a public hearing- on U.S.-
Japan trade, commercial, and economic relations. The hearing will be held
on Tuesday, July 13, 1993, in the main Committee hearing room, 1100 Long-
worth House Office Building, beginning at 10:00 a.m.

Japan is one of the United States' most important trading partners.
Japan is the second largest (Canada is the first) export market for U.S.
goods and also the second largest source of U.S. imports (again behind
Canada). In the post Cold War era, trade, commercial, and economic issues
are likely to take on new significance in the overall U.S. -Japan relation-
ship, which in the past has been influenced more by foreign policy and
national security concerns.

The U.S. -Japan trade relationship has been as problematic as it has
been important. U.S. -Japan trade frictions stem from a number of factors,
the most obvious of which is the large merchandise trade surplus Japan has
run with the United States and with the rest of the world (ROW). In 1992,
Japan's surplus with the United States was approximately $48 billion and
with the ROW, a record of $133 billion. A second source of difficulty has
been Japan's failure to eliminate key barriers to market access. Such
barriers include structural impediments, such as Japan's closed
distribution system and Japanese land policy, and sectoral barriers in
industries, including autos and auto parts, supercomputers, satellites,
forestry products, agricultural products, telecommunications equipment,
and construction. A third set of problems has arisen in conjunction with
certain Japanese imports into the United States, particularly in key
industries such as autos and steel. Finally, the U.S. -Japan trade
relationship has been strained by allegations that Japanese-owned
companies producing in the United States, the so-called "transplants,"
have engaged in anticompetitive practices.

Although the Clinton Administration's policy on trade is evolving,
recent reports indicate that the President and his trade and economic
officials intend to take a pragmatic, "results-oriented" approach to
tackling problems in the U.S. -Japan economic relationship. Among the
objectives of this approach are to enhance American goods' and services'
access to the Japanese market and to encourage Japanese "transplants" to
source more from American companies.



On April 16 of this year. President Clinton and Prime Minister
Miyazawa met in Washington, at which time the two leaders agreed to forge
a new, multifaceted framework for negotiations over the next three years
on bilateral trade, commercial, and economic issues. U.S. and Japanese
negotiators have since had a series of talks on this framework, with the
intent of reaching agreement by as early as the July 7-9 summit of the
Group of Seven (G-7) countries in Tokyo.

According to press reports, the United States has proposed a
framework that includes macroeconomic objectives such as a reduction in
Japan's merchandise trade surplus as a percentage of gross domestic
product (GDP) and an increase in the value of foreign manufactured imports
into Japan, also as a percentage of GDP. In addition, the United States
has suggested that negotiations with Japan focus on baskets of sectoral
and structural problems, including (1) Japan's compliance with existing
trade agreements; (2) Japanese government procurement; (3) regulatory
reform and regulated industries in Japan; (4) Japan's automobile and
automotive parts industry in Japan and in the United States; and (5) U.S.-
Japan "economic integration," which encompasses investment practices,
technology transfer, intellectual property rights, emerging technologies,
and long-term business relationships.

With the Clinton Administration's policy on Japan taking shape, and
with the potential for further developments in the bilateral framework
negotiations at the upcoming G-7 summit in Tokyo, it is an opportune time
for the Subcommittee to hear testimony from Administration officials and
from interested public witnesses on U.S. -Japan trade, commercial, and
economic relations. This hearing will provide the Administration with a
forum in which to brief the Subcommittee on the results of the G-7 summit
in Tokyo, both generally, and specifically, with respect to U.S. -Japan
relations. In addition, the Subcommittee is interested in hearing
testimony from others who wish to provide their views on the U.S. -Japan
trade relationship and how the Administration is dealing with it.

DETAILS FOR SUBMISSION OF REQUESTS TO BE HEARD ;

Requests to be heard must be made by telephone to Harriett Lawler,
Diane Kirkland, or Karen Ponzurick [telephone (202) 225-1721] by close
of business Wednesday, July 7, 1993. The telephone request should be
followed by a formal written request to Janice Mays, Chief Counsel and
Staff Director, Committee on Ways and Means, U.S. House of Representa-
tives, 1102 Longworth House Office Building, Washington, D.C. 20515. The
Subcommittee staff will notify by telephone those scheduled to appear as
soon as possible after the filing deadline. Any questions concerning a
scheduled appearance should be directed to the Subcommittee office
[(202) 225-3943].

In view of the limited time available to hear witnesses, the Subcom-
mittee may not be able to accommodate all requests to be heard. Those
persons and organizations not scheduled for an oral appearance are encour-
aged to submit written statements for the record of the hearing. All
persons requesting to be heard, whether they are scheduled for oral
testimony or not, will be notified as soon as possible after the filing
deadline.



witnesses scheduled to present oral testimony are requested to
briefly summarize their written statements. The full statement will be
included in the printed record.

In order to assure the most productive use of the limited amount of
time available to question hearing witnesses, witnesses scheduled to
appear before the Subcommittee are required to submit 150 copies of their
prepared statement to the Subcommittee on Trade office, room 1136 Long-
worth House Office Building, at least 24 hours in advance of their
scheduled appearance. Failure to do so may result in the witness being
denied the opportunity to testify in person.

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE :

Any interested person or organization may file vnritten comments for
inclusion in the printed record of the hearing. Persons submitting
written comments for the printed record should submit at least six (6)
copies of their comments by the close of business Monday, July 19, 1993,
to Janice Mays, Chief Counsel and Staff Director, Committee on Ways and
Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements for
the printed record of the hearing wish to have their statements distribut-
ed to the press and the interested public, they may provide 100 additional
copies for this purpose to the Subcommittee office, room 1136 Longworth
House Office Building, before the hearing begins.

FORMATTING REQUIREMENTS ;

Each statement presented for printing to the Committee by • witness, any written statement or exhibit subiriii..
for the printed record or any written comments in response to a request for written comntents must conform to the
guidelines listed below. Any statement or exhibit not in compliance with these guidelines will not be printed, but will be
maintained in the Committee Tiles for review and use by the Committee.

1. All statements and any accompanying exhibits for printing must be typed in single space on legal-size paper and
may not exceed a total of 10 pages.

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit
material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications
will be maintained in the Committee Tiles for review and use by the Committee.

3. Statements must contain the name and capacity in which the witness will appear or, for written comments, the
name and capacity of the person submitting the statement, as well as any clients or persons, or any organization
for whom the witness appears or for whom the statement is submitted.

4. A supplemental sheet must accompany each statentent listing the name, fuH address, a telephone number where
the witness or the designated representative may be reached and a topical outline or summary of the comments
and recommendations in the full statement. This supplemental sheet will not be included in the printed record.

The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits
or supplementary material submitted solely for distribution to the Members, the press and the public during the course of
a public hearing may be submitted in other forms.

**********



Chairman Gibbons. Good morning.

Is Mr. Dreier present?

[No response.]

Chairman Gibbons. Ambassador Kantor, let's take you first.

While Ambassador Kantor is taking his place, let me make an
opening statement, then any other members who want to can make
a statement.

Mr. Ambassador, we called this meeting this morning because we
wanted a firsthand report fi'om you on the two things you have
been participating in in Tokyo: one, the jump starting of the Uru-
guay round; and two, the meeting of the G-7 countries. We would
like your views and we ask you to be as candid as you can be in
this public arena. We are particularly interested in the bilateral
framework agreement that you concluded with Japan in an effort
to begin opening the Japanese market. We realize that the Japa-
nese Government is in a shaky position in that it is facing elections
very shortly, and that Tokyo is not really in a position to do much
bargaining. Nevertheless, we are going to have to follow the nego-
tiations very closely. And as I told the two deputies seated on ei-
ther side of you the other day, we really want to find some objec-
tive criteria by which we can grade ana judge the effectiveness of
U.S. policy vis-a-vis Japan, and we are going to have to follow the
negotiations very closely. We realize the framework agreement is
just a part of the development of these criteria.

So, Mr. Payne or Mr. Crane, would you like to make statements
before we hear from Ambassador Kantor?

All right, fine. Ambassador Kantor, let's go ahead.

Mr. Crane. Wait, I would like to say something.

Chairman Gibbons. Oh, Mr. Crane has something he wants to
say.

Mr. Crane. I would like to make a brief statement. Thank you,
Mr. Chairman.

Mr. Chairman, I want to welcome Ambassador Kantor here to
discuss the recent step forward in the Uruguay round talks.
Though modest in substance, the G-7 market access agreement is
important symbolically. However, much remains to be done in the
tariff area and the United States should not continue to be recal-
citrant in agreeing to moderate some of our very high tariff peaks,
especially in the textile area if we expect success.

The U.S. bilateral trade deficit with Japan and Japan's extraor-
dinary trade surplus with the world are difficult problems that
must be addressed, but success in this area will not come through
intervention by zealous governments, but rather through reliance
on market forces. The enormous trade flows between our two coun-
tries represent millions of individual economic transactions that
are a testimony to competitiveness.

In the upcoming framework talks with Japan, I urge you to focus
on actual government restrictions to market access in Japan. We
should seeK to deregulate the Japanese economy so our entre-
preneurs will have more opportunities to succeed there. Most im-
portantly, we must urge Japan to assume responsibility for the
world trading system commensurate with the large economic bene-
fits it receives from liberalized trade. There are important issues
in the round where Japan needs to give more and work harder to



help develop consensus on tariffs, market access, and services in
particular. We must assess our problems with Japan in light of the
many positive aspects of the bilateral relationship.

Japan is our second most important export market, and Japanese
citizens spend more per capita to purchase U.S. goods than U.S.
citizens spend to purchase Japanese products. U.S. exports to
Japan increased 109 percent between 1986 and 1992, and last year
U.S. exporters sold $47.8 billion of exports to Japan, making it a
very lucrative market, indeed. In short, the bilateral imbalance is
only a small part of a much larger, more complicated, and I think
more positive picture.

I thank you for yielding, Mr. Chairman, and I look forward to to-
day's testimony.

Chairman Gibbons. Well, thank you.

Let me make an administrative announcement before we start.
We have to clear this room today by 12:45 in order to make room
for a meeting with Ambassador Kantor and his colleagues who are
to brief us on this same subject, so I wish all witnesses would keep
that in mind and try to keep their remarks as succinct as possible.

Ambassador Kantor.

STATEMENT OF HON. MICHAEL KANTOR, U.S. TRADE
REPRESENTATIVE

Ambassador Kantor. Thank you very much, Mr. Chairman. I am
glad to have not only you, but Congressman Crane and Congress-
man Payne, and I will let them debate some of the finer points of
this among themselves as we go forward with the Uruguay round.
Obviously, as you reach these agreements, there are always areas
in which people will disagree, Mr. Chairman, as to how you should
negotiate and what should be obtained, but let me just say that we
view what the President accomplished at the Gr-7 in terms of the
Uruguay round as a breakthrough. For 7 years we have been seek-
ing a market access agreement in manufactured products, and that
was achieved. There were some people who will believe we didn't
get enough, some people who will believe we got too much in some
areas and not enough in others, but in the 18 sectors I think it can
be clearly stated that breakthrough was achieved and we have
reengaged the round, and we have a new momentum based on the
confidence I think that has been engendered between not only the
quad nations, the quad entities, the European Community, Can-
ada, Japan, and the United States, but the G-7. And I would like
to report to you that meetings are already being held in Geneva in-
volving not only U.S. representatives, but representatives of other
nations as well under the leadership of the new GATT head, Peter
Sutherland from Ireland. And Peter reported to me yesterday that
in fact there is great optimism.

We know we have a lot of work ahead of us, that this market
access agreement in manufactured products is just a beginning. We
have to address the issue of services where we did make some
progress, which I would be happy to talk about today, the very im-
portant issue of agriculture, where we need to make tremendous
progress in the area of tariffication and the areas of both current
and minimum access, as well as disaggregation and other areas as
well, and, of course, the so-called rules, the trade rules, various



areas in that that we are — as you know, the United States is con-
cerned about, whether it is the antidumping language currently in
the draft final act or the subsidies portion of the draft final act,
other areas as well, including the protection of intellectual prop-
erty, and so we know this is just a beginning and we are trying
to be pragmatic and practical and realistic about what was
achieved, but I think it clearly can be said that this President by,
one, indicating on February 26 at American University that the
Uruguay round was one of the highest priorities of this administra-
tion and was a significant part if not a vital part of his economic
plan, was a start, that he then asked for the renewal of fast track,
which this committee and others in the Congress provided the lead-
ership with regard to in order to get fast track not only through
this body but the other body without amendment, which was criti-
cal to our credibility in dealing with our trading partners in reach-
ing an agreement.

Next, of course, the President insisted we take up market access
in manufactured products and services first, which I think was a
wise choice on his part, and insisted that we complete it by the G-
7 which gave a real time limit to these discussions. In the mean-
time the President, as you know, engaged world leaders in contin-
ual discussions with regard to completing the market access discus-
sions by the G-7 and, of course, completing the Uruguay round by
December 15. Truly this was an area in which the United States,
President Clinton, the cooperation of this Congress worked together
in order to fully restart a process that was badly, badly in need of
some momentum, and I think we achieved that in Tokyo. You
know, there is a tendency, Mr. Chairman, to want to overstate
what was achieved, especially when you come home and it has
been a good week, but I don't think we should do that in this case
or in the case of the Japan framework.

I think we ought to be realistic about what we face. This is tough
sledding. There are a number of major issues we will face together.
This committee has been extremely supportive of the administra-
tion on both sides of the aisle, which we appreciate and will con-
tinue to work with you on market access issues, on services issues,
on agricultural issues, on issues of the rules of the game, so to
speak, in order that we can get a balanced and successful Uruguay
round package by December 15.

I would like to, before I get into the Japan framework, introduce
to the committee my two ambassadors. Ambassador Yerxa and Am-
bassador Barshefsky who did such incredibly good work in Japan
leading up to that. Truly we would not have been able to reach the
agreements we reached without them. I think they deserve a lion's
share of the credit, and the President has said it and I would like
to say it to this committee, and they deserve a tremendous amount
of plaudits for what they were able to accomplish in working not
only with me, but working with the President in Tokyo.

As far as the Japan framework is concerned, Mr. Chairman, we
have indeed, I think, broken new ground. We began these discus-
sions with the Japanese Government on the basis that our eco-
nomic relations with Japan were not in good order. We had good
political relations and they are strong, our security relations have
never been stronger, but our economic relations were the third leg



8

of the stool, which was not as strong as it should be. We decided
there were four principles. The President decided four principles
that we needed to rely on in order to reach a successful framework
agreement, an agreement which would be the rules of the game,
which would outline the principles upon which we would work in
order then to reach agreements in various sectors or we call them
baskets. There are sectors within the baskets, as you know.

The four areas we decided on, we want, one, a results-oriented
agreement. No more promises, no more vague statements, but a re-
sults-oriented agreement. Second, we wanted quantitative and
qualitative measures, and if you look at page 4 of the agreement
you will see that in tnat paragraph. Number three, we wanted five
baskets or major areas we had to deal with. One is Government
procurement; two, regulatory reform; three we call other sectors
and includes among other things auto and auto parts which, as you
know, Mr. Chairman and members of the committee, represents
about two-thirds of our trade deficit with Japan. Fourth, compli-
ance with existing agreements, and fifth, economic integration, and


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Online LibraryUnited States. Congress. House. Committee on WaysUnited States-Japan trade, commercial, and economic relations : hearing before the Subcommittee on Trade of the Committee on Ways and Means, House of Representatives, One Hundred Third Congress, first session, July 13, 1993 → online text (page 1 of 21)
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