JAPAN: EVOLVING ATTITUDES ON MOSS TRADE TALKS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP04T00447R000201330001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: December 22, 2016
• Document Release Date: April 19, 2010
• Sequence Number: 1
• Publication Date: March 5, 1985
• Content Type: MEMO

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Central Intelligence Agency
Washington. D. C. 20505
DIRECTORATE OF INTELLIGENCE
5 March 1985
Japan: Evolving Attitudes on MOSS Trade Talks
Summary
Despite US press reports of widespread foot-
dragging in Tokyo on pending bilateral trade issues,
important segments of the Japanese bureaucracy have
moved quickly to avert possible retaliation by
addressing high-visibility import barriers in some
designated market-oriented sector-specific (MOSS)
areas. Domestic political and industry pressure is
building, moreover, for even the conservative
ministries responsible for the forestry and
telecommunications sectors to adopt a more positive
attitude toward solving some glaring problems. The
stroke. suffered by former Prime Minister Tanaka--
Liberal Democratic Party (LDP) kingmaker and
Nakasone ally--could in coming weeks, however, lead
to intensified factional maneuvering. If the party's
focus is turned inward, action on the trade front
may be hindered.
Buying the MOSS Approach
The disarray and confusion that characterized the Japanese
bureaucracy's initial reaction to the MOSS approach gave way in
February to a concerted effort by some ministries to remedy
Northeast Asia Division, OEA,
Japan Branch, Northeast Asia Division,
nalysis. Information available as of 5
March 1985 was used in its preparation. Comments and questions
u' r
are welcome and may be directed to the Chief, Japan Branch,
This memorandum was prepared by
DUPLICATE of C05422641 RIP
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snecifir trade irritants identified by Washington.)
Ministry of
International Trade and Industry (MITI) and the Foreign Ministry
opposed a sector-specific attack on bilateral trade problems,
they--along with the Finance Ministry, a longtime supporter of
sectoral, rather than macroeconomic, measures--now appear
committed t egotiations a success, at least in the
short run
We believe fear of US_protectionism underlies this a arent
conversion to the MOSS approach.
The prospect
of protectionist legislation strikes a raw nerve, particularly
with MITI because its domestic constituencies profit from open US
markets. Keidanren, Japan's big-business organization and
spokesman for the country's most prominent exporters, has
repeatedly called on the government to reduce tariffs and
simplify import procedures. With extensive Japanese press
coverage of Senator Danforth's investigation of import surcharges
making the threat of retaliation more real, Keidanren renewed its
liberalization demands on 26 February and specifically.
recommended concessions in the lumber and pharmaceuticals
sectors.
Moving Recalcitrant Bureaucrats
Ministries such as Agriculture, Telecommunications, and
Health and Welfare, whose traditional constituencies are less
internationally minded than those of MITI, do not seem overly
concerned about US threats. The ministries involved with
agriculture and telecommunications, moreover, are politically
powerful enough to enjoy a fair degree of independence in
negotiations. Progress in the sectors under their control--
forest products and telecommunications--has been disappointing
thus far. In contrast, in late February the Health Ministry
decided to end medical insurance practices that discriminate
against a US dialysis equipment manufacturer. We suspect high-
level LOP leaders, the Foreign Ministry, and groups such as
Keidanren brought immense pressure to bear on the Ministry of
Health and Welfare to romnvA chic highly visible barrier to
foreign products.
Similar domestic pressure is building to force officials in
the telecommunications and, to a lesser extent, forest products-
sectors to acquiesce to some longstanding and well-defined US
requests. For example, an internal government memo, dated in
late February, indicates LDP faction leader and State Minister
Komoto--an avowed opponent of the MOSS, approach--is now pushing
the Agriculture Ministry to present compre measures liberalize the entire agriculture sector.
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MITI and industry groups also are pushing for quick
finalization of telecommunications ordinances; their suggestions
on draft ordinances released already have generally been along
the same lines as those offered by US officials.
Although prospects for movement on telecommunications and
forest products have improved somewhat, the scope and timing of
Tokyo's ultimate concessions will probably be disappointing.
Agriculture Ministry officials are certain to stall as long, and
give as little, as possible. Similarly, the Telecommunications
Ministry's ongoing bureaucratic wrangles with MITI, as well as
its insecurity about its international negotiating skills, will
probably delay progress.
growing high-level Japanese discontent with what is viewed as
never-ending US trade demands.
concessions made now, when the dollar is
strong, will do little to narrow the trade imbalance. This
growing sensitivity could well work against Japanese cooperation
in addressing the subtler trade barriers that the MOSS approach
is designed to identify and correct over the next several
years.
The Political Factor
The health of former Prime Minister Tanaka is the wild card
that could affect Tokyo's action on import liberalization in the
short and long run. Preliminary reports suggested the stroke he
suffered on 27 February was mild and that he would be out of the
hospital within a month. Later reports, however, disclose this
was overly optimistic and that Tanaka may be hospitalized up to
four months. If he is permanently incapacitated or dies,
domestic politics will dominate the Japanese leadership's
attention. MOSS negotiations as well as practically all other
high-level decisionmaking will, at least temporarily, grind to a
halt. For MOSS in particular, given his close links with the
Telecommunications Ministry, Tanaka's death could also alter the
internal bureaucratic power balance, creating new opportunities
and obstacles in that sector.
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JAPAN: TRADE SECTORS OF INTEREST TO THE UNITED STATES
Sector Action During February
1. Telecommunications US negotiators have received
drafts of five of seven
Cabinet orders and 58 of 72
ministerial ordinances
governing the industry after
NTT privatization.
Telecommunications Ministry
(MPT) has yielded to minor US
demands on services and
equipment approval.
Remaining Problem Areas
Potential still exists for
NTT to dominate market
after 1 April, discouraging
new entrants; both regulation
of services and equipment
certification system include
red tape that could lead to
discrimination. against US
suppliers.
Prospects
Continued turf battles between MPT and MITI may
delay concessions from Japanese, but MPT opposition
will probably wane. MPT inexperience in negotiations
may force concessions as US pressure continues and
domestic pressure from MITI, industry, and the Prime
Minister builds. US interests in market opening
overlap with those of some Japanese groups.
Keidanren supports easing standards and certification
procedures as well as stricter antitrust supervision
in order to safeguard prospects for new market
entrants, for example.
2. Forest products Bilateral talks on 25 February Tariffs; nontariff barriers;
produced only recognition that protection of paper and pulp
views on tariff cuts are industry under depressed
widely divergent. industries law.
3. Medical equipment Health Ministry has agreed to Refusal to accept foreign
and pharmaceuticals end medical insurance practices clinical test data; complex
that discriminate against US import approval procedures.
dialysis equipment
manufacturers.
4. Electronics In response to USTR Brock's Not yet defined. Both sides
mid-February recommendation will poll industries to
that computer parts be identify trade barriers and
mutually eliminated, MITI assess US competitiveness.
Minister Murata suggested that
tariffs on all electronics--
not just computer parts--be
removed.
Reports that Nakasone is willing to provide
financial support to forest products industry
if concessions are made to Washington and a
4.4-percent jump in housing starts in 1984 (the
first gain in 6 years) provide a small glimmer of
hope for increased imports. Substantial
bureaucratic and industry opposition remains,
however.
MHW study on the possible acceptance of foreign
clinical test data is due the end of March.
Keidanren is calling for simplification of import
procedures, but Health Ministry claims it lacks the
resources to make changes in the regulations..
Next formal talks scheduled for end of March with
issues not clearly defined but no confrontations
probable in near term. MITI--with lead on electronics--
favors action on MOSS. Will try to build on momentum
already initiated during drafting of chip protection
act and 1 March removal of semiconductor tariffs.
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Subject: Japan: Evolving Attitudes on MOSS Trade Talks
Original - OEA/NA/Japan
1 - OEA/NA/Korea
1 - C/OEA/Northeast Asia
1 - C/OEA/China
1 - C/OEA/Southeast Asia
1 - OEA/Research Director
1 - D/OEA
1 - DDI
1 - Executive Director
1 - PDB Staff
1 - NIO/EA
1 - D/OMPS
1 - C/EA 0 25X1
1 - OCR/DSG
1 - NIC Analytic Group
1 - CPAS/ILS
5 - CPAS/IMC/CB
1 - NIO Economics
1 - 25X1
1 - Donald Gregg, Office of the Vice President
1 - Under Secretary Allen Wallis, Department of State
1 - Assistant Secretary Paul Wolfowitz, Department of State
1 - Desaix Anderson, Department of State
1 - William Brooks, Department of State
1 - Rea Brazeal, Department of State
1 - Gaston Sigur, National Security Council
1 - William Martin, National Security Council
1 - Douglas McMinn, National Security Council
1 - Roaer Robinson, National Security Council
1 _ Defense Intelligence Agency 25X1
1 - Under Secretary Lionel Olmer, Department of Commerce
1 - Byron Jackson, Department of Commerce
1 - Clyde Prestowitz, Department of Commerce
1 - James Murphy, United States Trade Representative Office
1 - Michael B. Smith, United States Trade Representative Office
1 - Assistant Secretary David Mulford, Department of the Treasury
1 - Doug Mulholland, Department of the Treasury
1 - Under Secretary Daniel Amstutz, Department of Agriculture
1 _ National security Agency 25X1
DDI/OEA/NA (5 March 1985) 25X1
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SECRET NOFORN NOCONTRACT ORCON
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