PRESS BRIEFING BY
DIRECTOR OF THE NATIONAL ECONOMIC COUNCIL GENE SPERLING
AND SENIOR DIRECTOR FOR ASIAN AFFAIRS AT NSC KEN LIEBERTHAL
Akasaka Prince Hotel
MR. LEAVY: All right, now for the real news of the day, wehave abriefing for you -- the Director of the National Economic Council, GeneSperling, and Senior Director for Asian Affairs at the National SecurityCouncil, Ken Lieberthal. Gene will talk about the economic piece, and then
Ken will give a preview of the day, of the bilats with Prime MinisterObuchi.And then they will take your questions.
MR. SPERLING: The President clearly is speaking to theJapanesepeople and to Prime Minister Obuchi at a very critical time for Japan intermsof their economic choices. He, as you know, did the town hall meetingyesterday. He just spoke to the AmCham, and then has time with PrimeMinisterObuchi both during lunch and then during the bilaterals.
Clearly, one of the opportunities that the President had inthistrip was a chance to speak directly to the Japanese people in the speechtoday, but probably most directly through the town hall meeting. And thePresident, as he does in these situations, took very seriously how hewantedto communicate and what messages he wanted to deliver.
And I think those of you saw the town hall meeting yesterday,heard his speech, one issue, firstly, he's making clear, that the UnitedStates very much wants a strong Japanese economy. In both of ourcountries,there are people who -- ineach of our countries -- who still believe that somehow this is azero-sum game. If the Yankees are stronger, the Red Sox must beweaker.
But as opposed to a situation which has never been moreclear, which is that the world economy needs a strong Japan and astrong United States, and that both countries, as well as Asiaand the rest of the world, are benefited from our strength. AndI think that is am important message for the President todirectly make clear, that the United States wants a strongJapanese economy and believes it is in the interests of theregion and the world, particularly at this sensitive time.
Secondly, the President spoke and is continuing tospeak on the notion that structural change, that opening markets,that having a more market-based allocation of credit, that thesedecisions and movements, while difficult, pay off for a greatpeople in terms of higher-paying jobs and a stronger future, andthat in the United States we have gone through difficultpolitical choices, but that they have paid off.
And the President referred to issues in thederegulation area like telecom and airlines, where the UnitedStates has gone through deregulation that has ended up beingpositive in terms of job creation. And, in fact, intelecommunications, the United States has had job growth by over17 percent since deregulation, while Japan had only 3.3 percentincrease during that time. That is to stress simply thatderegulation and opening markets and having a more market-basedsystem, however threatening change can at times seem, has beenpositive and can and should be positive.
The third point, which is very important, reflects theconflict or the balance between savings and growth for societiesthat are concerned about an aging population. Japan clearly haseven a more serious situation than we do. At the moment, both ofus have about 20 percent of people over 65, compared to thosebetween 24 and 65, the working population. By 2050, Japan mayhave as many as 50 to 60 percent of their population over 65,compared to those between 20 and 64. Only Italy has as serious asituation.
But the message that the President was very muchdelivering, both in his AmCham speech and in the town hallmeeting was that strong growth and strong productivity growth isalso essential to having the resources for dealing with an agingsociety; and that while high savings rates is important, so is astrong and growing economy; and that Japan needs to have astronger debate, the Japanese people, about what is the rightbalance -- even as we in the United States have had to have thatdebate in somewhat the other direction, increasing our savingsrate at times to deal with an aging society.
Fourth, the President talked very directly about thefact that the United States has, itself, lessons that we havelearned in terms of dealing with the banking crisis. It isestimated by people who studied the S&L crisis that the eventualcost to the United States in fixing the S&L system was five timesgreater than it would have been if we had acted more directly andquickly, that the cost went from $20 billion to over $125 billionbecause of the delay, and that the United States can say that wehave erred in our dealing with banking in the past and that thereare lessons one can learn from our mistakes.
And, certainly, here the President has beencomplimentary of Prime Minister Obuchi for the amount of fundsthat have been set aside for banking legislation, $60 trillionyen, $500 billion; but that the essential element of whether thatlegislation will work does go to the issues of how prompt thecorrective action is, how much you're able to get assets backinto the market, back being sold, back available for creativeopportunities and that with strong injections of public capitalmust come the conditions that will make the banking system workin the future.
And, finally, the President spoke on the issue of tradeand I think has spoken in three areas as to the critical role theU.S. and Japan play at trade right now -- that we right now facea critical time in the world economy where there will betemptations by countries to pull in that could lead to a cycle ofprotectionism and that it's critical for the world's leadingeconomies to play a leadership role in furthering marketliberalization. And the President has spoken about that in termsof Japan in three contexts.
One is our efforts in terms of multilateral tradeliberalization. And there's no question that we were frustratedthat Japan did not play a more constructive role in APEC Internetliberalization of the nine sectors in the EVSL. But theimportant thing we're stressing now is that Japan share with us aleadership role in getting resolution on those nine areas in theWTO next year and that we have leadership together in otherefforts going forward.
Second, that we need to have progress in the areaswhere we have agreements, areas that range from flat glass toinsurance where we do not feel the implementation of thoseagreements has been strong enough, that it is important at thistime for the United States to show that there has been progress;and that, finally, where we have areas -- the President hasmentioned steel, where they've had 114 percent increase inoverall steel from Japan, 550 percent in hot-rolled steel -- thatit's important if the United States is to keep its markets openand resist protectionism that the American people have confidencethat there is fair trade dealings with us and that the notion ofleadership on multilateral, on progress and implementing andensuring in areas where there are surges that there has not beenunfair trade practices are critical for all of us maintaining ourconfidence in open markets.
And the President mentioned specifically the impactthat the combination of market opening and demand has on theregion. And the statistic he used was that during this year theUnited States has taken in $5 billion more in imports from thekey struggling Asian countries. But at the same time, there'sbeen $13 billion less in exports from those countries to Japan.And so Japan's market opening and their stronger demand iscritical in this very tangible way, as in others, to the strengthof the region.
With that, let me turn to Ken Lieberthal, who will justmake clear the events of the day and go through the nationalsecurity side.
MR. LIEBERTHAL: Thank you, Gene. Let me begin with abrief overview of the schedule for the day. The President gave aspeech at AmCham that wound up just about a half hour ago. He'snow over at the U.S. Embassy, meeting and greeting embassypersonnel.
From there, he'll have lunch at a restaurant. This iswith the Prime Minister and several others, but it ischaracterized as a social occasion, not as a working lunch. Ibelieve he'll take a short stroll after lunch and see somethingof street life in Japan.
Then they begin the bilateral meetings. There will betwo of them, one right after the other. The first will focus oninternational security issues and the second will take upeconomic issues. Those together will run for a little bit shy oftwo hours. There will then be a brief meeting with the press.Each leader will make a short press statement and then there willbe an opportunity for just a few questions afterwards. Then thePresident gets on the plane and departs for Seoul.
Let me give you an overview of some of the, I think,most important national security issues that are going to bediscussed. On the global side, I think clearly the mostimportant issue on the agenda concerns North Korea. There thePresident will want to explain our views about difficulties withNorth Korea. He's talking to a man who leads a country that hadthe indignity of watching the North Korean missile over-fly itsterritory without any advance notice on August 31. So there willbe an attempt to get our thinking together about how best to dealwith North Korea.
The issue here, let me stress, is not one of changingpolicy. The issue is one of how you take the agreed framework,the framework that we have for our policy toward North Korea, andstrengthen it; create the incentives for North Korea actually toabide fully by its commitments; and that working in terms oftheir commitments is important for maintaining the necessarypolitical support, I think in the United States and Japan, inorder to keep North Korean policy on track.
So that part of what the President is doing here -- andlet me say also when he goes to the ROK from here -- is to get abasic mutual understanding as to what the nature of thechallenges in North Korea and how we can best handle thatchallenge over the coming years. It's an issue for our friendsand allies in the region.
I would expect that several other international issueswill come up, although more briefly -- among those wouldcertainly be an update of Iraq, I think potentially Japanesesupport for the Middle East peace process. Prime Minister Obuchijust came from a visit to Russia; next week he'll host the firstvisit ever by a Chinese head of state to Japan. I'm sure thePresident will want to hear about his views on Russia and discusswith him a bit the upcoming visit from Jiang Zemin of China.
And then, finally, there are some bilateral securityissues. These are well known. I won't take time, let me justmention them. The defense guidelines legislation and discussionof when they are likely to be submitted and adopted by the Diet;the implementation of what's called the Saco agreement, basicallythe agreement for changing the footprint of our armed forces inOkinawa. And then, finally, I think the two men will want tohighlight the common democratic values that we share.
One of the points that the President made in his speechthis morning to AmCham was the compatibility as he understands itbetween democratic systems of government and success in marketeconomies in the information-based society that we all are facingin the 21st century. And I think that they'll have some remarksabout that that they'll also want to make.
So that's a brief overview. Both of us are open toquestions on any of these topics.
Q When you were talking about the increase in hot-rolled steel, are you talking about over a year or over someother period of time?
MR. SPERLING: The increase in hot-rolled steel looksat, I believe it's the first eight months of this year, andcompares it to the first eight months of the previous year. Andduring that time I believe it -- I can check this for you -- butI believe it's gone from 200,000 metric tons to 1.3 million,during that same time period, which is a, obviously, more thanfivefold increase.
Q Both in Kuala Lumpur, Vice President Gore, andhere, President Clinton has indicated there is like some limit tothe flood of Asian imports. Can you quantify sort of when you'llcry uncle?
MR. SPERLING: I don't -- there are many differentreasons that you can have a change in imports or trade deficits.At times in the last few years we've taken in more simply becauseour economy was growing so much stronger and that reflected thestrength of our economy.
I think what the President is saying is that this is adifficult time in the world economy and that it's important thatcountries like the United States -- the leaders, United Statesand Japan -- retain their commitment to open markets, recognizingthat with change and flows that could come from fallingcurrencies, it becomes that much more important for a leader suchas the President to be able to assure the people in our countrythat we're operating by a rule-based system, where people areoperating under the trade laws. And so what we're looking at isnot so much a particular quantity, but when the Presidentmentions and area like hot-rolled steel, we aren't going to makea judgment on that because there is currently an anti-dumpingcase going on against Japan, Russia and Brazil on hot-rolledsteel right now.
But we do think it's fair to say to countries, Japanand others, that it's important right now that we both takeefforts to open markets, but that we also ensure that we'reoperating by a rule-based system because it is a sensitive time.And if people believe that the excess in imports reflects unfairtrade practices, that will, as the President said, likely lead topolitical pressures for retaliation which could lead to a cycleof protectionism, which is exactly what the world economy doesnot need at this time.
Q But doesn't the anti-dumping case indicate thatyou believe that they are not operating by a set of rule-basedsystems?
MR. SPERLING: Well, the private industry filed theanti-dumping case.
Q But do you agree with them?
MR. SPERLING: I think what the President suggests isthat that dramatic of an increase is -- something has to belooked at closely. I do not think that we right now -- that it'sright for us to prejudge something that is going througheffectively a quasi-judicial process, but I think it's fair forus to tell countries that they need to make sure that they havetheir house in order in terms of trading relations with us, bothin terms of opening markets and in terms of not allowing unfairtrade practices or unfair dumping to occur. That's a generalmessage that we would have.
Q For either gentlemen, why do you think theJapanese will change their policy on trade liberalization whenit's moved to a WTO forum? What's the President going to say tothe Prime Minister to encourage that, and doesn't that wholedispute undercut your argument that in a democratic system youcan deal with all these issues because specifically thosedemocratic pressures that are making it very difficult for theJapanese to deal with this --
MR. SPERLING: Well, in our conversations with Japaneseofficials prior to APEC many actually suggested that they wantedthis to be dealt with more in a WTO context. We weredisappointed that there was not more progress made at APEC.Nonetheless, 16 countries did put forward offers of some form;that is twice as many countries as was used to leverage anagreement -- an information technology agreement. We want tofollow that same model. What we're suggesting is, we know thatthere are difficult pressures on all countries, but the importantthing is that if we can move forward in this broader context, wefeel very strongly that Japan should share with us a leadershiprole in doing that.
I won't start on -- we could have a lengthydiscussion-debate on democracy and tough economic choices, butthere is --but the point I'd make is every country has to dealwith tough political pressures in doing the right things. Tradeis one area, but as you know, deficit reduction for us was thattype of area.
So the democratic system is one in which democraticleaders have to try to engage in positive long-term economicareas that look out for the long-term benefit of all of theirpeople, and obviously have to make tradeoff between beingpolitically realistic; you have to make tradeoffs between intensepolitical pressures that you get from one area versus what youthink is the long-term benefits for the working people of yourcountry at large.
We believe that the working people of each country atlarge benefit from an open and ruled-based trade system. Weunderstand each country has to put up with or try to deal withintense pressures at times in doing that, but we believe that thelong-term benefit for the people -- the overall people of eachcountry are benefitted by an open system. And the Presidentmentioned particular areas where we have gone through moreopening or deregulation, whereas actually in the long-term led tomore job creation and high-wage job creation at that.
MR. LIEBERTHAL: Let me give you just a slightlydifferent cut on the democracy issue because the way we've arguedit, and we're quite serious about it, is that if you look at theattributes of a country that has good governance, good democraticgovernance, you have room for individual choice, you have alaw-based system with good property rights, you have freedom ofinformation flows, you have a government that is more accountableto its people and, therefore, more legitimate and alsopotentially more adaptable.
Those are qualities that in a fast-paced,information-based global economy are likely to enable you toperform better over the long run. That certainly is not toindicate that democracies don't have their own pressures and findcertain things difficult at different times. Obviously, they do.So this is a more fundamental and long-range kind of argument.
Q The President said in his speech today that he wasconvinced the security partnership cannot be maintained unlessour economies are strong. Does he mean to suggest in some waythat the security partnership is not lasting or is in some wayconditional?
MR. LIEBERTHAL: No, I don't think he was trying toindicate it was conditional. I think he's talking about anoverall partnership between the American people and the Japanesepeople. Part of that is a security alliance; part of it is ahigh level of economic interdependence and a shared set ofresponsibilities for economic leadership; and part of itdiplomatic.
And I think he was indicating that if you want to havethat overall relationship work well, each part of it has to workwell. And so no one should think that we would think in terms ofa security alliance, but in fact want a weak Japanese economy.Quite the opposite. We want the Japanese economy to perform atthe same time that we want them to be good alliance partners.
Q When heads of state visit the United States itwould be rare or almost unheard of for them to give advice orlectures on U.S. fiscal policy. Aren't you worried the Japaneseare going to resent this even if it is offered in the spirit offriendly advise?
MR. SPERLING: The President spent significant timepreparing for this, thinking about exactly what is the right wayand the best way to communicate with the Japanese people. And Ithink that if you look at the way he spoke at the town hallmeeting, I think it was one of a leader of a country sharing thelessons that one economic superpower has had, speaking directlywith the people of another economic superpower. And what he was,I believe, doing was praising the Japanese people as a peoplethat have overcome as much significant challenges as any peopleover the last 50 years, and talking about the ability to overcomethem in these situations.
And in the banking situation, the President does notcome and preach; he comes and talks about problems and challengesthat we had in our S&L crisis and what lessons might be learned.
On the stimulus and growth side, I think the Presidentwas very aware and respectful of the fact that Japan does have asignificant aging problem and in fact one greater than ours bythe middle of the next century, and that we as a country haveneeded to perhaps go in somewhat the other direction, to gobetter in higher national savings.
But what he suggested is that the Japanese people, likeus, need to think of what the right balance is. And the balanceof having strong growth, and the importance of that, forpreparing for an Asian society too.
So I think that the President -- I think if you look atthe town hall meeting that he had, he certainly, I think, triedto speak in a way that was offering some of the lessons we have.But I also do think that there is no question that we are at avery sensitive time in the world economy, and I think infairness, other countries were quite critical of the UnitedStates in 1993. And I think when we first came into office, whenwe went to forums, we were often harshly criticized that ourdeficit was a drag on the rest of the world.
So I do think it is fair for other countries to talkfrankly and candidly about what the inter-relationships are tothe world economy and the need for each country to do its part increating economic growth. And I think that's a positive messageand was put forward in a positive way.
Q -- the President said something like some peoplehere think he might have gone further, there might have been moreto it. What is he going to say to Obuchi about the specificpackage that was announced --
MR. SPERLING: I think the President recognized in thetown hall meeting and today that the Prime Minister is trying totake a positive step forward in a stimulus plan. I think that itis also the case that most top economic analysts have notprojected that that in itself would lead to meaningful growthnext year. So I think that our view is simply reflecting whatis, I believe, the widespread view of the top Japanese andinternational economists and forecasters.
And I think that the President's message would simplybe one that Prime Minister Obuchi would share, that there shouldbe an aspiration to higher economic growth and that there shouldbe constant effort until that is achieved. So I think that theywill obviously be able to talk more openly about that in private,but again, I do not believe that we have a view on this that isdifferent than what most economic forecasters have been saying.In fact, we have met with several of them while we have beenhere.
MR. LOCKHART: Can we take one more for Gene, please.
Q So far the Japanese haven't been listeningterribly hard about the idea of keeping markets open, the wholepoint of APEC. Their disagreement on these nine key sectors isone example. Do you have any indication that they're going tolisten at this point, the message will sink in?
MR. SPERLING: Well, I think the message the Presidentis bringing is that it's critical for the two countries to moveforward and that more than ever right now there needs to be signsof increased opening and cooperation if we are going to be ableto maintain the political support in the United States for theopen market orientation that we think has been good for theUnited States and good for the world.
So you'll have to ask their leaders -- we think theimportant thing is that the President communicate that messageand do so directly to the Japanese people as well as to PrimeMinister Obuchi. There's no question that we were frustrated atAPEC, and we have not hit that. We would like to also point topositive things we could do. For example, one of the goals thatwe will have is to have enough progress so that there can be afurther announcement of progress on the enhanced deregulatoryinitiative by the next time the President and Prime MinisterObuchi meet.
Q Joe, just one more for Gene? Is there anadministration reaction to this possible tax consumption cut that-- and Obuchi have talked about? And will they discuss it today,do you expect, the President and Obuchi?
MR. SPERLING: I don't think that we want to be in theposition right now looking at any particular element in the senseoffering kind of a micromanaging type of advice. I think thepoint that we have made is that we think it is extremelyimportant for the region and for the Japanese people ultimatelyfor growth to emerge, and that there should be a constant effortto go forward until it's clear that there will be sustainableeconomic growth.
So the President's message will not be to try -- bothprivately and publicly, will not be to try to pull or push in anydirection on any specific micropolicy, but to encourage the PrimeMinister to not be satisfied with anything less than all effortsthat are necessary to achieve sustainable economic growth, andthat his efforts, while positive and deserving of commendationfor moving in the right direction, have so far, not from our viewbut from the market's view, not been seen as going as far asnecessary.
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