(To view the Webinar of this panel discussion, click here.)
INTRODUCTION
2008: A tumultuous year for the world economy. In December, the Japan America Society of Southern California and Nikkei America convened a panel of experts to discuss recent trends and their impact on trade between the United States, Japan (its fourth largest trading partner at $2.5 billion annually), and the rest of Asia.
OPENING REMARKS
Shigeru Kimura, Chief Executive Director, JETRO (Los Angeles)
The world economy is now facing not only the financial crisis in the United States but a global recession. I’m sure that we need the latest and most precise outlook for the year 2009.
President-elect Barack Obama has already started to make a new economic stimulus package. I believe the new burst of freedom, new burst of change, and new burst of the U.S. economy may come through global cooperation, including Asia, and I’m sure that Japan can play an important role in the vision for change, especially economic change.
PANELISTS
• Brian K. Peck (moderator), Counsel for International Trade
Crowell & Moring LLP; Adjunct Professor, International Trade, University of Southern California, Gould School of Law
As a native of Southern California, it’s a treat to welcome two such distinguished and high-ranking government officials, with such great expertise in both trade and economic affairs.
Wendy Cutler is responsible for developing and implementing US trade policy with Japan, Korea and APEC. She has negotiated bilateral trade agreements with Japan in areas such as telecommunications, insurance and semiconductors. In addition, she was the U.S. lead negotiator for the U.S./Korea Free Trade Agreement, probably one of the most complex and certainly largest free trade agreements in the world.
I don’t know what Los Angeles did to curry such favor from the Ministry of Foreign Affairs, but they sent a real star here with Consul General Ihara. He not only handles the cultural aspects of his position with great flair, but he brings with him real trade and substantive expertise. In his long, distinguished career, he’s been responsible for areas such as the WTO, Southeast Asia and Northeast Asia, and also served as economic minister at the Japanese embassy in Washington, D.C.
• Wendy Cutler, Assistant U.S. Trade Representative
Japan, Korea and APEC Affairs
Clearly the global economic crisis is having a direct impact on trade flows. The World Bank for the first time has forecasted a decline in global trade for next year. China has announced for last month the first decrease in its exports.
History has shown that when these types of developments happen, countries tend to look inward and put up protectionist barriers and restrictions on trade. That’s why I think it was so important in November when the leaders from the G-20 group of countries got together and made a political commitment not to impose new trade barriers.
The key question is "are we going to see continued trade negotiations and continued efforts to open markets abroad?" At least with respect to Asia, the answer appears to be yes.
In recent years the U.S. and Japan have moved from a relationship characterized by trade tensions to one characterized by cooperation. We will inevitably continue to have some trade problems, but hopefully we will be able to work together in a low-key, professional and constructive manner. At the same time, can we go further in our economic relationship? Are there things we can do together as the two largest economies in the world to set standards for the region?
• The Honorable Junichi Ihara, Consul General of Japan in Los Angeles
In April I heard a Nobel laureate economist discuss the “decoupling” of the world economy. This theory argues that even if one big economy, say the U.S., stagnates, the world economy as a whole will be all right because rising economies, such as China and India, will pull the world economy along.
However, today we observe the rapid, almost simultaneous spread of the crisis throughout the world. No economy seems immune to the negative impact of the US financial crisis. The theory of decoupling does not apply, at least to the financial world.
The unusual velocity of the downturn may require unusual policy measures:
• huge amounts of capital injections in the banking sector;
• unprecedented bailout measures which might include certain key manufacturing industries;
• bold fiscal policy which defies budgetary constraints and other fiscal disciplines.
Of course all these are emergency measures. They are not sustainable over time. But, as the security emergency after 9-11 dictated U.S. defense and foreign policy, I think the economic emergency will dictate the U.S. economic, financial, trade and other policies. The idea of negotiating the US/Japan Free Trade Agreement might not have much chance to take hold for the time being.
QUESTIONS & ANSWERS
BP: You have both mentioned [in other remarks today] intellectual property protection as an important area of cooperation between the US and Japan. Are there discussions of other possible areas of cooperation?
WC: I expect there will be a lot more discussions with the new administration over energy and the environment. How to improve investment climates is another issue. Personally, I think both sides could benefit from a discussion of food security. This is an issue of great concern to Japan, and from the US perspective, we think we are a reliable food supplier.
JI: Japan and the U.S. have been cooperating within the framework of the Asia-Pacific Partnership on Clean Development & Climate. Security, including food security, is very important, but security measures should not constitute obstacles for the free flow of merchandise. We need more technology to allow secure but smooth trade.
Q: This resonates for Southern California, given the amount of trade through the ports of Los Angeles and Long Beach. How do you balance trade and security?
WC: Secure trade is a prime area for the U.S. & Japan to work closely on, how to best balance security concerns with clearance of goods and cutting costs. We have been discussing this on a working level, and perhaps we need to put more senior-level attention on it.
JI: Japan and the U.S. have common concerns and experience, and good technology. However, there are many different agencies and ministries involved, so sometimes coordination is not smooth. Administrative efforts are required along with technological innovation.
Q: What are Japanese companies and the Japanese government doing to address concerns over the high exchange rate and shrinking of consumer demand?
JI: The Japanese government has been suffering from a huge budgetary deficit for many years, so our ability to use government money is limited. I think it is very important for Japanese industries to make extra efforts to support the economy. When I met one of the [Japanese] automobile manufacturers here, they said that they try not to lay off their employees but to keep all of them to survive the recession.
Q: With the tightening credit situation it’s becoming more difficult to invest in new green technologies. Are there ways our two governments may work together on this?
JI: Japan has started a trial of cap-and-trade, and certain states of the U.S. have taken many initiatives. Our bilateral discussions will be quite productive for Japan to introduce regulatory mechanisms to fight global warming.
CLOSING REMARKS
Kiyoshi Hasegawa, President
Nikkei America, Inc.
The ties between the U.S. and Japan, and the U.S. and Asia, are of utmost importance to the global economy. It is no exaggeration to say that the key to the recovery of the world economy lies in Asia and its relation with the United States.
At Nikkei America, we are also seeking ways to strengthen the partnership between the U.S. and Japan. Recently we started a joint project with JETRO Los Angeles called Green Innovation Connect, which helps US businesses partner with Japanese green tech companies.
I would also like to congratulate the Japan America Society of Southern California, which will celebrate its 100th anniversary in 2009. You role in developing the relationship between Japan and the US will become undoubtedly even more important over the next 100 years.
