THE WHITE HOUSE

                      Office of the Press Secretary
                             (Tokyo, Japan)
________________________________________________________________________
For Immediate Release                                   November 20, 1998

PRESS BRIEFING BY DIRECTOR OF THE NATIONAL ECONOMIC COUNCIL GENE SPERLING AND SENIOR DIRECTOR FOR ASIAN AFFAIRS AT NSC KEN LIEBERTHAL on US-Japan Relations, 20 November 1998

                          Akasaka Prince Hotel
                              Tokyo, Japan   



11:17 A.M. (L)


MR. LEAVY:  All right, now for the real news of the day, we have a
briefing for you -- the Director of the National Economic Council, Gene
Sperling, and Senior Director for Asian Affairs at the National
Security Council, Ken Lieberthal.  Gene will talk about the economic
piece, and then Ken will give a preview of the day, of the bilats with
Prime Minister Obuchi.  And then they will take your questions.

Gene.

MR. SPERLING:  The President clearly is speaking to the Japanese
people and to Prime Minister Obuchi at a very critical time for Japan
in terms of their economic choices.  He, as you know, did the town hall
meeting yesterday.  He just spoke to the AmCham, and then has time with
Prime Minister Obuchi both during lunch and then during the bilaterals.

Clearly, one of the opportunities that the President had in this trip
was a chance to speak directly to the Japanese people in the speech
today, but probably most directly through the town hall meeting.  And
the President, as he does in these situations, took very seriously how
he wanted to 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 United
States very much wants a strong Japanese economy.  In both of our
countries, there are people who -- in each of our countries -- who
still believe that somehow this is a zero-sum game.  If the Yankees
are stronger, the Red Sox must be weaker.

   But as opposed to a situation which has never been more
clear, which is that the world economy needs a strong Japan and a
strong United States, and that both countries, as well as Asia
and the rest of the world, are benefited from our strength.  And
I think that is am important message for the President to
directly make clear, that the United States wants a strong
Japanese economy and believes it is in the interests of the
region and the world, particularly at this sensitive time.

   Secondly, the President spoke and is continuing to
speak on the notion that structural change, that opening markets,
that having a more market-based allocation of credit, that these
decisions and movements, while difficult, pay off for a great
people in terms of higher-paying jobs and a stronger future, and
that in the United States we have gone through difficult
political choices, but that they have paid off.

   And the President referred to issues in the
deregulation area like telecom and airlines, where the United
States has gone through deregulation that has ended up being
positive in terms of job creation.  And, in fact, in
telecommunications, the United States has had job growth by over
17 percent since deregulation, while Japan had only 3.3 percent
increase during that time.  That is to stress simply that
deregulation and opening markets and having a more market-based
system, however threatening change can at times seem, has been
positive and can and should be positive.

   The third point, which is very important, reflects the
conflict or the balance between savings and growth for societies
that are concerned about an aging population.  Japan clearly has
even a more serious situation than we do.  At the moment, both of
us have about 20 percent of people over 65, compared to those
between 24 and 65, the working population.  By 2050, Japan may
have as many as 50 to 60 percent of their population over 65,
compared to those between 20 and 64.  Only Italy has as serious a
situation.
  
   But the message that the President was very much
delivering, both in his AmCham speech and in the town hall
meeting was that strong growth and strong productivity growth is
also essential to having the resources for dealing with an aging
society; and that while high savings rates is important, so is a
strong and growing economy; and that Japan needs to have a
stronger debate, the Japanese people, about what is the right
balance -- even as we in the United States have had to have that
debate in somewhat the other direction, increasing our savings
rate at times to deal with an aging society.
   Fourth, the President talked very directly about the
fact that the United States has, itself, lessons that we have
learned in terms of dealing with the banking crisis.  It is
estimated by people who studied the S&L crisis that the eventual
cost to the United States in fixing the S&L system was five times
greater than it would have been if we had acted more directly and
quickly, that the cost went from $20 billion to over $125 billion
because of the delay, and that the United States can say that we
have erred in our dealing with banking in the past and that there
are lessons one can learn from our mistakes. 

   And, certainly, here the President has been
complimentary of Prime Minister Obuchi for the amount of funds
that have been set aside for banking legislation, $60 trillion
yen, $500 billion; but that the essential element of whether that
legislation will work does go to the issues of how prompt the
corrective action is, how much you're able to get assets back
into the market, back being sold, back available for creative
opportunities and that with strong injections of public capital
must come the conditions that will make the banking system work
in the future.

   And, finally, the President spoke on the issue of trade
and I think has spoken in three areas as to the critical role the
U.S. and Japan play at trade right now -- that we right now face
a critical time in the world economy where there will be
temptations by countries to pull in that could lead to a cycle of
protectionism and that it's critical for the world's leading
economies to play a leadership role in furthering market
liberalization.  And the President has spoken about that in terms
of Japan in three contexts. 
  
   One is our efforts in terms of multilateral trade
liberalization.  And there's no question that we were frustrated
that Japan did not play a more constructive role in APEC Internet
liberalization of the nine sectors in the EVSL.  But the
important thing we're stressing now is that Japan share with us a
leadership role in getting resolution on those nine areas in the
WTO next year and that we have leadership together in other
efforts going forward.

   Second, that we need to have progress in the areas
where we have agreements, areas that range from flat glass to
insurance where we do not feel the implementation of those
agreements has been strong enough, that it is important at this
time for the United States to show that there has been progress;
and that, finally, where we have areas -- the President has
mentioned steel, where they've had 114 percent increase in
overall steel from Japan, 550 percent in hot-rolled steel -- that
it's important if the United States is to keep its markets open
and resist protectionism that the American people have confidence
that there is fair trade dealings with us and that the notion of
leadership on multilateral, on progress and implementing and
ensuring in areas where there are surges that there has not been
unfair trade practices are critical for all of us maintaining our
confidence in open markets. 

   And the President mentioned specifically the impact
that the combination of market opening and demand has on the
region.  And the statistic he used was that during this year the
United States has taken in $5 billion more in imports from the
key struggling Asian countries.  But at the same time, there's
been $13 billion less in exports from those countries to Japan. 
And so Japan's market opening and their stronger demand is
critical in this very tangible way, as in others, to the strength
of the region.

   With that, let me turn to Ken Lieberthal, who will just
make clear the events of the day and go through the national
security side.

   MR. LIEBERTHAL:  Thank you, Gene.  Let me begin with a
brief overview of the schedule for the day.  The President gave a
speech at AmCham that wound up just about a half hour ago.  He's
now over at the U.S. Embassy, meeting and greeting embassy
personnel. 
  
   From there, he'll have lunch at a restaurant.  This is
with the Prime Minister and several others, but it is
characterized as a social occasion, not as a working lunch.  I
believe he'll take a short stroll after lunch and see something
of street life in Japan.
       
   Then they begin the bilateral meetings.  There will be
two of them, one right after the other.  The first will focus on
international security issues and the second will take up
economic issues.  Those together will run for a little bit shy of
two hours.  There will then be a brief meeting with the press. 
Each leader will make a short press statement and then there will
be an opportunity for just a few questions afterwards.  Then the
President 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 be
discussed.  On the global side, I think clearly the most
important issue on the agenda concerns North Korea.  There the
President will want to explain our views about difficulties with
North Korea.  He's talking to a man who leads a country that had
the indignity of watching the North Korean missile over-fly its
territory without any advance notice on August 31.  So there will
be an attempt to get our thinking together about how best to deal
with North Korea.

   The issue here, let me stress, is not one of changing
policy.  The issue is one of how you take the agreed framework,
the framework that we have for our policy toward North Korea, and
strengthen it; create the incentives for North Korea actually to
abide fully by its commitments; and that working in terms of
their commitments is important for maintaining the necessary
political support, I think in the United States and Japan, in
order to keep North Korean policy on track.

   So that part of what the President is doing here -- and
let me say also when he goes to the ROK from here -- is to get a
basic mutual understanding as to what the nature of the
challenges in North Korea and how we can best handle that
challenge over the coming years.  It's an issue for our friends
and allies in the region.

   I would expect that several other international issues
will come up, although more briefly -- among those would
certainly be an update of Iraq, I think potentially Japanese
support for the Middle East peace process.  Prime Minister Obuchi
just came from a visit to Russia; next week he'll host the first
visit ever by a Chinese head of state to Japan.  I'm sure the
President will want to hear about his views on Russia and discuss
with him a bit the upcoming visit from Jiang Zemin of China. 

   And then, finally, there are some bilateral security
issues.  These are well known.  I won't take time, let me just
mention them.  The defense guidelines legislation and discussion
of when they are likely to be submitted and adopted by the Diet;
the implementation of what's called the Saco agreement, basically
the agreement for changing the footprint of our armed forces in
Okinawa.  And then, finally, I think the two men will want to
highlight the common democratic values that we share. 
  
   One of the points that the President made in his speech
this morning to AmCham was the compatibility as he understands it
between democratic systems of government and success in market
economies in the information-based society that we all are facing
in the 21st century.  And I think that they'll have some remarks
about that that they'll also want to make.

   So that's a brief overview.  Both of us are open to
questions 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 some
other period of time? 

   MR. SPERLING:  The increase in hot-rolled steel looks
at, I believe it's the first eight months of this year, and
compares it to the first eight months of the previous year.  And
during that time I believe it -- I can check this for you -- but
I believe it's gone from 200,000 metric tons to 1.3 million,
during that same time period, which is a, obviously, more than
fivefold increase.

   Q    Both in Kuala Lumpur, Vice President Gore, and
here, President Clinton has indicated there is like some limit to
the flood of Asian imports.  Can you quantify sort of when you'll
cry uncle?

   MR. SPERLING:  I don't -- there are many different
reasons that you can have a change in imports or trade deficits. 
At times in the last few years we've taken in more simply because
our economy was growing so much stronger and that reflected the
strength of our economy.

   I think what the President is saying is that this is a
difficult time in the world economy and that it's important that
countries like the United States -- the leaders, United States
and Japan -- retain their commitment to open markets, recognizing
that with change and flows that could come from falling
currencies, it becomes that much more important for a leader such
as the President to be able to assure the people in our country
that we're operating by a rule-based system, where people are
operating under the trade laws.  And so what we're looking at is
not so much a particular quantity, but when the President
mentions and area like hot-rolled steel, we aren't going to make
a judgment on that because there is currently an anti-dumping
case going on against Japan, Russia and Brazil on hot-rolled
steel right now. 
  
   But we do think it's fair to say to countries, Japan
and others, that it's important right now that we both take
efforts to open markets, but that we also ensure that we're
operating by a rule-based system because it is a sensitive time. 
And if people believe that the excess in imports reflects unfair
trade practices, that will, as the President said, likely lead to
political pressures for retaliation which could lead to a cycle
of protectionism, which is exactly what the world economy does
not need at this time.
  
   Q    But doesn't the anti-dumping case indicate that
you believe that they are not operating by a set of rule-based
systems?
  
   MR. SPERLING:  Well, the private industry filed the
anti-dumping case.
  
   Q    But do you agree with them?
       
   MR. SPERLING:  I think what the President suggests is
that that dramatic of an increase is -- something has to be
looked at closely.  I do not think that we right now -- that it's
right for us to prejudge something that is going through
effectively a quasi-judicial process, but I think it's fair for
us to tell countries that they need to make sure that they have
their house in order in terms of trading relations with us, both
in terms of opening markets and in terms of not allowing unfair
trade practices or unfair dumping to occur.  That's a general
message that we would have.         
  
   Q    For either gentlemen, why do you think the
Japanese will change their policy on trade liberalization when
it's moved to a WTO forum?  What's the President going to say to
the Prime Minister to encourage that, and doesn't that whole
dispute undercut your argument that in a democratic system you
can deal with all these issues because specifically those
democratic pressures that are making it very difficult for the
Japanese to deal with this --
  
   MR. SPERLING:  Well, in our conversations with Japanese
officials prior to APEC many actually suggested that they wanted
this to be dealt with more in a WTO context.  We were
disappointed 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 an
agreement -- an information technology agreement.  We want to
follow that same model.  What we're suggesting is, we know that
there are difficult pressures on all countries, but the important
thing is that if we can move forward in this broader context, we
feel very strongly that Japan should share with us a leadership
role in doing that. 
  
   I won't start on -- we could have a lengthy
discussion-debate on democracy and tough economic choices, but
there is --but the point I'd make is every country has to deal
with tough political pressures in doing the right things.  Trade
is one area, but as you know, deficit reduction for us was that
type of area.
  
   So the democratic system is one in which democratic
leaders have to try to engage in positive long-term economic
areas that look out for the long-term benefit of all of their
people, and obviously have to make tradeoff between being
politically realistic; you have to make tradeoffs between intense
political pressures that you get from one area versus what you
think is the long-term benefits for the working people of your
country at large.
  
   We believe that the working people of each country at
large benefit from an open and ruled-based trade system.  We
understand each country has to put up with or try to deal with
intense pressures at times in doing that, but we believe that the
long-term benefit for the people -- the overall people of each
country are benefitted by an open system.  And the President
mentioned particular areas where we have gone through more
opening or deregulation, whereas actually in the long-term led to
more job creation and high-wage job creation at that. 
  
   MR. LIEBERTHAL:  Let me give you just a slightly
different cut on the democracy issue because the way we've argued
it, and we're quite serious about it, is that if you look at the
attributes of a country that has good governance, good democratic
governance, you have room for individual choice, you have a
law-based system with good property rights, you have freedom of
information flows, you have a government that is more accountable
to its people and, therefore, more legitimate and also
potentially more adaptable.

   Those are qualities that in a fast-paced,
information-based global economy are likely to enable you to
perform better over the long run.  That certainly is not to
indicate that democracies don't have their own pressures and find
certain 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 was
convinced the security partnership cannot be maintained unless
our economies are strong.  Does he mean to suggest in some way
that the security partnership is not lasting or is in some way
conditional?

   MR. LIEBERTHAL:  No, I don't think he was trying to
indicate it was conditional.  I think he's talking about an
overall partnership between the American people and the Japanese
people.  Part of that is a security alliance; part of it is a
high level of economic interdependence and a shared set of
responsibilities for economic leadership; and part of it
diplomatic. 

   And I think he was indicating that if you want to have
that overall relationship work well, each part of it has to work
well.  And so no one should think that we would think in terms of
a security alliance, but in fact want a weak Japanese economy. 
Quite the opposite.  We want the Japanese economy to perform at
the same time that we want them to be good alliance partners.

   Q    When heads of state visit the United States it
would be rare or almost unheard of for them to give advice or
lectures on U.S. fiscal policy.  Aren't you worried the Japanese
are going to resent this even if it is offered in the spirit of
friendly advise?

   MR. SPERLING:  The President spent significant time
preparing for this, thinking about exactly what is the right way
and the best way to communicate with the Japanese people.  And I
think that if you look at the way he spoke at the town hall
meeting, I think it was one of a leader of a country sharing the
lessons that one economic superpower has had, speaking directly
with the people of another economic superpower.  And what he was,
I believe, doing was praising the Japanese people as a people
that have overcome as much significant challenges as any people
over the last 50 years, and talking about the ability to overcome
them in these situations.

   And in the banking situation, the President does not
come and preach; he comes and talks about problems and challenges
that we had in our S&L crisis and what lessons might be learned.

   On the stimulus and growth side, I think the President
was very aware and respectful of the fact that Japan does have a
significant aging problem and in fact one greater than ours by
the middle of the next century, and that we as a country have
needed to perhaps go in somewhat the other direction, to go
better in higher national savings. 

   But what he suggested is that the Japanese people, like
us, need to think of what the right balance is.  And the balance
of having strong growth, and the importance of that, for
preparing for an aging society too.

   So I think that the President -- I think if you look at
the town hall meeting that he had, he certainly, I think, tried
to 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 a
very sensitive time in the world economy, and I think in
fairness, other countries were quite critical of the United
States in 1993.  And I think when we first came into office, when
we went to forums, we were often harshly criticized that our
deficit was a drag on the rest of the world. 

   So I do think it is fair for other countries to talk
frankly and candidly about what the inter-relationships are to
the world economy and the need for each country to do its part in
creating economic growth.  And I think that's a positive message
and was put forward in a positive way.

   Q    -- the President said something like some people
here think he might have gone further, there might have been more
to it.  What is he going to say to Obuchi about the specific
package that was announced --

   MR. SPERLING:  I think the President recognized in the
town hall meeting and today that the Prime Minister is trying to
take a positive step forward in a stimulus plan.  I think that it
is also the case that most top economic analysts have not
projected that that in itself would lead to meaningful growth
next year.  So I think that our view is simply reflecting what
is, I believe, the widespread view of the top Japanese and
international economists and forecasters.

   And I think that the President's message would simply
be one that Prime Minister Obuchi would share, that there should
be an aspiration to higher economic growth and that there should
be constant effort until that is achieved.  So I think that they
will 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 is
different than what most economic forecasters have been saying.
In fact, we have met with several of them while we have been
here.

   MR. LOCKHART:  Can we take one more for Gene, please.

   Q    So far the Japanese haven't been listening
terribly hard about the idea of keeping markets open, the whole
point of APEC.  Their disagreement on these nine key sectors is
one example.  Do you have any indication that they're going to
listen at this point, the message will sink in?

   MR. SPERLING:  Well, I think the message the President
is bringing is that it's critical for the two countries to move
forward and that more than ever right now there needs to be signs
of increased opening and cooperation if we are going to be able
to maintain the political support in the United States for the
open market orientation that we think has been good for the
United States and good for the world.

   So you'll have to ask their leaders -- we think the
important thing is that the President communicate that message
and do so directly to the Japanese people as well as to Prime
Minister Obuchi.  There's no question that we were frustrated at
APEC, and we have not hit that.  We would like to also point to
positive things we could do.  For example, one of the goals that
we will have is to have enough progress so that there can be a
further announcement of progress on the enhanced deregulatory
initiative by the next time the President and Prime Minister
Obuchi meet.

   Q    Joe, just one more for Gene?  Is there an
administration 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 the
position right now looking at any particular element in the sense
offering kind of a micromanaging type of advice.  I think the
point that we have made is that we think it is extremely
important for the region and for the Japanese people ultimately
for growth to emerge, and that there should be a constant effort
to go forward until it's clear that there will be sustainable
economic growth.

   So the President's message will not be to try -- both
privately and publicly, will not be to try to pull or push in any
direction on any specific micropolicy, but to encourage the Prime
Minister to not be satisfied with anything less than all efforts
that are necessary to achieve sustainable economic growth, and
that his efforts, while positive and deserving of commendation
for moving in the right direction, have so far, not from our view
but from the market's view, not been seen as going as far as
necessary.

   Thank you.

             END                       11:35 A.M. (L)


Return to Vinnie's Home Page

Return to Japan Page

Return to Trade Page