244 Janaury 25, 1983 REVITALIZING THE US.-JAPAN PARTNERSHIP INTRODUCTION The visit of Secretary of State George Shultz to Japan so soon after the journey of Prime Minister Nakasone to Was hington ensures that the contentious issues in U.S.-Jar>anese relations will continue to receive high-level and prioriEy attention.

Attention itself, however, is not sufficient. What must come out of this intense review of U.S.-Japanese relations is firm agree ment on the specific steps to be taken to restore the alliance between these two nations to full vitality.

Secretary Shultz should take guidance from the approach of Prime Minister.Nakasone and make his visit to Jar a substantive working visit focusing on ways of resolving the gerious trade and defense disagreements that exist.

It is substance, in fact, which needs to be addressed in defense, global burden sharing, and particularly in matters of trade. At times, in recent months, the trade related r ecrimina tions that Japan and the U.S. have hurled at each other almost have blurred the fact that the two nations have enormously strong and warm ties binding them to each other. It is the underlying strength of the relationship that makes it so importan t to resolve the trade differences. If the two countries fail to do so and if progress on this matter is not made, then the postwar, free-trade based international economic order, which'has brought unprecedented prosperity to many nations, including Japan, will be in danger of crumbling under mounting American demands for protectionism This study has been prepared by the Asian Studies Center Working Group Richard V. Allen, Edwin J. Feulner, Jr William L. Scully, W. Bruce Weinrod Jeffrey B. Gaper, Guy M. Hic k s, and Burton Y. Pines. 2 The strains caused by growing differences over trade-and defense-threaten the exceptionally close and special relationship that Japan and the U.S. have enjoyed in the post-World War I1 decades. The roots of the current frictions a re outmoded policies and attitudes laid down in the early postwar years when Japan was a minor factor in a world dominated economically and militarily by the U.S In the past decade, however, Japan has emerged as a major factor in the global economy, even a s the global military balance has shifted alarmingly against the U.S. and its allies In historic terms, these fundamental changes have come about very rapidly ences are immense, and a satisfactory resolution will require patience, perspective, and underst anding on both sides. But the differences can be resolved The adjustments necessary to resolve the current differ It is vital that they are.

Three distinct but interrelated subjects should form the agenda for the Shultz visit to Japan U.S.-Japanese commerc ial relations 2) the Japanese defense posture; and 3) the Japanese contribution to the enhancing of democratic values and institutions world wide, including ways for the Japanese to share some of the burden of U.S. global responsi bilities 1) the question of future The trade issue is urgent government and public still endorse the principle of free trade.

But there are growing pressures for direct action to alter the U.S.-Japantrade balance, as well as to counter what are perceived to be protectionist polic ies of the Japanese government. Unless the Japanese address these strongly felt concerns it is increas ingly likely that the U.S. could shift away from the free trade principles that have been the cornerstone of postwar international economic growth. Of c o urse, the U.S. also must be willing to act to meet legitimate Japanese concerns regarding its trade and economic policies Influential sectors of the U.S With respect to defense, the U.S. hopes that a maturing Japan will assume greater responsibilities.for its own defense as well as sharing to a greater extent in an Asian defense peri meter. While Japan has been increasing its defense efforts there is a widely shared consensus in the U.S. that significantly more can and should be done by the Japanese. The p ublic remarks of Prime Minister Nakasone during his visit are encouraging, but specific actions must follow.

There is also a perception in the U.S. that the Japanese could do well to take a more active international role generally.

Without taking a direct ly confrontational role vis-a-vis the Soviet Union, there is much that the Japanese could do economical ly and politically to bolster the free world and democratic values This takes an even higher priority in view of the new U.S. commitment to a IIDemocra c y Project. If 3 The U.S. and Japan must do more than acknowledge that problems exist. They must go further, perhaps by establishing a timetable for American and Japanese working groups to deal with the outstand- ing issues. Working groups on trade, defens e , and global responsi- bilities should be established with a mandate to report within a certain time with step-by-step measures to alleviate the problems. Only through such specifics can those Americans advocating changes in U.S. policy be persuaded that Japan is making the efforts necessary to resolve the critical U.S.-Japanese differences.

The recent Reagan-Nakasone summit, the upcoming Shultz visit, and the policies pursued by Japan in the following months will determine whether U.S.-Japanese relations will maintain a steady course, whether Japan is moving toward a fuller defense partnership with the U.S and whether the postwar, free trade international economic' system can retain its vitality. can assure continuing prosperity to the Japanese and other f ree Asian nations only this And only this will promote the continuing stabil- ity and closeness of the U.S.-Japanese alliance r THE NEW JAPANESE GOVERNMENT In a totally unexpected move, Prime Minister Zenko Suzuki on October 12, 1982, tendered his resigna t ion as President of the I ruling Liberal Democratic Party (LDP rank-and-file members of the LDP (approximately 93 percent of the membership) cast mail ballots. The results indicated a landslide Yasuhiro Nakasone over three powerful rivals. percent of the v ote (559,673 ballots) compared to 27.3 percent for his closest rival, Toshio Komoto, Economic Planninq Agency Director General. With the LDP controlling the Diet, it was assured that Nakasone would be elected Prime Minister to succeed Suzuki (See Appendix I for cabinet profiles northwest of Tokyo, the son of a leading timber merchant. Though he attended local schools in his youth, his collegiate education was provided at the prestigious Imperial University of Tokyo. While still enrolled in the law departme n t of the university, he passed the higher civil service examination but within a week was inducted into the Imperial Navy, eventually rising to the rank of lieutenant commander. Shortly after the war, Nakasone returned home, entered politics, and won a se a t in the Diet on his first attempt in 1947 Twelve years later, he won his first major cabinet appointment, when Prime Minister Nobusuke Kishi named him Director General of the Science and Technology Agency and Chairman of the Atomic I In the primary ballo t ing, held in late November, over 974,000 I I I victory for Administrative Management Aqency Director General I He captured 57.6 Now 64, Nakasone was born in Takasaki, a city 70 miles Upon graduation, he joined the powerful Interior Ministry, 4 Energy Comm i ssion small LDP faction. The following year, while serving as Minister of Transportation in the Second Sat0 Cabinet, Nakasone formed his own faction within the LDP, Shinsei Doshikai In 1967, he took over the leadership of a In 1970, he was named Chief of t he Defense Agency in the Third Sat0 Cabinet In that post, he published Japan's first Defense White Paper. Throughout the 1970s, he held several cabinet seats, including Minister of International Trade and Industry and Minister of State for Science and Tec hnology, serving also as Secretary General of the LDP during.the Miki cabinet.

Nakasone is one of the most cosmopolitan and widely traveled members of the LDP. He understands English better than any other postwar Japanese Prime Minister. A man of exception al ability and sophistication, he is also a rather complicated figure by Japanese standards and something of a maverick. During his early career in the LDP, he was considerd something of a "Young Turk and a hawk on defense issues. More recently, he has be en accused of political maneuvering, particularly for shifting his support from Takeo Fukuda to Kakuei Tanaka after the June 1972 resignation of the late Prime Minister Eisaku Sato.

On issues of principle, however, Nakasone has not wavered.

His commitment to a strong Japanese defense force has been consis tent since the end of World War 11. Even then, he was convinced that as he said, Ifcomplete independence would only come when Japan was capable of administering and defending itself and of contributing i n some measure to the security and well-being of other states For that reason, he called for an immediate revision of the Constitution following independence and for establishment of an independent defense system under total civilian control. Needless to s a y, he was branded by some as a ''dangerous individual, steeped in rabid nationalism Yet had Japan and the occupational authorities followed such advice, and demands that Nakasone himself still feels were ''eminently reasonable, much of the defense dispute between the U.S. and Japan would not exist.

Most observers expect that initially Nakasone's policies will differ little from those of Suzuki. The latter concentrated on trying to shrink the budget deficit while barely appeasing the United States with mode st defense-spending boosts and measures to open Japan's market to U.S. goods. Such an approach sits well with many LDP members in the Diet as well as with major business leaders and a large share of the public It is for this reason that bold leadership is needed to acknowledge the problems and to take the measures to resolve them before they are resolved for the Japanese by an impatient U.S. Congress with measures not in the long-term interest of either the U.S. or Japan. 5 TRADE No issue poses more of a t h reat to U.S.-Japanese relations and to the health of the global economy than does trade. In particular, friction has developed over growin? U.S. trade deficits with Japan, allegations of Japanese protectionism, and rapid incursions into U.S. markets by Ja panese exports, mainly steel autos, and high technology equipment.

These issues have served to restimulate long dormant protec tionist sentiments in the United States resulting in such measures as, for example, the Domestic Content legislation1 passed in 1982 by the U.S. House of Representatives specific issues, but rath e r the broader concept of "free trade espoused by the Reagan Administration and the Japanese government At stake are not just Trade Deficits In the period 1976-1981, the U.S. incurred a cumulative merchandise trade deficit with Japan of some $56 billion 19 80 alone, the deficit reached $10.4 billion; a year later it jumped to $15.8 billion ($18.1 billion counting shipping costs for imports Though 1982 figures are not yet available it is estimated that the trade deficit will soar to nearly $20 billion.

Most o f the U.S. merchandise trade imbalance with Japan is in automotive vehicles and consumer goods (see Table Market penetration has occurred mainly in textiles, television sets automobiles, motorcycles, and steel. Japan's market penetration has proved so rap i d in some cases that American domestic industry has found it extremely difficult to adjust Of course, other factors unrelated to Japanese policies have exacerbated the difficulty American firms have encountered in competing with the Japanese American wage scales, the unwillingness of U.S. firms to make lonq-term commitments to the Japanese market, the failure to design products to meet Japanese standards, inadequate language training for American businessmen abroad.

While Japan has made some moves to ease the trade imbalance e.g., the May 1981 decision to voluntarily restrict auto exports to the U.S. to 1.68 million units per year and the March 1982 decision to extend that ceiling for yet another year) persistent problems still exist over tariff and nontar i ff trade barriers In hiqh U.S. interest rates, rising Domestic content legislation in essence forces car manufacturers to use increasingly more American parts and labor in proportion to their sales in the United States (by 1986 rising scale would demand 9 0 percent domestic content of companies selling over 900,000 vehicles analysis of this problem, see Catherine England Domestic Content Laws For a detailed Will- They Save thi Auto Industry?" The HerItage'Foundation Issue Bulletin No. 87, August 24, 1982. 6 U.S. Merchandise Trade and Balances With Japan by Commodity Group 1990 and 1981 in billions of dollars (F.s.a U.S. Imports U.S. Exports Balance Commodity 1980 1981 1980 1981 1980 '1981 Total 30.7 37.6 20.8 21.8 -9.9 -15.8 Foods, Feeds, Beverages 0.3 0.3 5 . 4 5.9 5.1 5.6 Industrial Supplies and Materials 5.9 7.2 9.5 9.0 3,6 1.8 Capital Goods, Except Automotive 6.6 8.6 4.1 4.6 -2.5 -4.0 Automotive Vehicles Parts, Engines 11.4 13.0 0.2 0.2 -11.2 -12.8 Consumer Goods (nonfood Except Automotive 6.2 8.3 1.2 1.3 - 5 .0 -7.0 Other 0.3 0.3 0.4 0.9 0.1 0.6 Source: U.S. Department of Commerce. Highlights of U.S. Export and Import Trade Trade barriers Over the past fifteen years, Japan has reduced gradually its protectionist barriers in its industrial sector, though not i n agriculture. Japan's tariffs on industrial imports are scheduled to fall from an average of 5.0 percent to 2.5 percent over the first seven years of the 1980s Comparable U.S. tariffs are to fall from 6.1 to 4.2 percent) Tariffs on most industrial product s, however, are not a serious barrier to imports.

It.is quite a different matter for agriculture. These tariffs are serious still serious tariff barriers in agriculture. Only since November 1980 have the Japanese agreed to reduce tariffs from 90 percent to 35 percent on cigarettes, 60 to 35 percent on cigars, and from 110 to 60 percent on pipe tobacco. ttAuthorizedtf (government-approved retailers for imported tobacco were increased to 20,000 (out of a total of 250,000 Advertising of American tobacco produ cts was permitted for the first time. In May 1982, the number of t'author ized" retailers was increased to 70,000, and the government noted that eventually all outlets would be able to handle nonoJapanese brands.

Other areas of the agricultural sector are less open to foreign goods. Though the amount of authorized exports of U.S citrus and beef to Japan have been increased by 17,000 and 14,000 metric tons respectively, this is very little in terms of the potential demand. With Japan's agriculture noted for its high inefficiency and overproductivity of rice, it would seem that cheap U.S. farm products would be welcome. The agricultural sec tor, however, is one of the most powerful constituency groups of Nakasone's LDP Though Japan is America's largest market for wheat soybeans, and a host of other agricultural products, there are 7 Nontariff barriers continue to be one of the major impedi- Riqid import ments to U.S. penetration of the Japanese market. quotas, approval and inspection procedures, the restrictiv e distribution system, and special commercia1,arrangements based on Japanese culture are but a few of the barriers.

Upon assuming office, Nakasone pledged not only to continue On December 24th measures to open markets but to speed them up. the Japanese gov ernment announced its decision to lower tariffs on 86 items (see Appendix 11 including tobacco, chocolates, and biscuits which figure prominently in its trade frictions with the United States and European nations. carry out these cuts beginning in'April 1 9 83, together with tariff reductions for 228 other items decided upon when its second package of market-opening measures was devised from 35 to 20 percent. The rates for chocolates and biscuits each will be brought down from 31.9 to 20 percent. ment also a n nounced on January 13, 1983, that further market- opening measures Ifof an overall nature i.e nontariff barriers) were forthcoming. March 1983 The government plans to With respect to tobacco, Japan will lower the present rate The govern Some of these chan ges are expected as early as While specific tariff and nontariff reductions are welcome, a more comprehensive approach to overall trade issues is essential if the fundamental trade problem between the U.S. and the Japanese is to be resolved.

There is no do ubt that the trade issue is the single most divisive matter in U.S.-Japanese relations. Should significant agreement be reached in the near future on trade questions, the defense and global burden-sharing issues can be resolved in an amicable atmosphere; s hould the trade issues not be resolved, the atmosphere could become so discordant that attempts to resolve the other disputes would inevitably fail less, given the record of limited implementation following past Japanese verbal assurances, skepticism and c ontinuing U.S. pressure are justified. Perhaps the most useful approach now would be the establishment of a five-year plan with specific target figures to be reached in terms of reduced trade imbalance, reduced tariff and nontariff barriers, and related m e asures. Within that five- year plan, specific qoals and actions to be undertaken for each year within that period would also be established. Perspectives and guidelines on future trade negotiations (for example, with natural gas, oil, and coal development including Japanese invest- ment in Alaska) could also be set The initial signs under Nakasone are encouraging. Nonethe All of these specific goals obviously cannot be established immediately, yet agreement in principle to establish a plan could be made, a n d a joint working group established to develop specific 8 actions and a timetable for implementation. both governments to agree on the final working group proposal should be set. In early February, when both Secretary of State Shultz and Trade Representat i ve Bill Brock will be visiting Japan, perhaps the issue of a five-year plan could be broached, and an agreement to establish the joint working group could be initiated. The group could set May 28, 1983, as the deadline so the report could coincide with th e Williamsburg economic summit five-year plan are A firm deadline for Among the specific actions which Japan should pledge for the 0 0 0 0 0 0 0 0 further reform of the setting and administration of its standards further reduction in requirements that impo r ters obtain approval from other ministries prior to clearing customs reduction and eventual elimination of tariffs particularly on lumber, tobacco, paper, computer parts, chocolate, and leather phasing out of remaining import quotas and streamlining admin i stration as this occurs creation of additional opportunities for participation by U.S. firms in procurement by Japanese government agencies making policies on foreign direct investment fully clear and providing full national treatment for foreign investor s cessation of the shieldin7 of "targeted industries from liberalizing Japan's capital markets I import competition, especially beef and citrus; I I In addition to these specific ways in which the Japanese can contribute to the resolution of the t?ade bala n ce problem, there is another issue, which was raised during the Reagan-Nakasone discussions that requires study and joint U.S.-Japanese action gas from Alaska, exports of both products should be permitted to Japan by the amount of such sales. study, Dr. F red Singer, Senior Fellow, estimates Alaska's potential oil reserves at upwards of 47 billion barrels.

Unfortunately, the Alaska pipeline is being underutilized, and even half of the 1.6 mbd now leaving Valdez travels to U.S. Gulf Coast refineries via expe nsive Panama Canal or Cape Horn routes 50 cents per barrel, contrasted to $5 a barrel via these routes.

It is estimated that the U.S. could ship as much as .8 mbd of oil In order to more efficiently use American oil and natural This would reduce the balan ce of trade deficit with Japan In a forthcoming Heritage Foundation Transporting Alaskan oil to Japan would cost an estimated 9 to Japan (worth about $9 billion a year) and possibly 3.2 billion cubic feet per day of liquefied natural gas to markets in Asi a.

Thus the U.S. Congress should remove export restrictions on the sale of oil and natural gas from Alaska. Besides benefitting U.S.-Japanese trade it would also provide more energy security for Japan by diversifying their suppliers away from the Middle Ea st.

Defense American sentiment has been increasing that Japan is not doi.ng enough to protect itself militarily. or to defend East Asia from a mounting Soviet threat. With big U.S. federal deficits forcing Americans to look hard at their own defense needs , there is growing attention to ways in which America's allies can assume more of the costs of defending the free world.

Though Prime Minister Nakasone had stated that he favored increasing Japan's defense expenditures by 7 percent in FY 1983 the actual figure approved by his government is 6.5 percent.

Japan's national budget for FY 1983 is expected to be around The rate of increase is down 210 billion, up only 1.4 percent from 1982--the lowest increase in twenty-eight years. The defense budget will be $1 1.475 billion up from $10,775 billion in FY 1982. from the 7.35 percent increase originally requested by the Defense Agency and the 7.75 percent jump in spending for EY 19

82. The new defense allotment.wil1 be 0.977 percent of GNP, leaving it just below the 1 percent ceiling on defense spending set in 1976.

This 1 percent figure is being approached, however, not because of much greater defense spending, but because of economic stagna I tion making defense a relativ ely larger share of GNP I Despite the disappointingly low hike in defense outlays Nakasone has indicated strongly that he would introduce a supple mentary budget this year, which would grant retroactive pay raises to government workers, including members of the military.

This would boost overall military appropriations by over 8 percent adding some $165 million beyond the 6.5 percent announced increase.

Though this anticipated increase would substantially raise defense spending it is not really sufficient to deal with the current Droblems, especially those raised by Prime Minister Nakasone-in his Januiry 18 hterview with The Washinqton Post editors and reporters. During those discussions, Nakasone spoke of increasing Japan's air strength to prevent the in creasing Soviet penetration of Japan's air space, to secure complete and full control of straits that go through Japan's' islands, and to maintain the ocean lines of communication surrounding the islands.

Originally, the Japanese Self Defense Agency requested a 7.34 percent increase, so that it could meet the weapons procure ment plans outlined in the Second Mid-Term Program Estimate (Five 10 Year Program)2 scheduled to begin in FY 19

83. In this plan, the Defense Agency, among other things, planned to pro cure much modern military equipment, including fighters, helicopters tanks, missiles, and a large quantity of armored cars, howitzers and mortars. Under the new defense budget, the procurement program will be slashed.

It now appears, for example, that there will only be enough funds to buy thirteen F-15 fighter-jets rather than twenty, seven.

P-3C anti-submarine warplanes instead of ten, and two destroyers rather than three. Though these cuts may seem minimal, Washington has been suggesting that the Mid-T erm Estimates are themselves inadequate, as is the 1976 Defense Outline on which it is based to meet the changing military environment in the Pacific.

In June 1981, at the U.S.-Japan Security Conference held in Hawaii, the U.S. suggested that Japan add fo ur squadrons of F-15 fighters to the ten squadrons of interceptors set in the 1976 Outline. Japan's destroyer force target should also increase from 60 to 70, and submarines from 16 to 25. American delegates also suggested that the Japanese build an anti- submarine aircraft force of 100 P-3Cs.

If Japan were to achieve the targets set by its 1976 Defense Outline and the Second Mid-Term Estimate by 1987, which is now virtually impossible, it would have an impresssive air defense and a much improved anti-subma rine warfare capability of course, it does not. In fact, there are serious deficiencies At present o The Air Self-Defense Force consists of over 350 combat aircraft, including ten interceptor squadrons with 150.

F-104DJs and 130 F-4EJ fighters Both are ob solete o Japan's air bases have minimal survivability; they lack modern surface-to-air missile defenses as well as a modern radar system o Within the ASDF, reserves are inadequate o Of the Ground Self-Defense Forces of 910 tanks, 70 o Most artillery and a n ti-tank weapons systems are outmoded percent are of 1960s vintage o Transport capabilities are generally inadequate The Mid-term Defense Program Estimate charts the future course on major projects of especial importance to the GSDF, MSDF, and ASDF in form u lating annual defense programs, budget requests, etc for an annual defense capability buildup based on the 1976 Defense Outline.o o Most of the anti-submarine warfare (ASW) vessels are Logistics support is generally inadequate vulnerable to air attack o o All branches of the Self-Defense Forces (SDF) encounter o There is shortage of air support for ASW vessels shortages of ammunition and spare parts There is no integrated command and control for the services; and Japan must take account of the continued-an d unrelenting buildup of Soviet conventional and nuclear military power. Moscow deploys in Asia approximately 460,000 troops formed into 51 divisions; of these, about 360,000 (39 divisions) are stationed in the Far East To remedy its defense shortcomings, t he Nakasone,administra In particu- tion should begin a long overdue assessment of Japan's defenses and its role in the security of the Western Pacific. lar, the new government should develop o clear definition of and an explicit consti- tutional framework for the Self-Defense Forces o major revision of the Second Mid-term Estimate and more importantly a major review of the National Defense Program Outline of 1976 On the issue of Japan's role in "sea lane" defense, the Reagan-Nakasone discussions brought we l come news. Apparently, the U.S. and Japan have agreed to conduct an eighteen-month study on how Japan can take charge of the security of sea lanes in the Western Pacific. Eventually, military responsibility for that body of water "extending between Guam a nd Tokyo and between the Strait of Taiwan and Osaka" will be transferred from the U.S.

Seventh Fleet to Japan.

While Nakasonels comments on increased air-and naval expendi- tures were welcomed in the U.S the Soviet News Agency, TASS threatened that such p lans would "make Japan a likely targetfor a retaliatory strike." This is but another attempt by the Soviets to llfinlandizell Japan by intimidation and fear. It must be forcefully rejected by both the U.S. and Japan SHARING THE GLOBAL BURDEN The need for e nhanced cooperation between the United States and Japan extends far beyond the contentious issues of trade and defense spending that have received the most attention. With the 12 emergence of Japan as a leading economic and political force Tokyo-Washingto n collaboration on numerous other issues can contribute substantially to the attainment of the two governments goals of establishing a more secure, stable, and democratic environment in the world. In fact, perhaps Japan's most important role in world affai r s has been and will continue to be her contri bution towards the solution of a whole range of international economic problems. Among these: Japan has played a vital role in encour aging and sustaining the economic development of Asia 70 percent of Japan's bilateral aid goes to countries in Asia economic qrowth of Korea, Taiwan, and the Association of Southeast Asian Nations (ASEAN) countries in particular have taken place in tandem with Japanese economic expansion. Japanese bilateral and regional assistanc e programs as well as investment have encouraged this development. Many Asian states, however, suffer from severe economic problems, particularly debt management. Japan should provide more bilateral aid to the ASEAN states, as they are now doing with South Korea relations with all the countries by trying to reduce bilateral trade deficits Assistance in Asia The rapid Tokyo also should foster better commercial International Assistance: Beyond East Asia, Japan should assume more responsibility for assisting c ountries important to the free world which are suffering from various economic problems.

At present, Japan has the fourth largest Overseas Development Assistance program in the world target of disbursinq more than $21.4 billion in ODA between 1981 and 19

85. Under Prime Minister Nakasone, the FY 1983 increase is set at 7 percent, the only budget item other than defense to be increased. Japan can-thus continue to provide critical aid to countries such as Turkey and Pakistan. Similarly Japan, which imports s o much oil from the Middle East, could assist in the reconstruction of Beirut and thereby encourage the creation of a viable government in Lebanon In January 1981, Japan set a Refuqee Assistance: Around the world, but especially in Southeast Asia, Japan c a n contribute much more financially, to aid refugees. Given its enormous population pressures it is understandable that Japan limits the number of refugees that'can settle in Japan. However, Japan can contribute both aid and personnel to mitigate refugee s u ffering. The December 11, 1982 agreement between the U.S Japan, and the Philippines concerning support for refugee resettlement programs is an encouraging development. Under this agreement, there are new medical and dental stations, laboratory facilities a nd equipment, nurses dental assistants, and medical technologists in the Philippine Refugee Processing Center at Morong, Bataan. Japan has also agreed to help strengthen the job training programs to better prepare the refugees for gainful employment in th e ir country of final destination. 1 13 Assistance to Latin America: Japan can also use its economic and other resources to assist in the development of countries in the Western Hemisphere which also share borders on the Pacific Ocean. the government can he l p the development of those markets with programs that complement the U.S. efforts under the Caribbean Basin Initiative and other projects. the economic recovery of Jamaica under the Seaga government with a 10 million program inaugurated under the Caribbea n Consultation Group in March 1981 Basin in general the U.S. needs more sustained leadership in supporting programs there in order to engender the kind of support that Japan may be capable of providing been seriously examined in Japan: canal through Panama . commerce in the region and especially benefit U.S. domestic and international trade. For example, much of Alaskan oil presently flows through expensive small tankers transiting the canal policies dealing with d evelopmental problems, the United States an d Japan can engage in numerous other mutually beneficial pro j ects Just as Japan has developed large markets in this area Japan has been helpful in In Jamaica in particular, and the Caribbean A project of-potentially major importance in the region has the building of a sea-level A new sea-level canal would revitalize U.S.-Japanese Cooperation: Besides closely coordinating 1) Hish technolow and joint ventures. Japanese industry should be interested in investing in development of U.S. oil, minerals, and othe r raw materials. Through joint ventures with U.S. companies, Japan may be able to secure a reliable supply of materials from the U.S while helping American companies modernize their industrial infrastructure. Exchanges may also be fruitful in the applicati o n of some microprocessing techniques to defense. At the time of the Nakasone visit, Tokyo took important steps to liberalize the transfer of defense related technology to the U.S Another area of cooperation involves the use of space for communi- cation, a s well as possible sources of solar power 2) Democratic Political Cooperation. As two of the world's largest democratic nations the U.S. and Japan should expand international cooperation and exchanges among democratic countries. The Liberal Democratic Part y already is taking important steps towards this by helping to create and promote the Pacific Democra- tic Union: Japan has also indicated important interest in promot- ing the ambitious Youth Exchange program being undertaken by the United States Informat i on Agency creating a sixth permanent seat on the Security Council for Japan. This would both reflect the reality of Japan's role in the U.N and increase Asian representation on the Council United Nations Cooperation: The United States should propose On va r ious issues that come before the U.N Japan should more boldly press for realistic means of addressing international 14 issues. One example of this is the Law of the Sea negotiations On December 10, 1982, both the United States and Japan declined to sign t h e United Nations Law of the Sea (LOS) Treaty in Montego Bay, Jamaica. Twenty other nations chose not to sign, including the United Kingdom, the Federal Republic of Germany, Belgium, Italy, and South Korea. But because 117 nations signed the controversial a ccord, it will take effect with little difficulty. It will not, however, bind those nations that do not sign it. The U.S. has concluded that the treaty is not in American interests nor in those of world economic growth As a major industrial state, Japan h a s much to lose by endorsing the concepts contained within the Law of the Sea Treaty mineral deposits in the deep seabed, and to ensure its navigational rights and privileges can all be attained without signing the Treaty In particular, Japanese ambitions f or mining the deep seabed can best be realized within the framework formed by a separate agreement with the United States and its other major industrial allies outside the Law of the Sea Treaty Japan's desire to protect its ocean resources, to mine CONCLU S ION Thus, the agenda for the Shultz visit to Japan should be extraordinarily full. Minister Nakasone was in Washington must be followed up with more concrete implementation procedures. the U.S. visit one of his first actions as Prime Minister is encouragi ng, but time is growing short for follow-through.

U.S.-Japanese relations are tottering on a precipice of misunderstanding and differing priorities in the areas of commer- cial relations, defense, and global burden sharing. Should U.S.-Japanese relations c ontinue to drift apart, the vital interests of both nations could be harmed. While.there remains a consensus in the U.S. that, all things being equal, free trade is the cornerstone of a sound international economic order, there is a rising chorus calling for protectionism. Japan's trade surplus with the U.S and the penetration of Japanese goods into key U.S markets are fueling the protectionist sentiments.

Free trade is the best policy. However, unless the Japanese take specific actions, which include a lo ng-term, step-by-step agreement to ease trade barriers and other steps to alter the balance of trade problem, free trade could be buried by a protec- tionist tidal wave. injure Japan, the U.S and the free world Initial discussions held while Prime The fac t that Nakasone made The long-run impact of this could seriously While the fundamental aspects of the defense alliance between the U.S. and Japan are still solid, a continuing unwillingness on the part of Japan to shoulder more of the responsibilities for f inancing the joint defense effort, as well as a failure to stake out more of a role in the physical defense of adjacent areas 15 could unravel the partnership. The U.S. government and a substan tial proportion of the American public feel that it is not un rea sonable for Japan to contribute to the common defense in roughly the proportion that the U.S. itself and its NATO allies participate.

While the U.S. is patient and recognizes that Japan's military growth must take some time, a firm commitment to this goal should be made by Japan.

Finally, a noticeably increased Japanese willingness to take on global responsibilities of a nomilitary nature, to assist the U.S. in promoting democratic political institutions and economic development, would greatly ease the psychological climate which is the context of trade and defense disputes. Were Japan able to move out of its self-limited international role, it would be a sign of good faith that Tokyo is interested in a serious effort to resolve the trade and defense i s sues In contrast to former Prime Minister Suzuki, Mr. Yasuhiro Nakasone is known for bold and dynamic leadership and as one of a few senior Japanese politicans who consistently has called for Japan to fully accept the responsibilities and role of a mature industrial nation In his few weeks in office, Nakasone has demonstrated determination to stand by his convictions, particular ly by his strong support for defense budget increases In his Japan to reciprocate by providing greater support for the U.S now -t h at it can afford to do so. By visiting the U.S. so soon and at a time when bilateral relations are so difficult, he further confirmed his determination to set Japan on a course toward a full and equal partnership in defense and trade with the U.S. which c an only be welcome here.

What 2s required now is a fundamental restructuring of Japan's economic policies and trade relationships as well as a reconsideration of an appropriate and constructive world role commensurate with its economic and technological po wer and with strategic realities. This cannot be accomplished overnight. Nor can it be accomplished without sacrifices and bold new initia tives. Above all, it is necessary to perceive the current problems in perspective, to strive to establish a framewor k for laying down -guidelines and goals. opening statement to Parliament, he broke precedent by frankly acknowledginq Japan's great debt to the U.S. and the need for I I I I Yasuhiro Nakasone visited,Washington at a most difficult period in U.S.-Japanese r e lations was issued at the conclusion of the visit, all indications are that the talks were productive in lessening the frictions between the states. Still a great deal more needs to be done be hoped that Nakasone has the wisdom and vision and political co u rage 'to continue to do what is necessary to ensure a close U. S Japanese relationship for the foreseeable future Though no formal communiqu6 It is to 16 APPENDIX I PROFILES OF THE NAKASONE CABINET o Akira Hatano (71 Minister of Justice Former superintend e nt general of the Tokyo Metropolitan Police Department. After retiring from police service in 1970, he ran unsuccessfully for the 1971 Tokyo gubernatorial election against Ryokichi Minobe. Hatano, a graduate of the night college of Nihon University in Tok y o, was the first night college graduate ever to rise to the top police post. Hatano received a certain degree of prominence when he publicly criticized the judge in the Tanaka trial for admitt- ing evidence depositions of American executives of the Lockhe e d Corporation. Japanese Diet, Hatano is technically a political independent, though he is generally considered to be allied with the Tanaka faction. This is his first appointment to a cabinet post As a member of the upper house of the o Shintaro Abe (58 M i nister of Foreign Affairs Abe is a son-in-law of former Prime Minister Nobusuke Kishi and heir apparent to the faction controlled by former Prime Minister Takeo Fukuda. Tokyo, Abe was a prominent journalist of the Mainichi News- papers. In the Suzuki cabi n et, Abe served as Minister of International Trade and Industry A graduate of the University of o Noburu Takeshita (58 Minister of Finance Considered a trusted aide to former Prime Minister Tanaka and No. 3 in the faction (after Secretary General Susumu Ni k aido Takeshita has held several cabinet posts. chief cabinet secretary in both the Sat0 and Tanaka cabinets. He served as construction minister ?luring the Miki administration, and finance minister under Ohira o Mitsuo Setoyama (78 Minister of Education A senior member of the Fukuda faction, Setoyama managed the unsuccessful campaign for Abe in the latest LDP presidential .election. Sato cabinet and justice minister under Fukuda. He was previously construction minister in the o Yoshiro Hayashi (55), Minist e r of Health Welfare A member of the lower house for the past13 years, Hayashi has previously served in the Ministry of International Trade Industry for some 19 years. this is his first cabinet post. A member of the Tanaka faction, 17 0 0 0 0 0 0 0 Iwazo K a neko (75 Minister of Agriculture, Forestry Fisheries A member of the Suzuki faction, Kaneko hails from the fishing prefecture of Nagasaki and is considered an expert on fishery. Before being elected to the lower house of the Diet in 1958, he had been acti ve in prefectural politics. be a staunch defender of Japanese farming and fishing inte- rests.

Considered to Sadanori Yamanaka 61 Minister of International Trade Industry A leading figure in the Nakasone faction, Yamanaka is consi- dered an expert in domes tic policies. His last cabinet post was director general of the-Defense Agency in the Tanaka cabinet. Considered energetic, fast-thinking and very outspoken. Close ties with the Japanese beef industry.

Takashi Hasegawa 70 Minister of Transport A journalist-turned-politician and leading member of the Nakagawa faction, Hasegawa once served as labor minister under both Tanaka and Miki.

Tokutaro Higaki 66 Minister of Posts Telecommunications A member of the Nakasone faction, this bureaucrat-turned- politician has been elected to the upper house twice. graduating from the University of Tokyo, he joined the Agriculture and Forestry ministry. able in agricultural affairs.

Akira Ohno (54 Ministerof Labor After Considered quite knowledge A son of the late vice pre sident of the LDP, Bamboku Ohno the new labor minister comes from Gify Prefecture where he has been returned to the lower house seven times. He has assumed such posts as parliamentary labor and finance vice- ministers, and deputy secretary general of the LDP. He has no factional affiliation.

Hideo Utsumi 60 Minister of Construction A member of the Tanaka faction, Utsumi has successfully been reelected to the lower house six times A graduate of Chuo Uhiversity in Tokyo, this is his first cabinet appointment.

Sachio Yamamoto 71 Minister of Home Affairs; Chairman of the National SafetyCommission A member of the Tanaka faction, Yamamoto was formerly head of Osaka prefectural police headquarters before his transfer to the construction ministry where he became v ice-minister. Member of the lower house. 18 o Masahara Gotoda (68 State Minister, Chief Cabinet Secretary A trusted lieutenant of, former Prime Minister Tanaka, Gotoda is a member of the lower house. he was a former career bureaucrat in Japan's national p o lice force, rising to the post of chief of the agency. by most to be a key figure in Tanaka's brain trust o Hyosuke Niwa (71 State Minister, Director General of the Before entering politics Considered Prime Minister's Office Director General of Okinawa De velop- ment Agency A member of the Komoto faction, Niwa is considered a top expert on agricultural affairs. Land Agency during the short-lived Tanaka cabinet in 1974.

Elected to the lower house nine times.

Former head of the National o Kinikichi Saito (73 State Minister, Director General of A close associate of former Prime Minister Suzuki, Saito supervised the Nakasone LDP presidential primary. A graduate of the University of Tokyo, Saito began his governm e nt career with the powerful Interior ministry but then switched to the labor ministry following the Second World War o Kazuo Tanikawa (52 State Minister, Director General of the An American-trained education expert, Tanikawa is a member of the Komoto fact i on. A member of the lower house, he is considered dovish on diplomatic and defense issues Administrative Management Agency Defense Agency Fluent 'in English o Jun Shiozaki (65 State Minister, Director General of Economic Planning Agency A member of the Su z uki faction, Shiozaki has been p1aying.a key role in tax affairs. After graduating from the Univer- sity of Tokyo, he spent 26 years with the Ministry of Finance before entering the political arena o Takaaki Yasuta (66 State Minister, Director General of S cience and Technology Agency Chairman of the Atomic,Energy commission A domestic policy expert in the upper house, especially in finance and taxes. Former vice-governor of the Ishikawa Prefecture o Matazo Kajiki (63 State Minister, Director General of Env i ron- ment Agency 19 A member of the upper house, Kajiki has, for the past 2 years, served as chairman of the Diet Policy Committee of the LDP. He has devoted considerable time to land reform projects since joining the Agriculture Forestry Ministry after h i s graduation from Kyoto University o Mutsuki Kato (56 State Minister, Director General of National Land Agency Director General of Hokkaido Development Agency A member of the Fukuda faction, Kato is acknowledged to have an aggressive personality and to be a leading expert on railway and civil aviation administration. He has been labeled a "gray official" for his alleged involvement in the Lockheed scandal. 20 APPENDIX I1 DECEMBER 1982 REDUCTIONS IN JAPANESE TARIFFS INDUSTRIAL PRODUCTS (Present rate/new rat e in percent o Items of interest to the U.S Cash registers account ing machines, numbering six items (4.5-10.3/3.6-7.2 parts for calculators etc. (4.9/4.2 unrecorded magnetic tapes, numbering two items (4.5 and 4.9/3.6 and 4.2 lead storage batteries (6.6/5 . 8); kraft papers, etc numbering two items (11.8 and 7.7/9.3 and 5.9); corrugated paperboard, etc., numbering two items (4.9/4.2 paper coated with man-made resin, etc. (6.2/5.1 o Items of interest to the European Community: Flax-ramie handkerchiefs (21.5/1 2 .7); land-use internal combustion engines of 500 'horsepower- or less (5.3/nil) forging-press machines, etc., numbering six items (4-7.5/nil o Items of interest to the U.S. and the European Community Farm tractors, numbering five items (4.2-5.9/nil FARM P R ODUCTS (Present rate/new rate in percent o Items of interest to the uI's Mangoes (7.5/final rate of Tokyo Round of multinational negotiations at 6.0 avocadoes (7.5/6.0 guava (7.5/6.0); grapes (15.6/13.0 dried grapes (3.1/2.0 walnuts (23.8/20.0 papaya 6.3/ 4 .0); kiwi fruits 8.8/8.0 stearin of beef and pork fats (5.9/5.0); fatty materials obtained from wool grease (5.9/5.0); cotton seed oil (Y18.12 per kg/Y17 per kg); processed animal or vegetable oil (5.4/5.0); fatty alcohol (5.4/5.0); chewing gum, sugar-add e d (33.8/30/0 ripe olive (11.6/9.0 marmalade and fruit jelly, sugar added (32/unagreed item of the Tokyo Round); canned peach of 2 kg or over (16.9/15.0 roasted almond (12.3/10.0 mixed vegetable juice, non-sugar (12.0/9.0 vegetable juice, non-sugar (12.6/1 2.0 o Items of interest to Southeast Asian nations: Coconut oil 9.4 or Y10 per kg/9 or Y10 per kg); castor oil (9.4/9.0 o Items of interest to the European Community: Cocoa powder (22.8/21.5); roasted chicory, extracts and essences 10.8/10/0).

Source: The Japan Economic Journal, Vol. 20, No. 1038 (Tokyo December 28, 1982, p. 2.