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Interview with Yasuo Takeuchi, Nikkei Shimbun

Daniel Sullivan, Assistant Secretary for Economic, Energy, and Business Affairs
Hotel Okura
Kyoto, Japan
May 9, 2008

ASSISTANT SECRETARY SULLIVAN: I want to begin just by mentioning a few things about what I'm doing here, just an overview statement. Thanks again, I wanted to first let you know it's great to be back in Japan. I've gotten here a lot. You know I do the G-8 Sous Sherpa negotiations, so this is my second round of negotiations. We're actually starting to draft the text, the leaders’ text. So we just finished two days of negotiation. So if I don't get all the answers right, it's because my brain is a little fried. But I'm also, from the U.S. State Department's perspective, the official who participates in the U.S.-Japan subcabinet meetings, so I've come to Japan a lot to work on our bilateral economic issues. It's my first time in Kyoto, but it's a beautiful place, and it's great to be here. And I just also very much from the beginning want to compliment the Japanese government on its leadership and how it's handling the G-8 negotiations, and the themes that it’s chosen which we think very important, and they're doing a great job. My colleague Mr. Yoishio Otabe [?] from the Ministry of Foreign Affairs is a very experienced negotiator, very knowledgeable. I know that my colleague Dan Price has also been very pleased with the leadership, so I know the President is looking forward to the summit.

What I wanted to just briefly touch on, at least from the U.S. perspective, are some of the themes that we've been promoting and some of the things I think that we see will be important elements of the summit, at least from the U.S. side, that we're trying to emphasize. The first one is a focus on accountability. The G-8 has made some very important commitments in the last several summits. In particular, some of the commitments that have been the focus of the G-8 have related to health issues, global health issues, particularly in the developing world relating to HIV/AIDS and other infectious diseases. You may recall that last year in Heiligendamm there was a $60 billion commitment. And the U.S. takes these commitments very seriously. We are emphasizing accountability in terms of the G-8 coming through to meet these commitments, so we are very focused on that. So that's a big theme that we want to be emphasizing throughout the negotiations and that will be an important component of the summit, we believe.

There is also the element related to maintaining a commitment to open-market principles, particularly in the face of economic uncertainty, so that's been a theme of ours. Of course we agree with the Japanese focus on the issue of climate and the way that the G-8 can address the climate challenge, so we're looking forward to continuing our work on that and also in the major economies process, which will be an important element of the summit with the major economies leaders’ meeting here as well.

And related of course to the climate challenge is a focus on clean-energy technology. The last several years the G-8 has underscored the importance of clean-energy technology development, deployment, R&D for those in it. We think it's an important opportunity this year to actually take action and show G-8 action. As you probably know, the U.S. and Japan, particularly on basic R&D and government-funded R&D, have very, very strong records. I can get you the exact number, but I think our two governments account for around 70% of all global government-backed R&D, so it's a strong area for the U.S. and Japan.

So those are some of the themes from the summit, and the other area I just wanted to touch on briefly was, given my experience with the bilateral relationship, are looking at ways – the United States is very interested in ways that enhancing and deepening and really fulfilling the promise of our strong political security and economic relationship and fulfilling the promise on the economic side. We are the two largest economies. That's really what the U.S.-Japan subcabinet meetings have been doing. We meet every six months, and we focus on things such as deepening our investment relationship, deepening our trade relationship. And one area that I focus on in addition to this is, my bureau leads the negotiations for civil aviation negotiations for the United States. We're looking at ways to expand our relationship there through a liberalization agreement. If you want to get into some of these topics in more detail, I'd be glad to.

That's the bilateral side, but the multilateral side is also very important. And the biggest area where that importance of deepening U.S.-Japan cooperation in a multilateral forum of course relates to the Doha negotiations. The U.S. – from the President, to the U.S. Trade Representative, to our Secretary of State, to our Secretary of the Treasury, to our Secretary of Commerce – all are very, very focused on Doha. And it's an area where we believe the U.S. and Japan – our interests are so very closely aligned, particularly in the manufacturing and services area, that we have always encouraged our Japanese colleagues to play a similarly strong role in terms of pressing for the most ambitious agreement possible. So those are just a few introductory comments that I wanted to make, and again I appreciate you coming down here to talk to me, and I look forward to our discussion.

QUESTION: Today you had a Sous Sherpa meeting. So what did you focus on, topics? You said climate change, open markets, health issues. What is the most important topic?

ASSISTANT SECRETARY SULLIVAN: As you know, the way the G-8 summits work, it’s the president, which of course this year is Japan, focuses – they set out the agenda, and they focus on what they want to discuss. So we’ve been meeting for the last two days, and as I mentioned, actually starting to work on elements of the leaders’ declaration. So all the countries were here. And we focused on some of the core issues that the Japanese presidency has made its important areas, all of which we agree on. So, for example, we did focus on development, particularly with regard to Africa. And again, one of the things that I emphasized throughout these negotiations was this issue of accountability, which I think the Japanese government is clearly also very interested in. So there was a long discussion and negotiation on aspects of that. We also focused, again as I mentioned, on the issue of addressing the climate challenge, and there was a focus as I mentioned earlier on the agreement on commitments with regard to clean-energy technology, focusing on clean energy, basic R&D, commercialization, deployment through, whether it's a clean-energy technology fund that the U.S. and Japan have committed to with our colleagues from the United Kingdom or through a reduction in tariffs on clean-energy technology goods and services, which we have been very interested in. So we focused on that.

We also focused discussion on issues relating to the global economy. And again, one of our themes that we thought was important was, especially during challenging economic times, is to maintain a commitment and confidence in the open market and trade liberalization system that is so significantly benefiting both the United States and Japan. And then finally over lunch we had a discussion on some regional issues, particularly with regard to some of the issues that – there was a discussion on the importance of economic development in some of the areas of the world that we, the Japanese, and other G-8 member countries think is particularly important. And we had a discussion on looking at ways to coordinate and cooperate on economic development issues with regard to Pakistan and Afghanistan. So, very, very useful discussions. I think we made significant progress, but a lot of work ahead, as you can imagine. So it was a busy two days.

QUESTION: You said you talked about African development today? African development program? I think it is related to the food price crisis and health issue. So first of all, regarding the food price crisis, what did you talk about in this meeting?

ASSISTANT SECRETARY SULLIVAN: Well, that's a great question. As you can imagine the topic did come up. And again, I know Prime Minister Fukuda has talked about this as an important topic of discussion at the G-8. What we did was, you may have seen that, a number of G-8 countries have already reacted to the food crisis, and what we were looking at, in particular I can tell you, last week President Bush announced an initiative that already builds on the $200 million that he had committed to that to an additional $770 million. So this is approximately a $1 billion program that focuses on emergency humanitarian relief, but also focuses on policies that could help both in terms of medium and long term in terms of increasing productivity in developing countries so we don't have this problem again. And of course the President mentioned the importance of a strong Doha agreement with regard to both having a moderating effect on global food prices but also increasing production capacity for developing countries with significant market openings in terms of agriculture markets through a strong Doha agreement. And he also highlighted the importance of science and technology, particularly as developing countries look for science and technology that can help for agriculture productivity for crops that are more resistant to drought – things like this. So these were the elements of the President's announcement and what the United States is going to do, but we were discussing these different elements and how the G-8 could actually agree on some of the elements announced by the President, some of the other G-8 leaders. So it was a very useful discussion, and I think it's an area where, again, the prime minister has already mentioned it, where the G-8 can and will play an important global leadership role.

QUESTION: Could you tell me your idea what kind of message the G-8 summit should deliver in the July summit? Do you think the G-8 summit will have a concrete target? Do you think G-8 countries should have a concrete target?


QUESTION: No, regarding food prices. For example, what kind of assistance G-8 countries give to developing countries?

ASSISTANT SECRETARY SULLIVAN: What kind of assistance? I think that's a good question. Again, the President’s announcement last week called on other countries to help. As you know, the World Food Program has said there's a shortage of about $750 million, so I think it's clearly an area where the G-8 can play a leadership role. The United States is proud of its leadership role. We traditionally have provided almost close to half global food aid typically. As the President mentioned in his statement, we'll continue to lead in that area. But I think that other G-8 countries are already stepping up to help address this crisis.

But again, what's important, and where the focus of the G-8 as we discussed it today following some of the aspects of what the President talked about, there's clearly the need for a humanitarian response now. And that's what many countries are doing, and G-8 countries can play a strong leadership role. But there's also a need to address some of the underlying causes of this rise in food prices. And these, as I mentioned, relate to agriculture productivities, supply chain bottlenecks in certain areas of developing economies, and the need for increased access to science and technology. So I think the G-8 coming together can play a leadership role in helping and of course working with global institutions like the World Bank, the World Food Program, the UN, but to help with regard to maintaining a focus on the medium and longer term policies that need to be implemented to really address the underlying causes of the dramatic rise in food prices. So again, under the leadership of your prime minister, this appears to be a topic that's going to be an important one at the summit. And we are pleased to be playing an important part in driving that agenda and presenting ideas to our G-8 partners on how the G-8 can come together to address it.

QUESTION: Next is climate change. The leader’s meeting of major economies process will be held in July in conjunction with G-8 summit. What will be the result of this meeting you expect?

ASSISTANT SECRETARY SULLIVAN: Well, I think first of all it's very important – this major economies process, this actually was an initiative that President announced last year in May right before the Heiligendamm G-8 summit, and the process was endorsed in the leaders’ statement by the G-8 leaders in Heiligendamm. The President has been clear that we see it as helping provide a detailed contribution to the UNFCCC process. That's an important point. But it's also critical to get these – the largest economies account for upwards of 80% to 85% of all global greenhouse gas emissions – to get together in a room and really work on a post-2012 framework. And so already we think a lot has been accomplished by starting to build the trust that is necessary among these very important but very diverse countries.

There's G-8 countries – there's actually all the G-8 countries – and the major emerging economies. And so our primary goal we would hope that among all the major economies in this process would be to reach an agreement on the long-term goal of cutting greenhouse gas emissions. Now given the different circumstances of each of the different countries, this would be a very significant achievement. But it's certainly not going to be easy, and the United States has been working extremely hard. We've had several different meetings, and again the Japanese support on this initiative and having a summit on this issue coinciding with the G-8 summit, the leadership of Japan is very important on this.

QUESTION: What I ask is that major economies, including Japan, United States, China, India, can agree to a long-term target at the leaders’ summit meeting?

ASSISTANT SECRETARY SULLIVAN: Do I think that that can happen?


ASSISTANT SECRETARY SULLIVAN: As I mentioned, that's what we're hoping, and it's a goal that we are continued to focus on. As you can see with different meetings, the focus is not just a U.S. focus; I think it's the focus of all the countries that are part of this process. So that's the focus right now. But again, as I mentioned, there's also the element of getting these countries as we've been doing over the last nine months at the very senior levels in a room working out these issues. Even the process of what we're trying to achieve in many ways has been very important, because it helps deepen the trust that is going to be needed to address global climate change challenge.

QUESTION: You say you are hoping – you say “hoping.” But does it depend – what you want to say is it depends on China or India movement?

ASSISTANT SECRETARY SULLIVAN: I don't want to single out any country in this. I think it depends on all the countries coming together. And that's where our focus is going to be. But as I again emphasized, these countries that constitute upwards of 80% to 85% of total global greenhouse gas emissions focusing on a long-term goal as an important element of this summit we think is a very worthy objective.

QUESTION: But it is Japan and the United States say it is essential for China and India to attend the next framework.


QUESTION: Do you think major emitters such as China and India should set binding targets on the next round?

ASSISTANT SECRETARY SULLIVAN: Well, I think the President has mentioned it in his remarks on these issues, but we think in terms of – it’s important for all major economies – developed and developing – to make substantial commitments as part of a post-2012 framework. So what form those commitments are is what part of the major economies process is focusing on right now, but clearly we think it is important that all the major economies make substantial commitments.

QUESTION: President Bush announced last month that he called for 14% growth of the United States greenhouse gas emissions by 2025.


QUESTION: Some people say – including Japanese officials – say this would be too loose. So please explain the aim of the President’s speech.

ASSISTANT SECRETARY SULLIVAN: Well, I think what the President did was, he focused on realistic goals and principles that the United States has been focused on, and laid those out in those remarks, and I think the administration actually has quite a strong record in terms of laying out goals and principles, and achieving those, and I don’t have them here in front of me, but if you look at, in terms of climate issues, with regard to energy intensity issues that have been targets of the administration, since the beginning, really, very, very early on, the administration has been meeting those. So this is a continuation of realistic goals, targets, principles that the administration has set out, and certainly intends to meet those.

QUESTION: Well, yesterday – the day before yesterday – China’s president Hu Jintao came to Japan, and Prime Minister Fukuda agreed to cooperate on climate change, so in the statement of climate change, the two countries agreed to adopt a sectoral approach. What is your position on this sectoral approach to reduce greenhouse gas emissions?

ASSISTANT SECRETARY SULLIVAN: Well, I didn’t see the agreement between the prime minister and President Hu Jintao. But our position has been that sectoral approaches can be a very important component addressing the climate challenge, and it’s important that – it raises a bigger point that one of the things that we think is important to emphasize is that addressing the climate challenge is certainly not an area where a one-size policy fits all. Many countries – and I see it clearly at the table, you know, as we do the G-8 negotiations – many countries have undertaken many different kinds of policy tools and measures to address the climate challenge, and so, for certain countries this can mean different areas of focus, and what we’re trying to do is to emphasize the importance of the issue, and a sectoral approach is one extremely important tool that we think is important, and I know that the Japanese government has, too. So it’s an area that we think our two governments see a lot of agreement on.

QUESTION: But I think China thinks the sectoral approach is the way to get technology and financial assistance from developed countries. How do you think of that idea? And do you have provision to give financial or technology assistance to developing countries?

ASSISTANT SECRETARY SULLIVAN: I think – well, as you mentioned, you said you had your views on what you thought China thought. So I won’t comment on that. But I do think, to answer your question more directly, we think the U.S. and Japan and the United Kingdom have been working hard on and are – the three of our ministers of finance recently wrote an op-ed article in the Financial Times, I believe it was, on launching a clean-energy technology fund, which would exactly do that. And that’s focused on helping leverage investments in developing countries – primarily focused on existing technologies, not developing new ones. But that fund would be focused on existing technologies. President Bush in a speech has committed the United States to $2 billion over three years, in terms of helping to fund this. We are trying to actually achieve a goal of $10 billion, I know. So this is one example where it addresses exactly the question that you asked, in terms of the importance of that and how we can help address that issue, which is an important issue.

Another related way in which we think that’s important is through, as I mentioned at the outset, is through focusing on significant tariff reductions on clean-energy technology goods and services. I think – I can get you the numbers later – but I think the average tariff in the developing world on these kind of technologies and goods and services is about 15%. Well, in an area of trade that’s in the hundreds of billions, that’s very significant numbers. And again, I think that global duties paid are upwards of $600 billion. And so this is an area that the United States has been focused on as part of the Doha negotiations. We had a joint proposal with the European Union on this, and it’s an issue and an initiative that we think would be an important one for the G-8 countries to endorse, because again it goes to the issue that you addressed about the deployment of clean-energy technologies in the developing countries.

QUESTION: Developing countries such as China or India stress common but differentiated responsibilities. What is your position on these ideas? Do you think it is important for the world to reduce emissions?

ASSISTANT SECRETARY SULLIVAN: Well, again I think it’s a concept that everybody has accepted and has endorsed, but at the same time, as I mentioned earlier, in terms of post-2012 framework, that our view is that all the major economies need to make significant commitments. What exactly those are, obviously, will be determined in continuing negotiations, but those commitments do need to be significant.

QUESTION: Regarding climate change – this is the last question – in the last summit in Heiligendamm, the G-8 countries agreed to consider seriously curbing global greenhouse emissions by 2050. What is your position on this idea, and in the summit this year, frankly speaking, major economies – the leaders meeting on the major economies process – how do you think of this idea working in this process?

ASSISTANT SECRETARY SULLIVAN: Well, I can tell you, true to the commitment that the United States made at the Heiligendamm summit, related to that very phrase that you talked about, we have been undertaking serious consideration on that issue, on some of the mid-term targets, and these are all part of the ongoing discussions, primarily focused on the major economies process right now. One of the things that was interesting at the G-8 summit last year -- the U.S. was very much of the focus that it’s very, very important in setting a long-term greenhouse gas reduction goal to have the major economies in the room, and that’s why the President wants the major economies initiative, because having all of them in the room, feeling a sense of ownership on what that long-term goal may or may not be, is an important component in actually moving forward on addressing this global challenge, and so the U.S. government has – since the Heiligendamm leaders’ statement and leaders’ agreement – has been doing just what that says, seriously considering that and other elements of our climate goals.

QUESTION: Next is bilateral relations between Japan and the United States. My question is openness of market. What must we already – we are watching very carefully the J-Power case. So how did you see this problem?

ASSISTANT SECRETARY SULLIVAN: I don’t know. Well, let me answer that more generally. I think you guys – you know, one of the things at the U.S.-Japan subcabinet meetings that have been a focus of our discussion is looking at ways to deepen the investment relationship between the U.S. and Japan, and that issue – it’s very interesting, in some ways it’s very personal for me. I’m from Ohio, and as you may know, Japanese companies – Honda and others – have made major investments in Ohio over the last 20 years. It’s benefited Japanese companies – it’s certainly benefited Americans, and there’s thousands and thousands of Ohioans who have very good jobs, high-paying manufacturing jobs, because of foreign direct investment from Japan in the United States. So one of the things that we have tried to emphasize in the U.S.-Japan subcabinet is to encourage a similar openness to foreign direct investment in Japan, because we see it as a mutually beneficial way to deepen our economic relationship. It would benefit Japanese citizens, and it would benefit U.S. companies. I know that many leaders over the last couple of years in Japan, including at the prime minister level, have called for a doubling of foreign direct investment by 2010, and we in the United States think that that’s a very important goal, and all countries have the right to examine inward foreign direct investment based on national security issues. We have a review process that’s narrowly focused on national security issues, but beyond that, we don’t think it benefits any country to block investment, and it’s important for Japan and the United States to resist investment protectionism, and actually that was an important outcome of last year’s Heiligendamm summit -- the very first G-8 leaders’ statement that was focused on resisting investment protectionism and extolling the virtues of open investment.

With regard to the specific J-Power case, I don’t know enough about the details on that one to make an intelligent statement.

[About 30 seconds off the record]

Related to the foreign direct investment, again, every country’s different, but the percentage, as a percentage of Japanese GDP of foreign direct investment in Japan is much, much lower than it is in the United States. It’s less than 5%. In the U.S. it’s about 14%. In the U.K. it’s about 44%. So we think that there’s – again, this goes back to my opening remarks about ways to enhance and deepen our relationship, and this issue on foreign direct investment has been a focus of the U.S.-Japan subcabinet meetings, and we think it’s important to keep continuing to focus on it.

Is that it? OK, thank you for coming.

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