Press Briefing by United States Trade Representative Charlene Barshefsky, National Economic Advisor Gene Sperling, Deputy National Security Advisor Jim Steinberg, and Deputy Treasury Secretary Larry Summers

3:05 P.M. EDT

MR. LEAVY: Good afternoon. As you know, the President's meeting with Prime Minister Obuchi has concluded. The President is on his way back to Washington. Here to give a readout of the meeting are Deputy National Security Advisor Jim Steinberg, National Economic Council Chair Gene Sperling, Deputy Treasury Secretary Larry Summers, and U.S. Trade Representative Charlene Barshefsky. They will each make a short opening statement and then take your questions.

Jim.

MR. STEINBERG: Thank you, David. As you all know, President Clinton and Prime Minister Obuchi just finished more than three hours of meetings this morning and afternoon -- a wide-ranging conversation on the full range of subjects of interest to the two. The meetings fell into three parts. There was a one-on-one meeting to begin with that lasted for about 45 minutes, followed by two sessions of slightly more than an hour each, one largely focusing on economics and the second largely on security and foreign policy issues.

As I say, it was a very comprehensive set of discussions. The conversation was excellent between the two, a good chance to build a personal relationship, and a very open and broad-ranging exchange. One of the things that I think was most important, as you heard at the beginning, was that the President has invited Prime Minister Obuchi for an official visit to Washington early next year.

Both the President and the Prime Minister stressed how important this relationship was to the two of them, the President pointing to the fact that the two Ambassadors that he's appointed to Japan, former Vice President Mondale and now Ambassador Foley, really represent the best that America has to offer and a real reflection of the quality of the relationship.

As I said, they had an opportunity to build a personal relationship and agreed at the end of the meeting that they would call each other Keizo and Bill.

Before I talk a little bit about the specifics, just to give you a flavor of the kind of relationship that they are building, at the beginning of the first, larger session, Prime Minister Obuchi wryly referred to an incident that took place a few months ago when he was referred to in the press as resembling cold pizza. And he thanked Secretary Albright for her comments, that she said she liked cold pizza, and the President observed as how he had had cold pizza last night. So it really gives you a sense of the kind of interaction between them.

On the security front, which was the focus of the lunch sessions, they began by reaffirming the importance of this security relationship, which both described as strong as ever. And they reaffirmed their commitment to that security relationship. They had an extensive discussion of the situation on the Korean Peninsula, and particularly the recent missile tests from North Korea. They both indicated that they took this to be a matter of serious concern; at the same time, they both stressed the importance of continuing with the agreed framework and with KEDO. The Japanese Prime Minister reiterated and reaffirmed their intention to honor their commitment and the President made clear that he intends to push forward with our concerns -- our joint concerns about North Korea's missile program.

They discussed the implementation of the defense guidelines and the SACO agreement. In particular, the Prime Minister indicated that while he regretted that we had not been able to fully implement the SACO agreement, that he was committed to moving forward on that. They discussed moving forward on theater missile defense and the statement that the two foreign ministers and defense ministers reached this past weekend on working together on that.

They had a broad-ranging discussion on foreign policy topics, including China, Russia, Indonesia, and Malaysia. The two discussed climate change and the upcoming meeting in Buenos Aires of the parties to the Kyoto Agreement, and the recent agreements that they announced today on global GPS and Y2K.

Gene.

MR. SPERLING: I'll be brief and then let Larry Summers and then Charlene give you a little more detail on the components of the economic side. As Jim said, they had a candid -- quite candid, open discussion. When we arrived there, there was supposed to have been a 15-minute, one-on-one tea session with them. That went on for 45 or 50 minutes. In asking the President, the conversation, he felt it was important to keep the contents of it private, but he stated that over two-thirds of that discussion had been on the banking and financial restructuring issues concerning Japan.

We then went into the extended bilateral meeting. They spoke again to the larger group about some of the banking and financial restructuring issues. The Prime Minister referenced a meeting that he had had in December with Secretary Rubin, where he went over some of the things they talked about and discussed how some of the things they're doing related to that conversation. I'll have Larry go into more of the details. He also talked about the stimulus demand issues.

And then their final topic was on trade, where the President talked about the importance of showing progress on market-opening measures in the region and the importance of APEC; of the importance of enforcing the existing agreement in our sectoral issues; and then the deregulation issues, as well. Charlene will go into more detail there.

They also talked about the global crisis more generally. The Prime Minister stated that he had carefully -- at the lunch in fact, stated that he had carefully read the President's speech at the Council of Foreign Relations and had agreed with the main points there and stressed the importance of them working together through multilateral institutions on restoring growth and the social safety sector issues.

Let me let Larry speak for a moment and then Charlene, and then we'll be happy to take your questions.

DEPUTY SECRETARY SUMMERS: Thanks, Gene. The context for the economic and financial discussions between the President and Prime Minister Obuchi was the G-7 statement that was issued last week and the President's speech, both of which highlighted the fact that the balance of risks in the world economy had shifted, making growth more important and emphasizing in particular the close cooperation among major economies at this period.

The President, in his comments, stressed the urgency of swift and effective action to simulate domestic demand-led growth and strengthen the financial system in Japan. Prime Minster Obuchi made it clear that it was his intention to take appropriate measures to secure an early turnaround in the Japanese economy. They agreed on the importance of what happened in Japan for the global economy.

Recalling the historical experience in many countries, including our own, the President emphasized the need for the Japanese financial authorities to infuse public money swiftly and in sufficient amounts into Japanese banks to ensure they were able to continue lending on a strong and sustainable basis.

The President and the Prime Minister also agreed on the importance of Japan's accelerating the disposal of problem assets, improving financial disclosure, strengthening the supervisory system, and restructuring the financial system with protection for depositors, and had quite a thorough discussion on some of these questions.

Finally, the President and the Prime Minister agreed to work together to respond to the President's call for increased efforts to respond to humanitarian needs in crisis countries in Asia, and to work together to accelerate efforts to promote comprehensive programs for corporate and bank restructuring in the critical countries, working alongside the multilateral development banks.

AMBASSADOR BARSHEFSKY: The President and Prime Minister, as Gene said, discussed a number of trade issues. First off, the President raised the critical importance of continued and accelerated deregulation of the Japanese economy. In that regard, we will be providing Japan at the end of this month with a second set of substantial deregulatory measures we would like to see Japan take in a variety of sectors, including telecom, pharmaceuticals, energy, housing, construction, and so on.

In October we'll be presenting to the government of Japan a list of deregulatory measures we would like to see them take in the automotive sector, where deregulation has essentially stopped. And the President made clear that he would like to see a very full package of deregulatory measures reached by the time of the G-8 this spring. You'll recall our last set of substantial deregulatory measures was achieved at the Birmingham G-8 meeting.

Second, the President underscored the critical importance of enforcing existing agreements and, in particular, government procurement, insurance, glass, autos and auto parts, paper, and others. With respect to government procurement, public works spending by Japan will occur in traditional areas, such as construction, as well as in areas of 21st century technology, such as computers, supercomputers, medical technology, and telecommunications. These five areas are covered by five separate bilateral procurement agreements that we have with Japan to help ensure that American companies and foreign companies get a fair shake in the procurement process -- procedural protections, due process, and so on. So that was underscored.

Third, the President stressed the critical importance of Japan being constructive in the APEC process so that the nine sectors discussed for further market opening can come to fruition and ultimately be taken to the WTO for further work after the APEC leaders meeting. And I think I've already mentioned that enforcement of existing agreements was discussed, the President feeling that implementation by Japan of its commitments was absolutely critical, despite and because of difficult financial times.

Q: A couple of different questions. First, if I heard what you were saying correctly, the President and Prime Minister agreed on the need for certain measures, but on one particularly crucial one, I think the beginning of your sentence was just the President urged the Prime Minister to use public funds. Did you get any further clarification about whether Japan is or is not going to use public funds? And let me ask a second question on an unrelated matter.

There have been some wire stories out of London about possibly the creation of a new fund or a new mechanism or a new tool to bail out Latin American economies, particularly Brazil. Can you tell us what developments have taken place on that front?

DEPUTY SECRETARY SUMMERS: On your first question, Jake, the Prime Minister made it clear to the President that there were a set of very complex discussions, political discussions that were under way in Japan with respect to the banking legislation, that it was something he was very much focused on and very much saw the importance of.

He referenced some of the banking problems that we had had in this country, the historical experience generally, and made it clear that he saw this as something that Japan had to address in an effective way. And certainly the President made clear that that was how we saw it and made clear that he was prepared to be helpful in any way that we could.

The Prime Minister talked about how much he valued advice in this difficult situation, and I think they both recognized in their comments that what was important was not words at this point, but what steps Japan was able to take over time to address these questions.

On the Brazil and Latin America question, I don't have anything new to give you. Certainly, it's been, I think, clear from the comments that the President has made and that the Secretary has made that we are watching the situation in Latin America and around the world, in particular in Brazil. There's certainly been conversations with the Brazilian authorities, with the IMF, with the G-7, as we're always in touch on significant financial situations, but I wouldn't want to put too much behind the particular kinds of reports that you're referring to. It's a situation we're watching and it's very much going to relate to the choices Brazil makes going forward.

I would say that Brazil is a country that has made enormous progress in recent years in both stabilization and in opening up its economy, taking important steps towards privatization and structural reform, although there are obviously many steps that are still important going forward. And clearly Brazil, like a number of other countries in Latin America, has been hit by market judgments that have a great deal to do with contagion as well as any judgment of their own economic situation. And that's certainly something that I think we in the international community need to be mindful of going forward.

Q: Just to follow, are you explicitly denying that there is discussion of a creation of a new fund then?

DEPUTY SECRETARY SUMMERS: You know, there are always discussions of a variety of things, but there is certainly no specific proposal that's about to come out.

Q: Mr. Summers, the President said last week that the global economy is facing its worst challenge since World War II. Can you tell us how he expressed his concerns about Japan's responsibility right now, specifically, to Prime Minister Obuchi.

DEPUTY SECRETARY SUMMERS: I think he made it clear that the judgment of not just American officials, but economists and financial experts around the world and of officials in many other parts of the world, was that what happened in Japan was going to be -- was very, very important. But it wasn't a point that was stressed very much because Prime Minister Obuchi, very much toward the beginning of his comments, said that he understood that what happened in Japan was very important for Japan, but also very, very important for the economies of Asia and indeed for the global economy, and that's why he felt a particular responsibility to focus on it. And he noted some respects in which it was easier to focus on it right now than it had been at some earlier points when he had had discussions of these questions.

MR. SPERLING: The President also reiterated, I think, the point he had made in his Council of Foreign Relations speech, that he went back to 1993 and talked about at that time there being a clear consensus of the need for the United States, Europe, and Japan each to do what they needed to do to restore growth, and that there was maybe a different recipe for each country, but that there needed to be that same common sense right now.

Q: Larry, I'm not sure I fully understand the Prime Minister's response on this issue of the need for swift public money into the banks. The Chairman of the LDP said overnight that there would be no public money put into the long-term credit bank of Japan, which seemed to be a return to the agreement that they struck at the end of the week.

There's something of a disconnect between the impression we're being left here that there is an agreement between the leaders on the need for public funds, and what we're hearing back in Tokyo from Mr. Obuchi's own aides.

DEPUTY SECRETARY SUMMERS: David, I think what I said was that the President believes, and certainly we all believe, that the infusion of public money is essential to an effective solution of these problems.

I think the Prime Minister made it clear that they were working very hard on this legislation, that there were a lot of moving pieces in how this legislation would go, and he did not make a commitment to us as to what its specific content would be, although I think it was clear from his comments that he recognized the importance of Japan grappling in an effective way with these banking problems that are so consequential for its economy and for the global economy.

Q: Did he ever specifically address his own view of whether or not public funds should be injected?

DEPUTY SECRETARY SUMMERS: He addressed -- I don't think I've got much to add to what I've already said. I think it's better to let the Prime Minister or his people characterize any precise beliefs that he has. What I think he did make clear was that this was very much something they were very focused on in working through a solution to the banking system and his commitment to having it be effective.

Q: Larry, do you come away from this meeting confident that Japan is going to take the steps necessary?

DEPUTY SECRETARY SUMMERS: I don't think it's for us to predict. I think one of the things that was very healthy in the discussion between the Prime Minister and the President was that they both recognized that what was going to be important was the steps that were taken and the actions that were taken by all countries going forward, and that that was what was crucial rather than words and statements.

Q: We've had a history of meetings where U.S. officials come out and say we've encouraged Japan to do more, and then in the aftermath of that U.S. officials being dissatisfied with what Japan does. Is this any different, or is this just going to follow that pattern?

DEPUTY SECRETARY SUMMERS: We will have to see what kind of legislation emerges in the banking area. As important as the legislation question is what kinds of concrete regulatory steps the Japanese are able to take, what kinds of movements there are and decisions there are with respect to the budget as we move towards the 1999 budget, what kinds of actions are taken with respect to tax policy. And of course, what's most important is not what we think, it's what markets think and how markets respond to the situation.

I think it's only then that we'll be -- it's only with benefit of hindsight that we'll be able to judge the policy steps that are taken during this period.

Q: Is the President trying to set any deadlines for when these steps will take place?

DEPUTY SECRETARY SUMMERS: No, it's not -- the President stressed in his comments the basic underlying strength of the Japanese economy, its tremendous capacity and sophistication, and his recognition that Japan had to make its own economic decisions and chart its course, although the course it set would have important implications for the world.

And the Prime Minister made it clear that advice, particularly from countries like the United States that had had problems in the financial system at various points, was something that he very much welcomed.

Q: When McCurry came out and briefed us before, he was going awfully heavy on this Japan and U.S. as friends and that they talked as friends. It sounded as if there were a lot of soft-peddling going on compared with some of the previous meetings between the two sides, whether at the summit level or other levels. And I wonder if the reason for that is you have concluded that perhaps the tone of some of these previous meetings has generated counterproductive results with Japan; or that because the Japanese situation at this point is so desperately fragile that we don't want to make it worse.

DEPUTY SECRETARY SUMMERS: I don't think either of those things, Paul. We have always spoken to the Japanese as friends and have always recognized that this is perhaps the world's most important bilateral relationship, that we all have an enormous stake in what happens each other's countries, and that as friends we're able to speak candidly with each other and able to think about how we can mutually support each other.

I think I've by now had the opportunity to be present in meetings between the President and six Japanese Prime Ministers, and I would say that in each of those meetings the friendship, the commitment to mutual support, and the enormous importance that we attach to the relationship with Japan has been stressed. The President began the meeting with -- began the first of the expanded sessions by noting that Tom Foley and Walter Mondale were two of America's most distinguished figures in public life. And the fact that they have been chosen by his administration as ambassadors to Japan was a reflection of the enormous importance that we attach to our friendship with Japan.

Q: Mr. Secretary, does the President believe that Japan should infuse public money even over the objection of the opposition parties and many people in Japan?

DEPUTY SECRETARY SUMMERS: I think the President believes and his economic and financial advisors believe that in the context of a set of banking problems like those that have emerged in Japan, the lesson of history -- in our country, in the Scandinavian countries, in a number of other cases -- is that to work through those problems and preserve financial stability while at the same time providing for growth and avoiding a credit crunch, that the infusion of public funds into the banking system in a very carefully conditioned way -- not as bail-outs to shareholders -- can play a very important and critical role.

Q: Dr. Summers, can you tell us what the priority is -- on one hand, get the economy moving, get the banking system cleaned up; on the other hand, take a hit in some key sectors in terms of import. I know you don't see it as an either/or situation, but what's the priority here?

DEPUTY SECRETARY SUMMERS: You said it exactly right: it is not either/or. These are mutually reinforcing agendas. A stronger Japanese economy will obviously be a Japanese economy that is able to import more; it is an economy that will be able to dismantle import barriers with less disruption.

Conversely, a Japanese economy that is more open will be a Japanese economy that is more flexible and adaptable and will therefore be able to attract and generate investment opportunities that will be stimulus to growth to a greater degree. So these are very much mutually reinforcing agenda.

AMBASSADOR BARSHEFSKY: If I can add to that, as Larry said, we have always said quite consistently over the last year that in addition to banking sector reform and substantial fiscal stimulus, market opening and deregulation are critical if Japan is to achieve sustained long-term economic growth.

This is one reason that the President raised the variety of trade issues that he did, particularly deregulation, as well as agreements implementation, government procurement, and then of course market opening in the context of APEC. Each of these steps is important not only to the global economy, but also to the functioning of Japan's own economy, which remains terribly over-regulated and underproductive.

Q: How much time did they spend on trade and deregulation issues? We heard before that two-thirds of the first opening meeting was on financial and economic issues.

MR. SPERLING: You know, first of all -- and it relates to a lot of the questions on the banking side -- they were in for quite some time alone, and there were no note-takers. The President -- believe me, Jim and I tried to get our best briefing, and he felt their first meeting it was very important that he be able to have that kind of confidential conversation with him. So we asked for a nature of how much was spent on the banking and financial issues, and the President felt about two-thirds of the discussion had been.

Their discussion, I can't tell you -- they had a couple of exchanges. The President first raised the enforcing and assisting agreements in sector issues. He spoke about APEC. He talked about the opportunity to show that even in the current environment that there could be further progress made on market opening, how important that was. And then the Prime Minister replied and discussed this for a while. And then the President came back a second time and talked about deregulation initiative, and then as Charlene has already mentioned, talked about how much he would like to have another package that they could announce at the G-7/G-8 meeting.

Q: Secretary Summers, can I just reaffirm, did you say there was no specific international proposal for Latin America? Is that what you were referring to before?

DEPUTY SECRETARY SUMMERS: I think what I said was that there was enormous recognition of what had happened, profound changes that had taken place in the Latin American economies, of the extent to which they had been influenced by contagion and market reactions to other developments, that we were in close touch with the situation. The G-7 countries were certainly watching the situation in a very careful way. But I think what I said was that I could not foresee any imminent announcement of some package, but it was a situation, certainly, that we were watching very closely and certainly wanted to be in a position -- we in the international community, international financial institutions, want to be in a position to be responsive to problems that might arise.

Q: Moving to North Korea. Did the Prime Minister promise any commitment, resumption of the Japanese commitment to KEDO. A second question is how much do you expect -- North Korea for the missile talks which will resume next week?

MR. STEINBERG: The Prime Minister in broad terms reaffirmed Japan's commitment to the agreed framework and the President thanked him for that, because he indicated that while we continue to have serious problems with North Korea on the missile programs, that we have a common interest in seeing that the agreed framework go forward. And so the two agreed on that. There was not a discussion of specifics in terms of the timing of next steps, but there was, as a I say, a reaffirmation -- I believe the Prime Minister's words were something to the effect that Japan intended to continue to honor its commitment with respect to the agreed framework. So I think that was -- the President thought, a very good discussion.

With respect to the missile talks, we obviously have a lot that we intend to raise with North Korea. I think one of the important aspects of the agreement that we reached with the North Koreans two weeks ago was not only were they to resume some of their requirements under the agreed framework, but the moving forward with these missile talks, I think this is an opportunity for us to discuss in detail with the North why we are concerned not only with the indigenous missile program, the testing that's just taken place, but also problems with their exports.

And the President promised the Prime Minister that he would press very hard on that. And I think it is an opportunity for us to express on behalf of not only the United States but South Korea and Japan and all the countries of the region our concern about the program.

Q: I stepped out for a minute. Did anybody ask you about Iran and how you read Khatami's speech and the fact that the foreign minister didn't show up at the Six Plus Two meeting?

MR. STEINBERG: I have not, myself, seen the text, so I don't have a reaction to Khatami's speech.

Q: On Kosovo, could you just tell us what specific steps you've discussed in the last two days with other world leaders around the United Nations, and what the United States is planning on doing in the next few weeks to try to prepare for the humanitarian crisis you say is pending, and what actions you're trying to -- how you're trying to influence Milosevic?

MR. STEINBERG: The timing of the meetings here has been very good because, as you know, the British about a week and a half ago put forward a draft resolution concerning the humanitarian situation in Kosovo. And that issue has been worked very intensively over the last couple days. I expect that Secretary Albright, who's going to be meeting with allies I believe this afternoon, will be discussing that. We made some, I think, real progress.

She had a chance to discuss that with the Russian Foreign Minister yesterday, and so I think there's a lot of focus now on trying to get a statement from the U.N. to make clear that we think that the humanitarian situation is intolerable, that it is important that Milosevic end the military actions in Kosovo, that he create the conditions that allow for the safe and orderly return of the displaced persons, and that the international community is expressing grave concern about that.

At the same time, we continue discussions in NATO; we've done a considerable amount of planning. There are a number of options there, and I think we are making clear, both collectively and individually, that we consider the situation to be very serious there.

END 3:40 P.M. EDT