Members of the council, thank you for providing the United States Government with this opportunity to address you today.
This is the second time I have addressed this Council and I want to make a special point of passing along Ambassador Baker's best wishes and apologies for not being here to make the U.S. presentation.
The President and Ambassador share the belief that a strong Japanese economy is a prerequisite for a strong global economy and that one is not possible without the other. The President, furthermore, believes that structural and regulatory reform can be a major engine of economic growth and that reform is essential for improving the quality of life of the citizens of Japan.
I would also like to inform the council members that the Deputy U.S. Trade Representative Ambassador Huntsman and Senior Vice Minister for Foreign Affairs Motegi will exchange the U.S. and Japanese Regulatory Reform Recommendations for 2002-2003 later this week at the margins of the APEC meetings. Once the formal exchange is completed, the Embassy would like to deliver the final document to your office and will be happy to answer any questions you or the council members may have.
Japan has made progress in the last few years in streamlining the regulations that govern its economy and society. The Koizumi Administration continue to make a good faith effort to deregulate and restructure the Japanese economy, and the three-year regulatory reform program adopted by the Cabinet in March identifies many important goals and themes to advance regulatory and structural reform. The Prime Minister and his economic team appear to understand the urgency that ten years of stagnation has created, the so-called "LOST DECADE", and the new cabinet looks to be focused on returning Japan to economic prosperity.
Much, however, remains to be done. The reason we are here today, the United States and the EU, and the reason the Keidanren was here last month is to be a part of the continuing process of restructuring Japan.
As I said earlier, and I am not certain some pundits and analysts understand, but, the United States needs Japan to be a strong economy and an engine of growth for the rest of Asia because a strong Japanese economy makes for a more stable Asia Pacific region. The United States and Europe will not be truly strong and healthy without a strong and vibrant Japanese economy. The world economy is increasingly a three-legged chair. If one of the legs is weak, the entire chair is unstable. The purpose of Japan's regulatory reform effort is to strengthen the Japanese leg of the global economy and to make the rest of the world stronger. That is the approach agreed to by President Bush and Prime Minister Koizumi when they established the bilateral Regulatory Reform and Competition Policy Initiative under the Economic Partnership for Growth. And I know this is an objective of the Council: through regulatory reform, to help lead Japan back to sustainable economic growth.
As you are all well aware, there are many sectors of the Japanese economy that would thrive in a less burdensome regulatory environment.
Through deregulation, key growth sectors of the economy can be restructured and rationalized, and made more productive.
The United States welcomes Japan's continued efforts to liberalize measures in its electricity and gas sectors. These actions are critical for promoting economic growth and insuring a stable and safe supply of energy. I know that Japan is now in the midst of considering whether or not to take another big step forward with energy sector liberalization. We strongly suggest you take that step, but in a manner that promotes competition and greater efficiencies.
Further energy market liberalization will facilitate lowering of electricity costs to internationally competitive levels reducing costs for consumers and commercial users. This can help Japan's industries gain a greater degree of competitiveness and economic vibrancy. In addition, with greater liberalization, Japan would become more friendly to investment, as companies find lower operating costs a positive investment incentive.
If Japan's economy is to restructure and reform so that it can return to strong growth, a thriving and competitive telecommunications sector will be a critical component. Cost competitive services and business and personal plans for Internet and telephony users are a must in a world economy increasingly dominated by information technology.
Japan has been making some real progress in this area, due largely to specific measures to make the sector more competitive and cost-oriented. The enforcement of network sharing obligations and initial reduction in interconnection rates, for example unleashed ADSL and opened the door for local competition. Japan must follow through on these measures. And several big steps remain. Real deregulation for non-dominant carriers is essential to reduce unnecessary regulation that adds costs and inhibits customer service flexibility. The establishment of an independent telecommunications regulator is needed to strengthen the ability of the Government to enforce pro-competitive regulations and ensure that adequate competition safeguards are in place.
Companies and governments that embrace and adopt the use of Information Technology can increases productivity, create jobs and spur growth throughout the economy. Firms in competitive markets are more likely to adopt new technologies and are more likely to expand and succeed.
The United States Government remains very interested in the 2002 e-Japan Priority Policy Program action plan and urges your Government to reform Japan's legal and regulatory environment to be better suited to the digital age. It is important that Japan establishes technology neutral frameworks, for example, and creates an environment where e-commerce and the development of new IT products and services can flourish.
We welcome the emphasis the Koizumi Administration is giving to introducing competition and pursuing structural reform to improve the healthcare and social welfare systems. We believe that such approaches are critical to providing high quality care and to encouraging the development of innovative and cost effective drugs and medical devices.
We encourage the Japanese Government to continue to reform the regulatory systems for medical devices and pharmaceuticals: First, to ensure faster more efficient product approvals that give maximum consideration to common international practices; Second, ensure that the introduction of innovative medical devices and pharmaceuticals is encouraged and receive appropriate valuation in a transparent and predictable process; and Lastly to provide for meaningful industry input into deliberations on pharmaceutical and device pricing and reform issues.
Vigorous promotion and preservation of competition in Japanese markets will create an economic climate that encourages new entry and innovation, and fosters efficient companies that are competitive domestically and internationally. We therefore strongly support the proposal to establish the Japan Fair Trade Commission as an independent agency under the Cabinet Office (naikaku-fu). This would be one very important way of accomplishing greater independence for your antitrust watchdog. In addition, the JFTC would be in a better position to do its work if its staff were substantially increased, and its investigative authority strengthened, to cope with the rapid changes in the marketplace that can have serious competition implications.
The need for greater transparency in every sector of the Japanese economy is essential to ensure fairness, predictability and accountability in the regulatory process. If Japanese citizens, foreign and domestic companies and potential investors do not know how the rules and regulations affecting their lives and their business are going to be interpreted or administered, they will be reluctant to start new enterprises or to invest in the economy.
We note the Public Comment Procedures have been in existence since 1999. This measure was intended to introduce greater transparency into government decision-making process, but the measures do not appear to that successful. A recent survey by the General Affairs Ministry (Somusho) on the effectiveness of the Public Comment Procedures supports the view that more needs to be done to improve them. As in past years, a majority of comment periods were less than 30 days. Also of concern is the fact that, the percentage of cases in which government agencies incorporated comments into final regulations fell to 14 percent of the 354 rules and regulations open for comment in FY 2001.
Japan's judicial system remains in need of improvement if it is to help revitalize the country's economy. Both foreign and Japanese companies find it increasingly difficult to obtain fully integrated legal services in Japan. As a result, Japan's efforts to become an international financial center remain impeded. Japan's legal services sector continues to suffer from severely limited relationships among Japanese lawyers (bengoshi) and registered foreign lawyers (gaiben), putting the Japanese economy at a competitive disadvantage compared to countries without such restrictions. We strongly urge the speedy elimination of all restrictions on freedom of association between bengoshi and gaiben. This is the guiding principle in other advanced economies such as Germany, France, England, Belgium, and the United States.
There is one important point I would like to make concerning distribution. For Japan to really be open for business 24 hours a day, 7 days a week, Japan must continue to modernize and streamline its customs clearance procedures. The global economy brings new technologies and the need to move information and products rapidly from business to business and from country to country. The exponential growth of the express package delivery business in recent years is a manifestation of this phenomenon and the express carrier business is an essential cog in the evolution of the global economy. The United States believes there is a need for customs clearance regulations to be adapted to accommodate the rapidly growing express carrier business so that Japan's overseas suppliers can meet the demands of Japan's domestic economy.
Furthermore, Japan's economy cannot fully recover unless changes are made to its transportation system. The key area that I would like to highlight this year is the need for greater transparency in the calculation of landing fees at Japan's airports: the landing fees at Narita and Kansai international airports are the world's highest.
Greater market and investor confidence are two of the most fundamental benefits of the regulatory and structural reforms I have just touched upon. A deregulated economy with a strong competition policy component would have a transparent and open business system. The more open and transparent an economy, the lower the transaction costs for doing business. There is a direct link between the United States', UK's, and Canada's high transparency rankings and their rankings as the top destinations for international business as the most competitive economies in the world. Ranked 30th in global competitiveness by the World Competitiveness Yearbook, Japan is on par with Spain, Israel, Hungary and France. Japan can do better. Japan should do better.
I would like to thank the Council again for allowing the United States this opportunity to address its members, and I would like to commend you all for your dedication and commitment to helping Japan recover economically through regulatory and structural reform. As I mentioned, the United States will be making its formal requests of the Japanese Government later this week and we are again focusing on areas where we believe deregulation and reform will result in the greatest economic impact and contribute the most to a return to long-term growth. The Embassy will send copies of our submission to the Council, to all the Japanese Diet members, as well as to the economic organizations that are a part of this process, in Japanese no less.
I look forward to working together with the Councils' members in the future and if there is anything the U.S. Government, the Embassy or I can do to assist you in your efforts, please feel free to contact us.
Thank you very much.