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PRESS BRIEFING BY DIRECTOR OF ASIAN AFFAIRS FOR NSC JACK PRITCHARD, AND DEPUTY SECRETARY OF TREASURY LARRY SUMMERS Akasaka Prince Hotel Tokyo, Japan MR. LEAVY: For all of you who didn't get to ask questions atthepress availability with the President, we've got the Deputy TreasurySecretaryLarry Summers to talk about the economic aspects of President Clinton's andPrime Minister Obuchi's discussions this afternoon. And we've got JackPritchard, Director of Asian Affairs at the National Security Council, totalkabout the security aspects of today's discussions. Jack was also part oftheSpecial Envoy Kartman's trip to Yongbyon and can answer your questions onNorth Korea. DEPUTY SECRETARY SUMMERS: The President in his speech at theAmCham this morning articulated what were the major themes in the economicareas, so I'll just be very brief in summarizing the meeting. There were four main economic areas that were covered, allagainstthe context of the financial crisis in Asia that has now had globalramifications. It was a very good spirit between the President and PrimeMinister Obuchi in which there was a lot of emphasis back and forth on howourtwo countries could cooperate together to address those problems,particulararound the initiative that the President and Prime Minister announced tosupport growth and restructuring in Asia. Four main themes figured in the discussion -- the importance ofdeveloping an architecture that can avoid a repeat of these problems andthatcan contain problems most effectively when they arise, particularly inlightof the enormous volume of capital flows that are characteristic of today'smarkets. Second, the importance of establishing a basis for growth inJapancoming from domestic demand, the need to ensure that the stimulus packagethathas been announced is effectively implemented and that, if necessary, issupplemented. And the President spoke in particular about the problem ofencouraging spending and getting people to spend when that was very much inthe interest of the Japanese economy. The President spoke, as he did atthepress conference, to the importance of the banking issue, the importance ofwhat Prime Minister Obuchi had gotten done with the legislation, but nowtheparticular importance of implementation going forward. And, finally, the President discussed the range oftrade issues against the context of the American commitment tokeep our economy strong as a source of strength for the globaleconomy, but at the same time the need for others to do theirpart. The President referenced the steel issue and the increasein imports of steel from Japan as a source of potential concern,and also laid great stress on the need for Japan to carry throughon the agreements that had been entered into to ensure compliance-- referencing in particular automobiles and automobile parts,insurance, flat glass and procurement. Jack. MR. PRITCHARD: In the bilateral meetings that thePresident held with Prime Minister Obuchi they led off for about45 minutes on a discussion on security issues. In thatdiscussion the President and the Prime Minister discussed thebilateral aspect of our security relations. A couple of thingsthat were discussed, and that was the defense guidelines and theimportance of moving forward and passing the implementinglegislation. And Prime Minister Obuchi indicated that it was ontrack, and we're pleased with that. The other was the SACO, or the Special Action Committeeon Okinawa, that that's on track and moving forward andultimately will lead to the relocation of Futenba Air Base --excuse me, Futenba Marine Corps Air Station in Okinawa. The two also talked about the Wye River agreement, inwhich the Prime Minister indicated he wanted to help support tomaintain momentum for what the President had accomplished there,and is in the process, as he announced earlier, of pledging some$200 million to the Palestinians over the next two years. They also spent the best part of the discussion onNorth Korea. And I can go into a little bit of that detail alittle bit later. The two had an opportunity at dinner last night todiscuss other issues, regional issues, on Russia and China, sothat was not taken up in any significant detail. Q Can you tell us a few things about North Korea?One is the agreed framework puts certain things under observationand certain things are subject to inspections. Can you just giveus a sense of which is which? And I forgot the second question. MR. PRITCHARD: The agreed framework calls on the NorthKoreans to freeze their plutonium production capability atYongbyon, a nuclear site. They have done that. There are IAEAmonitors there now to safeguard and to verify the implementationof that. That's been done. We're on the verge of finishing thecanning operation of the spent fuel that is stored in the pondsthere. That should be done by the end of the year. What is built into the agreed framework is the specialinspections later as the lite-water reactors come on line, orabout to come on line, before key or critical components go intothe LWR, the IAEA must be satisfied about North Korea'scompliance with the NPT. So that's the distinction now. Q I remember the second question, which is, whatwere the objections that the North Koreans threw into theinspections that the President said earlier today wereunacceptable? MR. PRITCHARD: Well, now you're talking about a coupledifferent things. You are now talking about the suspectedunderground construction that if our suspicions are borne outcould turn out to be nuclear related, which is precisely thereason for Ambassador Kartman's trip into North Korea the 16ththrough the 18th of this month. So what we're looking at is whether or not what we haveseen is a violation of the agreed framework. The answer is, itis not at this point, but we certainly don't want to see anythingproceed down the road that, in fact, would endanger the agreedframework. Q So that's what the President was objecting to, wasinspections on that specific -- MR. PRITCHARD: What the North Koreans have initiallyindicated is that to allow inspections on this particular site,this new site, they have placed some obstacles in the way forwhich we have found not acceptable. And that's what thePresident was indicating. Q When you say it's not a violation, is that on thebasis of your trip or that's what you -- MR. PRITCHARD: No, the information that we've builtall along and the reason for which we are now confronting theNorth Koreans is the suspicions we have we want to ensure don'tlead to a violation of the agreed framework. So if they continuedown that road they very well could. Right now, as we saidbefore, it is not, but we're not concerned about the technicalityof the letter of the law. We have addressed this issue of ourconcerns with them. Q There are some in South Korea who say that theagreed framework is -- from the standpoint of the North Koreans,site specific, and that therefore, whatever may be going onsomewhere else in the country doesn't apply to the agreedframework. MR. PRITCHARD: No, that's not accurate. The agreedframework applies to the freezing of North Koreans' plutoniumproduction capability. So it wouldn't matter where that wereoccurring, if we had indications it was someplace else -- and wedo not -- it would fall into that category. Q What is the overall assessment of what North Koreais doing? Do you see the missile launch and the suspectedunderground site as a breakdown, or do you see them continuing totry to cooperate with South Korea, Japan and the United States? MR. PRITCHARD: That's kind of an either-or on twoextremes there. We are very much concerned about the 31 Augustmissile launch, and that's one of the things, as the Presidentindicated, he was here to discuss with the Prime Minister andit's high on his agenda when he goes to Korea today, and fordiscussions tomorrow with President Kim. In terms of the North Koreans, they certainly, Ibelieve, see this as the normal evolution of their own program.Missiles, as you know, are not captured within the agreedframework. They certainly don't think there is a violation;there is not, but this whole issue of what the North Koreans aredoing is very much a concern to us. We don't treat it asseparate issues and we are looking at the broad range of whatNorth Korea's activities are, whether or not they have boughtinto the concept behind the agreed framework and the four-partytalks which seeks to replace the Armistice with a permanent peacetreaty. Q -- the inability to inspect the underground siteand the missile development are outside the framework, the agreedframework, what does the United States do now? MR. PRITCHARD: One of the things when the agreedframework was developed, there was not a provision for some typeof challenge inspection or verification of concerns, and sothat's in fact what we're doing now. It's not that they areuntouchable or outside the realm of contact, but we areaggressively engaged in discussions with the North Koreans tofigure out how we can in fact satisfy our concerns -- site accessand to ensure that there is not a violation or will not be aviolation of the agreed framework. Q But what's the leverage the United States has --what can the United States threaten or offer? MR. PRITCHARD: Well, in basic terms the leverage isthe future of a relationship. The North Koreans hold very much avalue to the development of a relationship with the UnitedStates. Within the agreed framework part of the objectives onceit is carried out or as it is being carried out is the economicand political normalization there. We've got a series ofobstacles that are not allowing that to proceed at this point.But it still -- it cannot be understated how much the NorthKoreans ultimately value and will depend upon a more normalrelationship with the United States. Q In these talks that you have with the NorthKoreans, have they made it clear -- there was a news report todaythat there were two new launch facilities for medium-rangemissiles and stepped-up short-range missiles. Have they made itclear why they have such a robust missile program? Do theymaintain it's for their own security, do we suspect it's forleverage on other fronts? MR. PRITCHARD: Well, without commenting on thespecific story in mind that is coming out tomorrow in TheWashington Post or today in The Washington Post, the NorthKoreans have contended all along that they are a small country,they have some requirements to defend themselves. They have theright, the sovereign right for the indigenous production anddeployment of missiles. They certainly are a cash-strappednation which accounts for some of their motivation for theproliferation of those things. Q The President said that it is possible that thesedevelopments signal a more hostile attitude by the North Koreansto the rest of the world. What is your own take on that? Isthat the way you see it? MR. PRITCHARD: Well, let me suggest over the lastcouple of years or so we've seen things that, starting inSeptember of '96 with the submarine incursion into South Koreanterritory, followed by a more recent submarine incursion, etcetera, that you would not think should be going on at this pointin time. With a North Korean economy that is in dire straits,they ought to be engaged in a more productive and positive way.They're not. There's a new, as you're well aware, a newadministration in the Republic of Korea, headed by Kim dae-Jung,who is actively engaging the North. Recently Hyundai Corporationreached agreement with the North to conduct tour ships to KungaMountain, providing in the neighborhood of $150 million in cashover the next six years for the rights to develop that. So you would expect that they would be more engaged onthe positive side; that has not happened. They've gone through atransition over the last four years in terms of the death of Kimil-Sung, the downturn in their economy, the fall of the SovietUnion, the isolation of their traditional partners, the subsidiesthat they get on trade. So there's a good deal of turmoil goingon at the same time that they maintain a good deal of priorityand emphasis on their own military structure. That's what'skeeping them afloat. Q Can I ask you a trade question? The Americandelegation at APEC was clearly extremely frustrated with theJapanese position. The President's tone was different today, butconveyed the same message. Do the Japanese acknowledge theAmerican perspective? How nasty is this going to get? And howdetrimental is it at this particular time when we needcooperation between these two governments? DEPUTY SECRETARY SUMMERS: I think the President madeclear our disappointment and I think the Japanese recognized thatwe were disappointed, and I think understood the President'smessage that the United States had been a major source ofstrength for Japan and for other countries by accepting increasedimports -- that the President thought that that was the rightdecision and that was policy to which the President wascommitted. But, at the same time, it was a policy whoseviability depended upon everybody playing the rules and beingcommitted to a market opening process. I think, in that regard I think that message wasconveyed very clearly by the President and I think it wasunderstood by his Japanese interlocutors. I think it was clearthat what happens on the APEC trade liberalization as the forummoves to Geneva and the WTO process is something that the UnitedStates will be watching very carefully -- and certainly hasexpectations of Japanese cooperation. Q Given that Mr. Obuchi's hardly popular, given thatthe markets have reacted very tepidly to all of these stimulusfactors, including the nearly $200 billion this week, why was thePresident's attitude, his tone, today so conciliatory? He's notpopular at home. People don't think he's controlled thesituation. Yet the President is saying, give the man time. DEPUTY SECRETARY SUMMERS: Well, I think the Presidentwasn't so much trying to reach judgments about particularpolitical figures in particular countries. Instead, I think whatthe President was trying to show was his awareness of very realand important economic problems that the Japanese economy facesand awareness of the importance of maintaining confidence,recognition of the role that domestic demand and financial repairplay in restoring confidence, and trying to make clear that it'snot for the United States to prescribe precisely how these thingsshould be done, only to indicate that it is very important. I think the President was also at pains to stress --and I think this is a crucial issue -- that this is a win-wingame. The most important beneficiaries of successful economicpolicies in Japan will be the Japanese people, who will enjoyhigher standards of living. And at the same time, we are betteroff if Japan succeeds and we have a larger market for ourexports, a stronger market for Asian exports and a more resilientand stable global financial market. So this is something wherethe ends are very much in common between our countries. Q Well, when the Americans intervened in July, hecame here and talked repeatedly about a window of opportunity forchange. It's now November. None of those changes have reallytaken place. DEPUTY SECRETARY SUMMERS: There have been very realproblems and continuing very real problems and there's been someevidence of economic deterioration in Japan. At the same time Ithink it's important to recognize that in the last several monthsseveral important thresholds have been crossed. There has been acommitment to fiscal expansion, including tax cuts. There hasbeen a commitment to substantial infusion of public resourcesinto the banking system, and a commitment to transparentexamination of the banking system. Those are importantcommitments in the last several months. They have meaning to the extent that they areeffectively and strongly implemented, that's why the President'smessage was a message that was so much about the mutualimportance for the Japan and for the United States of effectiveimplementation of those commitments. Q Does the President have confidence that thecurrent Japanese administration has the capacity to affect aturnaround in the economy? MR. PRITCHARD: There are no certainties ever ineconomic forecasting. The President believes that the frameworkthat has been -- the policy steps agreeing -- recognizing theimportance of fiscal stimulus, putting public money into thebanking systems, that those are the right kinds of recognitionsand what is most crucial is effective implementation. And Ithink he spoke both publicly and then privately of his enormousrespect for what the Japanese people had accomplishedeconomically over the last 50 years, and that that economicstrength speaks very well to the potential of the Japaneseeconomy for the future. Q The President has expressed concern about theUnited States falling back into a protectionist stance. Can youexplain a little bit about why he's concerned about this, howmuch he's concerned about it and how he pressed this with thePrime Minister behind closed doors as well as publicly? DEPUTY SECRETARY SUMMERS: The concern is that at atime when U.S. economic strength is leading us to acceptsubstantially increased imports from other countries, inevitablythat process is associated with certain dislocations in sectorsof our economy that are accepting increased imports. That's partof a dynamic economy. But what the President made clear was notsomething that the United States could or would sustain was tradethat was not by the rules, nor would we want to see a situationin which the United States was the importer of only resort, asituation where other countries were not doing their part to growand accept imports from the countries that were in very seriousdifficulty. That is the right economic policy in the UnitedStates and it's an economic policy that corresponds to politicalreality. What he emphasized was that he was prepared to lead theUnited States economy in being an engine for the rest of theworlds, but rules had to be followed and others had to do theirpart. And in that context he referenced the steel question andhe referenced the question of agreement -- carrying through onthe various agreements in flat glass and insurance and the otherproducts. Q Privately, did Prime Minister Obuchi respond tothis? DEPUTY SECRETARY SUMMERS: I think the Prime Ministermade it clear that he understood that Japan had to do its part,but they didn't get into a specific case-by-case discussions ineach of the areas. But I think the Prime Minister understoodvery clearly and could see the point that the President wasmaking. Q Did the President refer to any specific industriesbesides steel, and what response did he get the Prime Minister onthe steel question? DEPUTY SECRETARY SUMMERS: He referred to the list ofindustries I went through. Q No, I'm not talking about the ones where you'vealready reached agreement, but other issues -- DEPUTY SECRETARY SUMMERS: He didn't, that I recall,refer to other industries outside of the ones where we needed --where the enforcement issues were crucial. And I don't thinkthat there was a specific commitment from the Prime Minister.But I detected from the various conversations I've had and Ithink others in our delegation have had an awareness here of theimportance of making sure that trade is by the rules in steel andother sectors. Q It sounds like the President and Prime Ministertalked about a wide variety of topics. And I was wonderingwhether either man brought up the subject of the impeachmentinquiry? And secondly, given the fact that that inquiry that thestart of the hearings have generated a tremendous amount ofcoverage and controversy in the states, has that provided even aminor distraction to the agenda here in Tokyo? DEPUTY SECRETARY SUMMERS: In none of the meetings inwhich I was a participant was any subject of that kind touchedon. And I have not heard any reports of it being touched on inany of the other sessions. Barry Toiv may be able to give you afuller readout. I've by now been on a lot of trips with the Presidentand this one was like the others in his being very focused on thetask at hand, having quite extensive briefings in which in anumber of questions he revealed by his question that he knew moreabout the subjects at issue than those of us who were briefinghim. So this certainly was not something from the discussions ofthe party on the trip one was aware of any distraction. Q Mr. Summers, private economists have forecastedthat even with the stimulus package the Japanese economy willshrink next year. Do you agree with that assessment and is thatwhy President Clinton keeps saying that this may not be enough? DEPUTY SECRETARY SUMMERS: I think the recognition thatthere is a risk of slow or negative growth is why there's a viewthat it may be necessary over time to do more. I don't have aspecific forecast of the Japanese economy to offer. Q Can you please tell us whether or not there is anysort of resolution on the steel issue? In the past the Japanesehave denied that there is any dumping. DEPUTY SECRETARY SUMMERS: I don't have any judgment toexpress on the question of whether there is or is not dumping bythe legal standard for that. That's something that adjudicatedin a different way. I do feel that the concerns that were beingexpressed about, as the President said at the AmCham today, the500-percent increase were very clearly heard -- let me just saythat. Q One question for Mr. Pritchard. Can you tell usif there was any discussion about Taiwan, either with respect toJapan's unwillingness to give the three no's assurances that --or with respect to missile defense or the defense guidelines? MR. PRITCHARD: As I indicated before, the Presidenthad an opportunity at dinner last night, sitting side by sidewith the Prime Minister, and they did discuss China. I cannottell you whether or not Taiwan or theater missile defense hadcome up. Q Can I ask another Korea question? Can we goback -- at some point -- what's the next step? Will there betalks again in Geneva, for instance, or have be basically saiduntil we hear more about this site we will have no moreconversations there? MR. PRITCHARD: No. We are actively pursuing -- one ofthe things that at the end of the discussions in Yongbyon weagreed we would continue this discussion -- we've got a targetdate of probably around the first week in December. But thereare some details that have to be worked out -- exactly where thisis going to be held and whatnot. But we are actively pursuingthis and the North Koreans have received the very serious messagethat we took to them. Q Is Bill Perry going to go to North Korea and talkto the North Koreans? Or what's the nature of his role that thePresident mentioned? MR. PRITCHARD: Right now, as the President indicated,Dr. Perry will come on board to help conduct an overall review ofour North Korea policy, taking into stock kind of offset forwhat's needed and going on -- details, talking with our allies inSouth Korea and Japan. Kind of following exactly what thePresident is doing now. He's come to Japan, he's talking withthe Prime Minister, he's going on to South Korea tomorrow todiscuss that. The Prime Minister recently had a state visit byPresident Kim in South Korea. President Jiang Zemin is cominghere as well. So you've got a series of these leaders talking andthey're talking very focused on the North Korean policy. Q Thank you.
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