Okinawa and the US-Japan Relationship

Remarks by Ambassador Howard H. Baker, Jr.

Okinawa Federation of Economic Organizations

28th February, 2003, Naha, Okinawa

(as delivered)

Mr. President, distinguished members of the club of the Okinawa Federation of Economic Organizations, Members of the American Chamber of Commerce of Okinawa; distinguished Ladies and Gentlemen. Mr. Chairman, I thank you for your gracious introduction. It's truly a treat to be here, to be once more in Okinawa.

I think it's appropriate to spend a few minutes talking about the U.S.-Japan economic relationship with this distinguished audience, but let me stress at the outset that the United States and Japan are not just business partners. As I often say, Japan and the United States are allies but we are also friends. In only fifty years, we have managed to create a relationship that has brought unprecedented wealth to our people and peace and stability to the region and, indeed, to the entire world. I don't think it is an exaggeration to say that Japan and the United States share a common destiny today. It is also true, my friends, that when Japan prospers, America prospers; and when America prospers, Japan prospers.

Okinawa plays an important role in our partnership, but as I discuss our economic partnership, I do not want to minimize the security dimension of that relationship. For global terrorism and weapons of mass destruction in the hands of a few dictators pose new challenges. And while these challenges have underscored the important role played by Okinawa in keeping the peace of this region, we also know that Okinawa has never asked to assume this role. America understands that the U.S. military presence on Okinawa, although vital for maintaining regional stability, also imposes a burden on Okinawa and its citizens. And we are mindful of these facts and we are as committed as ever to easing that burden by implementing measures contained in the Special Action Committee on Okinawa Final Report and by undertaking other cooperative initiatives.

It is clear that regional security and stability are the prerequisites to economic growth. And while Okinawa plays an important role in our security relationship, it can also play an important role in our economic partnership. Japan has faced many years of economic stagnation and the United States is just now coming out of its own recession. Difficult economic times underscore the importance of us working closely together. As business people and government officials, we have the responsibility to generate employment opportunities for the young and economic security for our middle-aged and senior citizens. We must address problems of deflation, maintain a healthy financial sector, and ease regulatory impediments that restrain the creativity of our people to create more jobs and wealth. Finally, we also share a responsibility to bring prosperity and growth to this region of the world.

My friends, I am a former politician. I served in our government for many years. I am acutely sensitive to both of these grassroots and global concerns. I have been heartened to hear that your governor and many Okinawans like yourselves are making these issues your priority concerns as well. We want to work with you because, as I have said, the health and welfare of the Japanese economy is an issue of great interest and importance to America and the people of America.

And while Okinawa has lagged behind the rest of Japan in some economic indices, I know it leads the nation in many areas such as the beauty of your location, the warmth of your people, and the general hospitality of this great prefecture. Okinawa also leads the nation in the birthrate, in the per capita number of centenarians, and I think Okinawa must also rank high among prefectures on potential to develop service industries - particularly those in terms of the trade with your visitors. We in America call that tourism. I've been told that you call it visitorism. I like your term better. And I shall carry it back to America as a better description of the men and women who come to Okinawa or come to see America.

Okinawa has many other opportunities, too numerous to mention. In addition to visitorism, you have opportunities in healthcare and the so-called "silver services" of providing for the aged. There are many opportunities for this great place.

My friends, no one can guarantee easy solutions to the challenges facing Japan's economy but we Americans have some ideas based on our own recent experiences in this respect. As a friend of Japan, we'd like to share these ideas, even as we acknowledge that it is up to Japan to determine its response to formulate its policies and meet its own challenges. In a speech to the Japan Society two weeks ago, our Deputy Secretary Kenneth Dam recommended some policies and measures for tackling Japan's fiscal problems, its deflationary trends, and its banking system hobbled by bad debts, and its industry in need of structural reform. Ken Dam's recommendations, however, are just that. They are recommendations. They are the product of our experience. And we make them with the full realization that Japan is a great sovereign nation and will make its own decisions in this field and all others depending on what you and you government thinks is best for Japan.

Secretary Dam concluded his remarks by observing that Prime Minister Koizumi's reform efforts are important to the world and to the United States, not only because, as he said, "continued world economic growth needs more than a single engine," but because regional and global society could suffer without "a healthy, vibrant Japan that is able to take its proper place on the world stage."

In the financial sector, the experiences of many countries - not just the United States - offer a better understanding of the steps necessary to clean up a troubled banking system. These require recognizing bad loans, closing insolvent banks, assuring that the remaining banks engage in accurate risk analysis and maintain sufficient levels of capital, and ensuring that the banks have good management. We also need more efficiency and competition in the financial service industry and Okinawa could be a model. We watch with interest the development of a Special Financial Zone in Nago.

We also would like to see improved transparency and openness that simulates competition and raises efficiency. "Dango" or bid-rigging is not only costly but it is old-think. Japan, including Okinawa, would create a more attractive investment environment and spur growth if it would provide ways for domestic and foreign firms to gain full access to information and opportunities and to allow them to participate in the regulatory process. My friends in the American Chamber would agree, I am sure, with this observation.

With respect to information technologies: Cheap, accessible, cutting edge IT and telecommunications are the lifeblood for an island economy. Distance doesn't matter if you are connected. American firms, such as AIG, Citibank, and Oracle, have taken advantage of Okinawa's success with call centers. There should also be much potential in e-commerce in general. If Singapore is a model, then expansion of IT must be a priority in Okinawa. Deregulation, transparency, and intellectual property rights (IPR) protection enforcement are essential needs if this field is to prosper.

But the benefits of the US-Japan partnership are not limited to these national-level initiatives. I would like to mention three areas that seem to have special relevance for Okinawa's development. In each of these areas, I think Okinawa's historic and existing links to the United States can play an important role, including especially the 80,000 people of Okinawan origin who live in America today.

First, tourism, the visitor industry. Tourism and the convention business are already pillars of the Okinawa economy but there is a vast potential for more growth. While Okinawa is host to nearly 5 million Japanese visitors a year, international tourism, especially from the West, often seems neglected. We are trying to help in America. Our State Department is supporting a joint project between Meio University and the University of Houston on curriculum development in the area of international conventions. Last fall, through our international visitor program, we arranged for three Okinawans to spend a month studying the American tourism industry. You've got a terrific product here, my friends. But you can do more to promote your image overseas, more to market Okinawa's natural beauty, its rich culture, and, most of all, the friendliness of its people.

And, next, may I mention your proposal for a Graduate University. While this is an ambitious project, done right, it should be a boon for attracting international businesses. We want to contribute and I know that the American Chamber here is supportive and is available to assist. Education in general is important and another initiative showing foresight is the special financial curriculum being developed at Nago Commercial High School, which may be the first such program in the nation. Our Consulate General arranged for a delegation from that school to visit a similar public school on Wall Street in New York.

Third, English language initiatives. Greater ability in English would almost certainly help attract international businesses. We think Okinawa prefecture and the University of the Ryukyus are wise in making this a priority. And we are anxious to know how we can help. There are many scholarships to the US and exchanges with schools on US bases in place. The Obuchi Scholarship and Fellowship Program, which we support, sends Okinawans to the East-West Center and the University of Hawaii. U.S. forces volunteer at elementary schools and we believe that constitutes a win-win program.

My friends, you should know that I am by nature an optimist. Our partnership between Japan and the United States is strong and mutually beneficial. Tomorrow we will overcome threats abroad and economic slowdown at home. Fifty years of cooperation have brought enormous benefits to our people in the form of the two largest economies in the world and by far the largest overseas bilateral trading relationship in the world.

I noted in the beginning of my remarks that Okinawa can play an important role in our economic relationship just as it plays an important role in our security partnership. I truly believe that because I have seen first-hand what can be accomplished - that we can go forward together. In my home state of Tennessee, more than two hundred Japanese companies have set up shop to do business. They have become a part of our communities. They provide jobs and investments that benefit not only Tenneseeans but also their Japanese sponsors. But all of them are part and parcel of the American economic complex.

I am convinced that Okinawa can duplicate that success. With forward-looking policies, the right incentives and aggressive publicity, you can open up the prefecture to increased foreign investments that will stimulate employment, raise incomes, tap the innate energy and imagination of your people, and to move forward with a more prosperous Okinawa. And this will result in even more positive consequences than we are able to identify and name today.

Our partnership can accomplish this and much more. I know that working together there can be many other examples that will help to bring prosperity and wealth to our people and yours, and for the benefit of the entire world. And I look forward to working with you, with working with this great country, with extending the friendship and alliance between America and Japan. I thank you for the promise of the future. And I thank you for giving us time for me to make these remarks today.