United States and Japan Remain in State of Disagreement Over Insurance Sector

USTR Barshefsky released a statement on July 1 reiterating the U.S. position that Japan has not fully implemented the 1996 Supplemental Measures on insurance and, thus, the United States does not consider the third sector "clock" to have started. This refers to provisions in the insurance agreement that ban Japanese entry into the third sector, or specialty insurance market, until certain liberalization measures have been implemented. Once Japan has complied with all of its deregulatory commitments outlined in the agreement, a two and one half year clock begins, after which Japanese entry into the third sector is allowed.

As expected, Japan's Finance Minister Hikaru Matsunaga responded to Barshefsky's remarks the next day by releasing a statement contending that Japan fully met its obligations under the 1996 agreement and that "Japan will fully liberalize the third sector in January 2001."

In addition to Minister Matsunaga, an unidentified senior MOF official commented in response to USTR Barshefsky's statement that the U.S. government merely wants to protect U.S. firms' monopoly in the third sector at the expense of Japanese consumers. This official also commented that "there is no room for further discussion . . .Japan's policy of removing regulations aimed at cushioning drastic change in the third sector in 2001 remains unchanged."

Now that the July 1 date has passed and the parties have clearly stated their contradictory opinions on whether the third sector clock has begun, there does not appear to be a real sense of urgency to reach a compromise. Barshefsky's statement merely commented that the United States "looks forward to working with Japan over the coming weeks." There has been little discussion by U.S. officials regarding what action the United States might take against Japan if this stalemate continues.