[Congressional Record Volume 144, Number 102 (Monday, July 27, 1998)]
[Extensions of Remarks]
[Page E1448]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         REGARDING THE UNITED STATES-JAPAN INSURANCE AGREEMENT

                                 ______
                                 

                      HON. SANFORD D. BISHOP, JR.

                               of georgia

                    in the house of representatives

                         Monday, July 27, 1998

  Mr. BISHOP. Mr. Speaker, I rise today to ask to insert into the 
Record the following Memorandum which the American Family Life 
Assurance Company (``AFLAC''), a Georgia company, has submitted to 
Ambassador Barshevsky, the United States Trade Representative.
  The United States Trade Representative will be leading an interagency 
review process to consider her decision regarding a violation of the 
United States-Japan Insurance Agreement.
  She has asked that submission be made to her office, and I think it 
appropriate to share with the House the AFLAC submission, which I know 
will be of interest to many both inside and outside the insurance 
industry.

                               Memorandum

     To: Interagency Task Force on Yasuda Fire & Marine's 
       Activities in the Third Sector
     From: Alan Wm. Wolff, Charles D. Lake II
     Date: July 27, 1998
     Re: Scope of Review and Copies of AFLAC's Submissions

       Yasuda Fire & Marine Co., Ltd. has entered the third sector 
     and has caused and is causing ``radical change'' in the 
     business environment of the third sector. Therefore, in 
     response to a request from the Office of the U.S. Trade 
     Representative, we are pleased to submit on behalf of 
     American Family Life Assurance Company of Columbus 
     (``AFLAC'') additional copies of our submissions regarding 
     Yasuda Fire & Marine's activities in violation of the U.S.-
     Japan Insurance Agreement.
       The interagency review of Yasuda Fire & Marine's activities 
     should be conducted on the basis of the primary object and 
     purpose of the U.S.-Japan Insurance Agreement, which is 
     enhancing U.S. market access in Japan. The U.S.-Japan 
     Insurance Agreement is designed to promote liberalization of 
     the Japanese insurance market by preserving the third sector 
     until the primary first and second sectors have been 
     liberalized by the Government of Japan. To achieve this 
     objective, the Japanese Government agreed to provide a 
     ``stand-still'' in the third sector, until the primary first 
     and second sectors have been liberalized.
       ``Stand-still'' means that giant Japanese insurance 
     companies such as Yasuda Fire & Marine are currently not 
     permitted to enter the third sector (i.e., stand-alone cancer 
     or medical market) or cause ``radical change in the business 
     environment'' of the third sector. This commitment is 
     premised on the fact that these giant Japanese companies have 
     been the principal beneficiaries of the highly protected 
     primary sector in Japan. The basic bargain struck under the 
     agreement is that until companies like Yasuda are forced to 
     face international competition in the primary sector, giant 
     Japanese companies would not be allowed to penetrate the 
     third sector. The U.S.-Japan Insurance Agreement is about one 
     thing and one thing only, that is, access to the Japanese 
     market for the sale of insurance.
       It is essential that the interagency task force conduct its 
     review of Yasuda Fire & Marine's activities in the third 
     sector of the Japanese market by examining the evidence based 
     on the object, purpose, and specific requirements of the 
     agreement. A single, narrow focus on the question of whether 
     CIGNA ``controls'' INA Himawari does not provide an 
     appropriate basis for review of the available evidence and 
     relevant issues. Yasuda Fire & Marine's activities in the 
     third sector pose an unprecedented trade policy challenge 
     to the United States with respect to its ability to 
     enforce its trade agreements. It involves a clever scheme 
     by a giant Japanese company to use its previously 
     unsuccessful joint-venture partner both as a sword and 
     shield to circumvent a trade agreement. Accordingly, we 
     urge the interagency task force to consider the following 
     facts:
       Yasuda announced its agreement to buy majority ownership of 
     INA Life, CIGNA's unsuccessful subsidiary, in August 1996.
       Yasuda renamed the subsidiary INA Himawari (``Sunflower'') 
     to add the Yasuda corporate symbol to the name of the 
     subsidiary to provide public identification of the entity as 
     part of Yasuda.
       Yasuda covered INA Himawari promotional materials in 
     sunflowers to further establish in the public's mind that INA 
     Himawari products were Yasuda policies.
       Yasuda transferred 10,000 of its agents to INA Himawari to 
     sell third sector products, and there is a potential for 
     approximately 60,000 additional Yasuda agents to be 
     transferred.
       Yasuda has linked its proprietary computer sales systems, 
     integrating its new ``subsidiary'' into its database, thus 
     enabling the two companies to provide a seamless line of 
     insurance products.
       Yasuda represented to its agents that INA Himawari was in 
     fact its subsidiary.
       Yasuda's agents acting through INA Himawari targeted 
     AFLAC's policy holders for replacement sales.
       Yasuda used its keiretsu links to further extend policies 
     into the third sector.
       Yasuda cross-subsidized the sale of INA Himawari products 
     by offering its agents special incentives rewarding 
     aggressive sales of INA Himawari products.
       Yasuda violated Japanese law in several regards in selling 
     these policies in the third sector. Yasuda agents:
       Offered rebates to new policy holders;
       Misrepresented INA Himawari as a Yasuda subsidiary;
       Conducted inappropriate product comparisons; and
       Provided inappropriate information on AFLAC's cash 
     surrender refund amounts.
       Without agreeing to sell off their companies, change their 
     corporate names and identities, take on platoons of outside 
     managers, and disclose proprietary information, it is 
     impossible for AFLAC or other foreign companies to enter into 
     similar arrangements with other giant Japanese insurance 
     companies. The transfer of Yasuda's agents to INA Himawari is 
     the direct result of CIGNA's withdrawal from the life sector. 
     It is impossible for other foreign companies dedicated to 
     staying in the Japanese market to commit to such 
     arrangements.
       As Yasuda Fire & Marine's penetration of the third sector 
     continues, foreign firms have been and are currently denied 
     opportunities accorded to Yasuda and other giant Japanese 
     insurance companies in the primary life and non-life sectors.
       We further urge the interagency task force to consider 
     among other things the following issues:
       Are Yasuda Fire & Marine's activities in the third sector 
     consistent with the object and purpose of the U.S.-Japan 
     Insurance Agreement?
       Has Yasuda Fire & Marine entered the third sector or has it 
     caused or is it causing ``radical change'' in the business 
     environment of the third sector?
       Does participation in ownership by a U.S. entity in a 
     joint-venture provide a blanket exemption for the Japanese 
     partner from the agreement's provisions?
       Has Yasuda Fire & Marine or INA Himawari engaged in 
     activities designed to mislead agents and consumers into 
     thinking that INA Himawari is Yasuda's subsidiary or a 
     functional member of Yasuda keiretsu?
       CIGNA is disinvesting from the Japanese market and seeking 
     to increase its exit price by taking advantage of the U.S.-
     Japan Insurance Agreement. Are CIGNA's actions consistent 
     with the U.S. objective to improve market access?
       Does permitting Yasuda Fire & Marine to continue its 
     activities in the third sector through INA Himawari promote 
     U.S. market access to the Japanese insurance market?
       When a prima facie case of a trade violation is presented, 
     and a responding company has exclusive possession of certain 
     relevant information, the burden of production should shift 
     to that responding party. Further, if that responding party 
     refuses to cooperate and provide the necessary information to 
     conduct an impartial review, an adverse inference should be 
     used against that party.
       The interagency task force's decision should promote market 
     access in Japan and discourage other Japanese companies from 
     using their U.S. joint-venture partner to circumvent U.S.-
     Japan trade agreements.

     

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