Reciprocity-based relationship needs to be built

Kenichiro Sasae: President Donald Trump always says, “I’ll make utmost efforts until the trade imbalance issue is resolved.” But it is very difficult to completely reduce the trade imbalance to zero. What is the President’s thinking in this regard?

Ambassador Hagerty: The President thinks that the U.S. is the most open market in the world. Since World War II, [the U.S.] has been tolerating situations where reciprocity is not guaranteed because there were countries that needed to be reconstructed. But their economies have been recovering. So I think the President wants to go back to square one and build relations that are based on better reciprocity. The President’s approach to China is very challenging for us. Things might have been much easier if we dealt with China a decade ago and things might have been more difficult after implementation of the “China 2025 strategy” [Made in China 2025 initiative] was implemented.

I think the U.S.’s relationship with Japan is moving in the right direction. It makes sense to manufacture things in places where they are sold. I think the situation will improve if movement in this direction is accelerated. The President has been dealing with China by “imposing tariffs.” But China has begun retaliating against American farmers. We must somehow make China change its non-market behavior. The President wants to change the situation for the better with American allies. But unfortunately, the 11-country Trans-Pacific Partnership deal without the U.S. (TPP-11) was effectuated, which will only made the situation worse. I don’t believe that’s what Japan really wants. So I want the Japanese government to promptly address the issue.

U.S. doesn’t intend to cause damage to China

Sasae: President Trump has been posting on Twitter remarks on the Japan-U.S. security treaty. There is concern that he might alter the security treaty, which forms the foundation of the Japan-U.S. relationship.

Hagerty: The Japan-U.S. security relationship is unshakable. I think the President expressed the frustration he feels. This is also related to trade, but Japan and European nations do not spend much on defense compared with the U.S. partly for historical reasons. But China is boosting its defense spending and increasingly becoming a global threat. The President is focusing on calling on U.S. allies not just to increase [defense] spending but to further enhance interoperability.

Sasae:  There is a solid consensus among Japanese on the need to make a greater effort in defense. But the relationship between Japan and the U.S. is essentially different from that between China and the U.S. What is your take on that?

Hagerty: I totally agree. Our purpose—our goal—is not to cause damage to China, but to change China’s behavior. We want China to be like us. Japanese and American companies were affected by China after it joined the World Trade Organization (WTO) and began to seek economic growth. China is engaging in unfair wars and using profits from those wars for its military budget. Japan and the U.S. need to be in close contact in terms of economy and security.

External pressure is important for China

Sasae: I heard that President Trump said something to the effect, “General-purpose items are not subject” to the export ban on Huawei and the market responded positively to his remark. Can you elaborate on this?

Hagerty:  What the President agreed to was only to allow the export of a certain number of products that do not affect security. But our stance against Huawei remains unchanged and we will not make concessions on security issues. China’s National Intelligence Law is applied to all companies and nationals. So we’re very worried about it.

Do you know why Nokia and Ericsson are falling behind Huawei? Because it’s difficult to compete against a non-commercial government-owned company.

Sasae: China detests interference in its internal affairs. I believe it’s difficult to solve problems related to its nature and system, such as subsidies and industrial policies. How does the U.S. plan to resolve these?

Hagerty: External pressure is important in relations with China. It’s particularly important to correct its behavior in the South China Sea. It’s up to China whether it will have two systems or accept a global market.

Situation in Hong Kong similar to Tiananmen Incident

Sasae: How does the U.S. see the recent movement in Hong Kong?

Hagerty: American citizens are very sympathetic to the people of Hong Kong. China has taken a “one nation, two systems” approach with respect to Hong Kong. But it is not working well. I wonder how China will resolve the problem. I was very surprised by the Tiananmen Square Incident. I don’t know whether a similar thing will happen in Hong Kong, but I think the current situation in Hong Kong is very similar [to the Tiananmen Incident].

Sasae: President Trump set foot on North Korean soil, shook hands, and held a meeting [with Kim Jong Un]. Some media outlets were critical, saying: “Is it meaningful? Isn’t it just a photo opportunity?” What do you think of this criticism?

Hagerty: The President shook hands with Chairman Kim to facilitate progress before delegating authority to Special Representative for North Korea Stephen Biegun. So I believe we’ll continue to have good communications with the North.

Sasae: Regarding the Group of 20 summit meeting in Osaka, is the U.S. determined to go its own way?

Hagerty: The U.S. has never rejected the idea of climate change. We just want to avoid signing a deal that is not good. It takes several decades before the imposition of an obligation on China [to cut greenhouse gas emissions], which is a risk. The U.S. is and will continue to improve the environment by partnering with Japan. It’s just we don’t accept a deal that is not good.