By Shujiro Urata, professor at the Waseda University graduate school
The United States did not open its auto market in the Japan-U.S. trade agreement. Dangling in front of Japan the specter of implementing additional tariffs under Section 232 if Japan failed to agree to its demands is nothing other than a threat. U.S. President Donald Trump has repeatedly taken actions that are in violation of the World Trade Organization (WTO), and this could lead to the collapse of the world’s free trade system.
If the free trade system falls apart, it will become a world where powerful countries benefit and nip in the bud the growth of small countries. The U.S. is changing the trade framework in a way that suits itself. The supreme example of this is the new United States-Mexico-Canada Agreement (USMCA), which introduces quantitative restrictions. It seems that the invocation of additional tariffs was avoided in the recent Japan-U.S. agreement, but there is a chance that tariffs will be invoked if the situation changes. Uncertainty remains, making it hard to move forward with investment.
Joining hands with the European Union (EU) and others, Japan should endeavor to reform the WTO and hurry to create rules for the digital economy and dispute resolution. We need to have the United States and China take actions based on rules. We should counter U.S. protectionism by creating several free trade zones that encircle the U.S. by harnessing the Regional Comprehensive Economic Partnership (RCEP) among others.