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Japan faces challenge of spearheading global trade rulemaking amid U.S.-China confrontation

  • September 10, 2020
  • , Nikkei , p. 5
  • JMH Translation

“Prime Minister Abe played a critical role in concluding the Trans-Pacific Partnership (TPP) agreement after the U.S. departure from the pact,” wrote Singaporean Prime Minister Lee Hsien Loong in a Facebook post in response to Abe’s announcement of his intention to resign. 

 

The Abe administration achieved results in the TPP and other large-scale trade negotiations by leveraging its stable support base at home and the relationships of trust Abe has forged with foreign leaders. The administration also enhanced Japan’s presence in Asia. Owls Consulting Group’s Keisuke Hanyuda, who is well-versed in trade policy, praises the Abe administration, saying: “There have been many large global agreements that were never finalized after the negotiations ended. The conclusion of the TPP under Japan’s leadership is a major turning point in trade policy.”

 

In trade negotiations, it is often the case that the interests of industries such as agriculture and auto conflict and domestic players become divided into supporters and opponents. But the Abe administration concentrated authority in the bureaucrats responsible for the negotiations. It separated [trade negotiations] from the interests of ministries that have jurisdiction over certain industries and thus established a mechanism to bring negotiations to a successful conclusion under the leadership of the Prime Minister’s Office [Kantei]. That clarified the point of contact for negotiations and made it easier for relevant countries to proceed with negotiations with Japan.

 

But trade negotiations are taking on a different tone now amid the intensifying confrontation between the U.S. and China. Countries are required not only to finalize negotiations focused on tariffs but also to think about economic security for the safe distribution of important materials, patents, and data.

 

Examples include negotiations for the Regional Comprehensive Economic Partnership (RCEP), which aims to create Asia’s biggest trade bloc by bringing together China, India, and Australia. The RCEP would allow the rule-based regional trade environment to be maintained while restraining the creation of a China-led economic bloc. The negotiations are not solely intended for economic stimulation but “have major geopolitical significance” according to Japanese Economy Minister Hiroshi Kajiyama.

 

Japan, the U.S., Australia, and India are deepening security cooperation in the Indo-Pacific region. The U.S. administration under President Donald Trump is stepping up pressure on the Chinese government and companies and strictly monitoring moves to side with China. India dropped out of the RCEP talks as it did not want to see its trade deficit grow due to an inflow of Chinese products. The confrontation between Beijing and New Delhi is increasing tensions over a disputed border.  

 

How will the new [Japanese] government act in Asia? A new move on Sept. 1 may be a sign of it.

 

The economic ministers of Japan, Australia, and India issued a joint statement on strengthening supply chains. They are making plans to diversify production bases with a view to work with the Association of Southeast Asian Nations (ASEAN). They are trying to develop a more realistic and multilayered relationship in parallel with the RCEP, which India is not keen on.  

 

The novel coronavirus pandemic and a rapidly deteriorating global economy may force countries to move to a more protectionist approach to trade policy. If countries intensify conflicts of interest, Japan needs to pave its own way to maintain free trade.

 

“A new boundary needs to be drawn in the world of trade because the concept of security has expanded,” comments Sophia University Professor Tsuyoshi Kawase. “Japan faces the challenge of leading rulemaking. Prime Minister Abe repeatedly used the term ‘flagbearer of free trade’ to describe Japan. The real value of this term will be put to the test with the new government.

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