By Hosokawa Masahiko, professor at Meisei University
New LDP president and economic security
Kishida Fumio was elected as the new president of the Liberal Democratic Party (LDP). But looking back on his arguments during the LDP presidential race, there was much left unsaid on economic policy and other matters. It is undeniable that he tends to put more focus on domestic affairs, such as reducing the gap between the rich and the poor and the proper distribution [of wealth], with a general election just around the corner. On the other hand, his ability to confront a rising China will be put to the test, with the highest priority given to economic security policy amid the ongoing conflict between the U.S. and China. The new LDP president will face concrete arguments about economic security immediately after launching his government.
The summit meeting of the Quad cooperation framework among Japan, the U.S., Australia, and India held recently also focused on economic security. The Quad leaders agreed to meet on a regular basis after successfully persuading India to remain in the group. The Quad emphasizes economic security, including infrastructure development and semiconductor supply chains, and uses this emphasis as a unifying force. That gives Japan a major role to play in the framework.
The relationship between the U.S. and Europe is also unstable due to the withdrawal of the U.S. military from Afghanistan and the creation of the AUKUS security partnership between Australia, the UK, and the U.S. The U.S. and Europe urgently need to mend fences to keep in step with each other in policy toward China. This raises the question of how the trilateral framework of Japan, the U.S., and Europe should work on economic security. Here, too, Japan is expected to play a role as an intermediary [between the U.S. and Europe].
Putting China under observation before its entry into the TPP
China’s application to join the Trans-Pacific Partnership (TPP) trade deal had a seismic effect on the LDP presidential race. Feeling a sense of crisis, Taiwan soon followed suit and applied for TPP membership. As the TPP chair Japan’s ability to strategically respond to applications will be put to the test. The U.S. does not participate in the TPP but is the central player behind the scenes. The U.S.’s involvement in Asia is Japan’s strategic goal and the new [Japanese] government needs to swiftly communicate with the U.S.
China sees the TPP as a campaign directed against it and aims to divide the TPP member nations by utilizing its huge market. For China, just being able to start negotiations for membership in the TPP is equivalent to tentative success. The country is poised to defeat each member nation even if it takes time.
How should the TPP members deal with this China’s move?
It goes without saying that the TPP members need to “determine whether China is ready to abide by the high-level rules of the TPP.” For instance, TPP rules regarding state-owned enterprises, data flows, and government procurement are hard for China to accept. It is unlikely that the Xi Jinping regime, which is tightening control over its economy, will accept reform. But it is dangerous to believe that China will not be granted TPP membership. China could create “loopholes” during negotiations and “emasculate” [the TPP].
Broadly, China, citing security reasons, might ask for exceptions and force the member nations to accept these during negotiations. China seems to believe that it can take advantage of its enormous market to get its own way as negotiations proceed. The TPP members should not be optimistic just because there are high-level rules.
That makes the decision on whether or not to launch negotiations over China’s possible entry all the more important. The TPP members required the UK, which applied for membership ahead of China, to “demonstrate steps to follow all rules” when the launch of entry negotiations was decided. It was also important that Taiwan said it is “ready to accept all rules.”
Formal negotiations on China’s participation in the TPP should be suspended and China should be “put under observation” until it makes a similar commitment and shows signs to reform. This does not mean China is “turned away at the door.” But it is important to block China’s expectation that it can water down the TPP just by entering negotiations on its potential membership. Recently, the Xi Jinping regime is running counter to reform by tightening its grip on the economy. So it is justifiable to “put China under observation” until moves toward reform are confirmed.
Japan’s new government should firmly maintain its focus
The next focal point is the U.S.’s attitude. Attention will be focused on whether the administration of President Joe Biden and the U.S. Congress will be awakened by a sense of urgency. China thinks “the U.S. cannot make a move before the mid-term elections.”
Japan should patiently persuade the U.S. to return to the TPP. But free trade has been blamed for the loss of jobs in the U.S. The Biden administration is also poised to make requests to add rules on environment and labor as it believes the current TPP is insufficient. Unfortunately, this dims the prospects for the U.S.’s return to the TPP for the time being.
The basis of Japan’s trade strategy is the “creation of an international order based on rules” and the TPP is an important pillar of this strategy. The goal of the strategy is to create a situation where China has no option but to reform itself. Therefore, Japan should devote itself to firmly maintaining the TPP’s high bar to membership by China. To that end, as I wrote earlier, the phase of deciding whether or not to launch membership negotiations is important. Those who say “at least membership negotiations should be launched” may seem to sound reasonable. But this is a facile idea that does not take the participation process into account and lets China have its way. China may put pressure on industry by taking advantage of its market going forward. It is critical for the new [Japanese] government to firmly maintain its focus.
A plan for China and Taiwan to join the TPP simultaneously is like a curveball and requires caution. It should not be adopted because it is an argument for a facile political balance involving China and Taiwan only. The plan would not only eliminate the possibility of the U.S.’s return to the TPP but also lower the bar for China’s participation in the TPP and marginalize the trade pact. Japan should not lose sight of its strategic goal.
Japan should patiently continue to attempt to persuade the U.S. to return to the TPP but its strategic thinking should not be rigid. It is undeniable that the U.S. will try to create a new framework for its Asia policy instead of returning to the TPP. To be ready for such a possibility, Japan needs to formulate a Plan B. A strategy should not solely depend on a wishful prospect.