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ECONOMY

U.S. and Japan to ask ASEAN to help avert next chip crisis

  • April 1, 2022
  • , Nikkei Asia , 1:24 a.m.
  • English Press

By KOSUKE TAKEUCHI, Nikkei staff writer

 

TOKYO — The U.S. and Japan will ask ASEAN nations to participate in a new supply chain framework designed to prevent the shortage of semiconductors and other strategic goods as they seek to reduce economic reliance on China, Nikkei has learned.

 

Washington is set to come out this year with a new Indo-Pacific Economic Framework, which seeks to build a new economic sphere around trusted partners with shared values such as freedom and democracy. Details of the plan have yet to be released.

 

The U.S. recently sent a draft document to the Japanese government aimed at encouraging members of Association of Southeast Asian Nations to join in. The two sides are now working on the specific wording, which must be carefully calibrated to avoid angering China while making it easy for ASEAN members with close ties to Beijing to participate.

 

Amid the global economic turmoil caused by Russia’s invasion of Ukraine and the coronavirus pandemic, the framework aims to reduce economic security risks by rebuilding supply chains to center on friendly countries like Japan.

 

It also serves as an alternative avenue for regional cooperation for the U.S., which faces domestic opposition to returning to the trade pact previously known as the Trans-Pacific Partnership.

 

Ensuring that international supply chains function properly can strengthen domestic manufacturing bases, guarantee product supplies and preserve jobs, the draft says. It includes language about respecting labor standards, suggesting that China, which has faced allegations of forced labor in Xinjiang, will not be welcome.

 

Positioning semiconductors and clean energy as priority fields, the framework calls for participating countries to expand cooperation to ensure access to the necessary materials.

 

The decarbonization section discusses concentrated investment in the technologies needed to accelerate the deployment of clean energy. Sections on digital cooperation and maintaining trade freedom are included as well.

 

The framework is not intended as a purely economic arrangement. The draft stresses that economic and diplomatic policy interests in the region are closely intertwined.

 

Washington is expected to encourage South Korea to join, but that may prove challenging.

 

The U.S. approached both Japan and South Korea last fall about setting up a working group on semiconductor supply, according to a senior official. There was also a proposal to bring in Taiwan, which produces much of the world’s supply of top-of-the-line chips.

 

The lack of progress after six months stems from friction between Tokyo and Seoul over chipmaking materials. Japan restricted exports of certain products to South Korea in 2019, amid a diplomatic chill over the wartime forced-labor issue involving Japanese companies and an incident in which a South Korean destroyer locked its fire-control radar on a Japanese patrol plane.

 

Incoming South Korean President Yoon Suk-yeol, who is set to take office in May, has sounded willing to move toward improving ties with Japan. This will not be easy, given that historical issues surrounding the two countries are a touchy topic for the South Korean public, but Washington is expected to urge the new administration to partner with Tokyo.

 

Foreign ministers from Japan, the U.S. and South Korea met in Hawaii in February and issued a statement stressing “the importance of collaboration … to improve economic security.”

 

The three countries and Taiwan account for more than 70% of global chip production, and investment in the field is also ramping up in Southeast Asia, which has ambitions of becoming a semiconductor hub. A partnership would help participants prepare for a potential conflict around Taiwan, which Beijing seeks to unify with the mainland.

 

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