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ECONOMY

Editorial: Economic 2+2 must respect rules of free trade

Japan and the United States have embarked on strengthening their partnership in the area of economic security. Following on the Japan-U.S. Security Consultative Committee, which brings together the foreign and defense ministers of the two countries, the two allies have created a forum for their respective economy and foreign ministers to consult periodically.

 

The Japan-U.S. Economic Policy Consultative Committee will endeavor to ensure stable procurement of strategic supplies by coordinating research and development on semiconductors and next-generation energy. The group will also strengthen export controls to prevent the outflow of state-of-the-art technologies that can be repurposed for military use. The Economic 2+2 was created with China and Russia in mind.

 

Russia has restricted its supply of natural gas to Europe, which opposes that nation’s invasion of Ukraine. China is a major source of rare earths, which are required for electric vehicles. Taiwan is on the front lines of the confrontation between the United States and China  because it is home to a large number of state-of-the-art semiconductor manufacturing bases.

 

The Economic 2+2 is very significant in that it is forum where nations that share values can work in concert to reinforce supply chains at this time when actions that use economic means to coerce other countries are becoming widespread..

 

The United States is also spearheading the Indo-Pacific Economic Framework (IPEF), an economic bloc initiative composed of a total of 14 countries, including Japan, Australia, India, and Southeast Asian countries. The Economic 2+2 will become the foundation of IPEF.

 

These initiatives also contain measures that give preferential treatment to specified industries, however.

 

The United States has recently allocated $52 billion for semiconductor research, design, and manufacturing. Japan will also provide public support for the fields of semiconductors and decarbonization.

 

Raising industrial competitiveness is critical, but measures that distort market functioning should not be taken.

 

Inappropriately reducing international prices through subsidies constitutes a violation of World Trade Organization (WTO) rules. It could incite rivals and spread protectionism.

 

Industrialized nations have criticized China’s industrial subsidies. Countries need to improve transparency by fulfilling their responsibility to explain whether their industrial policies are fair.

 

The free trade system is being rattled. To protect American industry, the U.S. administration under former President Donald Trump aggressively raised tariffs in the name of [national] security. The Biden administration has continued some of these measures.

 

The Economic 2+2 says in its statement that it will create a “rules-based international economic order.” It is true that trade and investment rules need to be reconstructed, but nations will not be able to gain others’ understanding if they prioritize benefits for their own nations alone.

 

The Japan-U.S. partnership must not undermine the concepts of freedom and fairness that define free trade.

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