How Japan manages US trade pressure
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How Japan manages US trade pressure

JAPANESE Prime Minister Shinzo Abe’s administration is strikingly successful in deflecting pressure for a bilateral trade deal from US President Donald Trump. Some of the secrets to Abe’s success are obvious, others less so.

Among the former is Abe’s continuing charm offensive towards Trump and the direct communications pipeline that has developed between the two leaders. These underpin perhaps the most cordial relationship the President has with any world leader. The connection is invaluable to Abe given the power of personal relations to ‘trump’ other factors when dealing with the President.

Abe used a recent trip to Washington to his advantage, informing Trump of pending political events in Japan that constrain Abe’s policy options — namely impending upper and (possibly) lower house elections. But this is far from the whole story.

SEE ALSO: Trump’s approach to China has bad implications for global trade & world peace

The Abe administration has also blunted the Trump trade offensive through massive weapons purchases from the United States and a large rise in Japanese investment in the US economy — including in key industries in states important to Trump. Substituting in other areas for concessions on market access is a long-standing tactic in Japan–US relations.

The Abe administration has also been able to take advantage of the Trump administration’s preoccupation with the escalating trade war with China. But it is well aware that Trump’s current frustrations with China might feed renewed pressure on Japan with the need for a quick victory on trade. Still, a proactive Abe administration policy of warming economic ties with China is designed to provide some insurance against protectionist retaliation from the United States.

Japan is also handling US trade pressure with less-obvious defensive manoeuvres that, so far, seem to be working.

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US President Donald Trump and Japan’s Prime Minister Shinzo Abe shake hands before a working lunch at Akasaka Palace in Tokyo, Japan November 6, 2017. Source: Reuters/Jonathan Ernst

First is Japan’s insistence on describing any negotiations for a bilateral trade agreement as leading only to ‘a trade agreement on goods’ in order to exclude currency matters.

Second, Japan is drawing on the success of its trade leadership in concluding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Japan–EU Economic Partnership Agreement (JEEPA), enabling it to enter negotiations with the United States with a firm limit set on any concessions. This principle seems to have been accepted by the United States — at least for now.

Third, these success stories are a powerful illustration of the benefits of ‘win–win’ agreements that are much touted by Abe — including to Trump — in contrast to the latter’s ‘win–lose’ model. Under the ‘win–win’ principle, each party trades some of its special interests for the benefits generated by the special interests sacrificed by the other side.

SEE ALSO: Trust – or lack of – is the underlying reason global trade is falling apart

It is the principle behind Japan’s current resistance to agriculture being targeted ahead of a wider bilateral trade deal with the United States. Opening Japan’s market for US agricultural products in exchange for the Trump administration’s abandoning its threat to raise tariffs on Japanese cars and car parts is not ‘win–win’ — it represents negotiations under threat of retaliation. So does the possibility of Trump’s signing an executive order to impose a 25 percent tariff on car imports from Japan in the event that it fails to ‘voluntarily’ limit car exports to the United States.

‘Win–win’ is flexible enough to be applied in bilateral, regional and multilateral agreements and it characterises preferential trade agreements such as the CPTPP and JEEPA. In the CPTPP, for example, the costs and benefits to participants can be spread across not only markets for goods, but also a broad range of other areas covered by the agreement — such as rules of origin, government procurement and competition policy. Although falling short of free trade, the CPTPP enables Japan’s farming sector to retain key protections while facilitating the expansion of Japan’s regional production networks.

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U.S. President Donald Trump pours fish food out as Japan’s Prime Minister Shinzo Abe looks on while they were feeding carps before their working lunch at Akasaka Palace in Tokyo, Japan November 6, 2017. Watching from the rear is U.S. Secretary of State Rex Tillerson. Source: Reuters/Jonathan Ernst

Japan is not ’the flag-bearer of free trade’. Free trade certainly is vital to Japan in maximising access to global markets given its shrinking domestic market. But Japan implements deals that retain varying levels of import restrictions, including tariffs, particularly in sensitive areas.

Finally, some broader shifts in Japan’s trade and national security strategies are generating greater confidence in its handling of US–Japan trade issues. Under Abe, Japan is assuming a more independent role in regional economic and trade affairs in response to the US retreat from regional economic integration — and as a hedge against the political, economic and security uncertainties that the Trump administration is creating.

Japan’s rapprochement with China, for example, is not restricted to economic and trade ties. The realignment not only capitalises on plummeting economic relations between China and the United States but is also driven by common anxieties about Trump. The official restoration of normal relations includes closer diplomatic and even defence ties.

SEE ALSO: Thorny issues remain in US-China trade negotiations

Similarly, Japan is building an autonomous political and economic relationship with Russia in the context of bilateral negotiations on the Northern Territories issue, while Abe is seeking to implement a direct engagement policy with North Korea. Abe wants summit talks with North Korean leader Kim Jong-un without preconditions, rather than continuing to rely solely on US mediation on the abductees issue.

Abe is a security realist, but also an ideological nationalist — a factor in the fine line he walks between solidifying US–Japan security ties and diversifying and deepening security links with other powers. The result is that Japan’s more independent standing as a regional and global actor is helping it to resist US pressure, which it no longer needs to stimulate domestic reform — a process it regards as virtually completed thanks to the CPTPP and JEEPA.

The balance of power is shifting in the US–Japan relationship and their positions in the region. Japan is becoming more influential as an independent actor while the United States is facing a loss of influence.

Aurelia George Mulgan is a Professor at the School of Humanities and Social Sciences, the University of New South Wales, Canberra.

This article is republished from East Asia Forum under a Creative Commons licence. 

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