Tokyo’s Awakening on Trump
Trump’s “America First” policy mantra brought matters of trade at the forefront of the U.S. foreign-policy agenda in a way that did not make Abe comfortable. Given Japan’s dependence on military support from the United States, Abe worried Trump would make the security guarantee conditional on favorable trade relations. Japan is the second largest country to run trade deficits with the United States (although the United States has a trade surplus in services with Japan), second only to China. Unlike China, Japan has chosen the United States as its main destination of foreign-direct investment, ranking as its second largest foreign-direct investor. Abe’s government has also been keen to attract U.S. investments in Japan to revitalize the Japanese economy.
Eager to avoid negotiating a bilateral free-trade agreement with the bullish U.S. administration, Abe pushed for the creation of a Joint Economic Dialogue at the level of Vice President Mike Pence and Japanese deputy prime minister Tarō Asō. The joint dialogue has little to show after two meetings to date. The two sides used the first meeting to agree on the structure of the Dialogue, while the second one—which lasted for less than two hours—concluded with broad calls for closer cooperation, and minor concessions on lifting restrictions for U.S. potatoes from Idaho and Japanese persimmons, streamlined testing procedures for U.S. automobiles, and transparency on agricultural designations and specific reimbursement policies. With the United States busy renegotiating the North America Free Trade Agreement and the FTA with South Korea (KORUS), the Economic Dialogue was essentially a face-saving measure.
In parallel to managing these protectionist risks from Washington, Japan has focused its efforts on advancing a global free-trade agenda. Japan’s goal was to produce trade deals that would not only reduce or eliminate tariffs and nontariff barriers among participating countries, but also to introduce progressive measures on labor and environmental provisions, intellectual property rights, etc. As a result, Japan would position itself as a key player in setting global standards for trade relations in the twenty-first century.
The first deal Japan finalized was the Economic Partnership Agreement (EPA) with the EU in December 2017. Equally anxious about the protectionist impulses of the U.S. administration, as well as the prospect of Brexit, the Europeans shared a similar desire to finalize an agreement that had until then been largely overlooked by both sides. This is the biggest trade agreement either side has negotiated, encompassing almost 30 percent of the world’s GDP. It will eventually eliminate almost all tariffs and reduce nontariff barriers between the two sides, and introduce provisions like geographic indicators for agricultural goods that may be directly detrimental to U.S. interests. As Abe told reporters on the day of the EPA announcement, the agreement hails a “new era” for Japan-EU relations.
The second key move for Japan, rattled by the U.S. decision to leave Trans-Pacific Partnership (TPP), was to take the remaining TPP11 out of its comatose state. On March 8, 2018, just hours before Trump announced plans to introduce steel and aluminum tariffs, Japan and the other ten partners signed TPP11, now rebranded the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Japanese officials renegotiated the deal with the no-so-secret hope that the United States would reconsider its decision to leave the original deal. Trump’s remarks at Davos in January 2018 during which he said the United States would “consider negotiating” with the TPP countries “either individually or perhaps as a group” temporarily rekindled the hopes of Japanese diplomats, but few remain optimistic about that prospect today. This remains true despite Trump raising hopes once again this month by instructing his trade team to “reconsider” U.S. entry into the TPP under the right circumstance.