Economic multilateralism and infrastructure diplomacy have been the key tenets of Japan’s geo-economic outlook for the past two decades. While economic multilateralism—which saw practical implementation under Prime Minister Shinzo Abe’s “Abenomics” and Prime Minister Yoshihide Suga’s “Suganomics,” and remains a key priority under current Prime Minister Fumio Kishida’s “Kishidanomics”—has revived Japan’s stagnant economy, it is infrastructure development that has shaped Tokyo’s economic diplomacy amid China’s increasingly aggressive economic posturing in Asia and beyond.
Japan has been a long-standing investor in infrastructural development in the Indo-Pacific region through both the Asian Development Bank and joint (bilateral and trilateral) financing with the United States. It even surpasses China’s infrastructure investments in Southeast Asia with a total of $259 billion in unfinished projects to China’s $157 billion. Therefore, as new players like the European Union (EU)—via its recently launched €300 billion Global Gateway hard and soft infrastructure connectivity strategy—look to meet Asia’s $22.6-$26 trillion infrastructure needs through 2030, Japan’s has a critical role to play as a reputed and stable regional player in connectivity and infrastructure development.
Can Europe partner with Japan to ensure the success of its latest strategy in the Indo-Pacific despite the long-standing U.S.-Japan alliance—especially considering the EU’s search for strategic autonomy? And why should Tokyo itself focus on such a partnership?
EU-Japan Convergence and the Balance of Power
China’s unilateral attempts to change the status quo in the East and South China Seas present an imminent threat to Japan. China’s new Coast Guard Law, passed in February 2021, has only amplified this perception. Owing to geographic separation and lucrative financial arrangements, Europe faces no such fears, and has thus far been on the fence about China. However, of late, the EU’s perception of China is hardening because of Beijing’s excessive influence in Central and Eastern Europe and the Balkans, and growing fears of member states getting caught in Belt and Road Initiative (BRI) debt traps. Moreover, Europe’s overdependence on the Chinese market and supply chains, and the lack of reciprocity in trade and investment opportunities, have hurt European businesses—and underscored Europe’s need to enhance its strategic and autonomous presence in the Indo-Pacific theater. Thus, amidst a rising China threat, strengthening the EU-Japan bilateral relationship to manage Beijing’s growing commercial, political, and military footprint in the region has become essential.
2018 was a milestone year that boosted the EU and Japan’s shared interests amid an intense U.S.-China rivalry: The EU signed a Strategic Partnership Agreement (SPA; ratification by all EU members pending) and an Economic Partnership Agreement (EPA), which were negotiated in parallel. The SPA—centered around a shared commitment to the rules-based order, global governance, multilateralism, democratic ideals, free trade, and the rule of law—will “promote political and sectoral cooperation and joint actions in more than 40 areas of common interest,” including cyber-crime, disaster management, energy security, and climate change. And the EPA, which rejects protectionism, aims to “improve the position of EU exporters and investors” by including “strong guarantees for the protection of EU standards and values.” Furthermore, the EPA also “goes beyond trade issues” by promoting cooperation to ensure “a greater level playing field for EU businesses in third country markets”—a cornerstone of Global Gateway, too.
Global Gateway and Japan’s Indo-Pacific Vision
Naturally, Japan’s take on the EU’s Global Gateway strategy is poised to stem from the importance of infrastructure diplomacy to its national interests. In this regard, Tokyo’s “Free and Open Indo-Pacific (FOIP) strategy” (officially addressed as a vision) and Global Gateway are converging through the trajectory of the EU and Japan’s rapidly evolving strategic partnership, which was initiated in 2018.
As outlined by the European Commission (EC), the Global Gateway strategy builds on the “2018 EU-Asia Connectivity Strategy” and the connectivity partnerships with Japan (2019) and India (2021). The EU-Japan Partnership on Sustainable Connectivity and Quality Infrastructure (2019) marked Brussels’ first connectivity partnership with a third country. It aims to strengthen “all dimensions of connectivity, bilaterally and multilaterally, including digital, transport, energy and people-to-people exchanges … notably in the regions of the Western Balkans, Eastern Europe, Central Asia, Indo-Pacific, as well as in Africa”—synergizing perfectly with goals of the global connectivity strategy. Furthermore, in October 2021, the European Investment Bank (EIB), the financing arm of the EU, and Japan Bank for International Cooperation (JBIC) signed an extended Memorandum of Understanding to strengthen co-financing opportunities in areas such as carbon neutrality, infrastructure, and innovation toward achieving the Sustainable Development Goals. At the May 2021 Japan-EU Summit, both sides announced a Green Alliance to promote cooperation in energy transition and innovation—thus taking their sustainable infrastructure goals forward.
Under Global Gateway, Japan’s values-driven infrastructure investment focus can be a vital asset for the EU. In response to China’s BRI launched in 2013, Japan initiated its own Asia-focused “Partnership for Quality Infrastructure” in 2015, which was updated and re-introduced in May 2016 as the “Expanded Partnership for Quality Infrastructure” (EPQI), with a $200 billion fund to finance infrastructure projects across the world between 2017-2021. Concurrently, overseas infrastructure development assistance emerged as one of the top priorities of Abe’s foreign and economic policies, marking a significant change in Japan’s aid program. Such a focus has continued and advanced under Suga and Kishida as part of Tokyo’s FOIP. Adopted in 2016, FOIP encompasses three pillars: (1) promoting the rule of law; (2) enhancing connectivity, including through quality infrastructure development per international standards; and (3) committing to peace and stability. These principles align with the “EU’s interests and values: rule of law, human rights and international norms and standards.”
On the other hand, Japan’s membership of the Regional Comprehensive Economic Partnership (RCEP), which came into force on January 1, 2022, may prove to be disadvantageous for the EU by limiting its ambitions to emerge as a standard-setter. Nonetheless, Japan has long sought to build alternatives—rather than counters—to the BRI through programs like the EPQI. It is recognized as a valuable partner in initiatives like the Blue Dot network (BDN) and the recently-launched Group of Seven-backed and United States-led Build Back Better World (B3W). Not only is Tokyo, as the biggest provider of infrastructure-focused official development assistance in Southeast Asia, a financial heavyweight, but it also adheres to value-driven quality infrastructure development via collaborations with the World Bank to establish the Quality Infrastructure Investment (QII) Partnership based on G20-QII principles. Hence, Japan will be a choice partner for the EU in its global connectivity strategy.
Several areas of cooperation include promotion of the rules-based order (a hark back to the FOIP pillars and EU’s guiding principles), maritime security, connectivity (infrastructure and digital), and the diversification of supply chains—which holds unique significance post-pandemic. Here, the EU should cooperate with the Supply Chain Resilience Initiative (SCRI), launched by Australia, Japan, and India. For Japan, which was one of the first major world economies to move its manufacturing out of China, investment in the SCRI was a natural step in its quest for a stronger regional identity. The EU too can utilize this framework to further its agenda toward strategic autonomy and greater presence in the Indo-Pacific via Global Gateway, which aims for “boosting competitiveness and security global supply chains.”
However, Japan is already a treaty ally of the United States, and as the EU seeks strategic autonomy, the two will have to re-arrange their interests in such a manner as to complement and supplement each other’s goals while protecting their own interests. The renewal of the trilateral partnership between the United States, the EU, and Japan in November 2021 to address challenges posed by the non-market policies and practices of third countries is a positive sign in this respect.
Japan’s Vientiane Vision and Global Gateway
Despite the economic opportunities the region presents, China’s overbearing and expanding military and economic footprint in the Indo-Pacific has prompted growing efforts by like-minded powers to manage (and even contain) China. As Europe looks to expand its regional presence, it must navigate such precarious security dynamics. Yet, the EU has no army and defense is exclusively a matter for member states; the North Atlantic Treaty Organization (which includes most EU states) is unlikely to interfere in the Indo-Pacific for fear of provoking China’s wrath outrightly. In this context, the EU can further boost defense cooperation by liaising with Japan’s “Vientiane Vision” (2016)—a defense cooperation initiative with the Association of Southeast Asian Nations (ASEAN), another major EU partner in the Indo-Pacific. Although primarily an infrastructure development strategy, Brussel’s Global Gateway is security-focused. As an extension of the EU’s Indo-Pacific strategy, Global Gateway will find synergy with the updated “Vientiane Vision 2.0” (2019) that integrates FOIP with the ASEAN Outlook on the Indo-Pacific (AOIP, also introduced in 2019).
Bridging the Gap: Prospects for a Defining Strategic Partnership?
Indo-Pacific states like Japan and India have taken a clear stand against China’s bullish behavior without compromising their inclusive Indo-Pacific visions. While Europe was largely ambivalent to earlier Chinese aggressions, changing dynamics amid the pandemic saw the EU resolutely criticize China over human rights abuses in Xinjiang, freeze the ratification of the EU-China investment pact—that was signed in December 2020 after seven years of negotiations—and one of its smallest member states, Lithuania, quit China’s “17+1” initiative. This changing mindset, coupled with its intent to bolster its Indo-Pacific presence, has resulted in Brussels enhancing its connectivity partnerships; the Global Gateway is an extension of this.