“API Geoeconomic Briefing” is a weekly analysis of significant geopolitical and geoeconomic developments that precede the post-pandemic world. The briefing is written by experts at Asia Pacific Initiative (API) and includes an assessment of burgeoning trends in international politics and economics and the possible impact on Japan’s national interests and strategic response. (Editor-in-chief: Dr. HOSOYA Yuichi, Research Director, API; Professor, Faculty of Law, Keio University; Visiting Fellow, Downing College, University of Cambridge)
This article was posted to the Japan Times on December 9, 2021:
API Geoeconomic Briefing
December 9, 2021
Japan must take a multifaceted approach to its economic security
Research Director, Asia Pacific Initiative (API);
Professor, Faculty of Law, Keio University;
Visiting Fellow, Downing College, University of Cambridge
On Oct. 13, Prime Minister Fumio Kishida held his first National Security Council meeting to discuss reviewing the national security strategy, which he mentioned in his policy speech at the Diet, Japan’s parliament, on Oct. 8.
The focus of the revised strategy, which is slated to be approved by the Cabinet in late 2022, is how economic security will be positioned in the new security strategy.
The national security strategy was announced in Japan for the first time in December 2013 during then-Prime Minister Shinzo Abe’s administration, and Kishida — then-foreign minister — was deeply involved in putting it together.
In June last year, Kishida — then-policy chief of the ruling Liberal Democratic Party — launched the Strategic Headquarters on the Creation of a New International Order, headed by himself and chaired by veteran LDP lawmaker Akira Amari, to lead discussions on compiling the party’s economic security strategy.
This indicates that economic security will hold a prominent position in the Kishida administration’s new national security strategy. But the important point is whether it will include specific goals and policies.
The legacy of the Kishida administration will depend heavily on whether it can come up with a proper long-term strategy on economic security, strengthen Japan’s power based on the strategy and proactively formulate international order.
Economic security in history
National security and economics were inseparably linked in the Japan-U.S. security treaty signed in 1960, meaning Japan and the United States positioned economic security at the core of their alliance from the outset.
Article 2 of the treaty states the two countries “will seek to eliminate conflict in their international economic policies and will encourage economic collaboration between them.”
In fighting the Cold War against the communist camp, the two nations’ governments believed that Japan having huge economic power and the two countries boosting economic interdependence at the same time would contribute to strengthening their alliance.
Nevertheless, during the Cold War era, the Japan-U.S. alliance became too focused on defense cooperation, and the two governments made little effort to collaborate on their economic policies.
Moreover, in the dying days of the Cold War, Japan and the U.S. came to regard each other more as rivals than as allies, with the U.S. even seeing Japan as an economic threat at times.
Aligned strategic interests
In November 2018, the Asia Pacific Initiative issued a joint report with the Center for Strategic and International Studies, focusing on economic cooperation in the Japan-U.S. alliance.
The report concluded that “the underlying strategic interests and goals of the United States and Japan in the Indo-Pacific region are highly aligned, transcending today’s bilateral trade tensions.”
The report was released at a time when then-U.S. President Donald Trump was repeatedly raising trade deficit concerns with Japan.
The report pointed out that there remained a strong demand in the Indo-Pacific region for American and Japanese leadership, that Washington and Tokyo had complementary skills in economic statecraft and that they should work to better coordinate their economic policies in the region.
It suggests the need for the two countries to further align their economic security strategy in line with Article 2 of the security treaty.
The Japan-U.S. alliance should go beyond merely correcting trade imbalances and should be constructed on broader economic cooperation.
To begin with, the two nations must reconfirm the fact that the security treaty mandates economic interdependence as the foundation of the bilateral alliance in Article 2.
Under the Trump administration’s America First policy and the “foreign policy for the middle class” of current President Joe Biden’s administration, the U.S. appears to be leaning toward nationalism and populism in the economic arena as well.
Against such a backdrop, it is welcome news that the Biden administration is moving to strengthen cooperation with Japan regarding economic security.
In April, then-Prime Minister Yoshihide Suga and Biden released a joint statement following their talks in Washington which said they had launched a new Competitiveness and Resilience Partnership, indicating their commitment to work together to boost economic security.
Amid China’s rapid development of advanced technologies, they also agreed to partner on sensitive supply chains, including on semiconductors, promoting and protecting the critical technologies that are essential to security and prosperity.
Japan and the U.S. will have to negotiate on various issues to put this partnership on track and we have to see to what extent this will lead to reorganization of supply chains.
Confrontations between the U.S. and China are not limited to potential military conflicts, but involve a variety of areas including science and technology, economic competitiveness, development policies and energy policies.
Due to the dramatic growth of the Chinese economy and technological development, the U.S. is losing its overwhelming superiority in many areas.
That is why the Biden administration has a strong intention to enhance mutual trust and step up cooperation with countries that share the same values, using such frameworks as the Japan-U.S. alliance, the “Quad” alliance of Japan, the U.S., Australia and India, and the AUKUS agreement between the U.S., the United Kingdom and Australia.
The key for the U.S. to realize such a strategy in the Indo-Pacific region is to work with Japan — the world’s third-largest economy and a holder of technological capabilities comparable to those of the U.S. or China.
The economic security strategy to be presented by Japan will have a great impact not only on the U.S., but also on other countries including the Quad members, the European Union and members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
One of the three pillars of the Free and Open Indo-Pacific strategy advocated by Japan is improving connectivity and strengthening economic partnership. Japan’s foreign policy attaches importance to connecting multiple sub-regions and countries to enable sustainable economic growth in the Indo-Pacific region.
Moreover, as Japan sees inclusiveness as one of the main features of the strategy, and considering the realities of the Japanese economy, it would be difficult to reorganize supply chains to completely exclude China.
Rather, Japan should position the Competitiveness and Resilience Partnership with the U.S. at the core of the Free and Open Indo-Pacific strategy.
The LDP’s Strategic Headquarters on the Creation of a New International Order issued proposals on creating an economic security strategy, addressing the significance of Japan achieving strategic autonomy and strategic indispensability on its own initiative.
However, in addition to such efforts, it is important for Japan to promote bilateral cooperation with the U.S., as well as pushing closer collaboration with like-minded countries such as the Quad members, to establish a multifaceted international strategy presented in the Free and Open Indo-Pacific vision.
Taking the lead
By combining different sets of cooperation, Japan can hold the leadership position in formulating an international cooperation framework to achieve economic security.
In using such a multilayered framework as a vital tool for foreign policy, Japan should strengthen its power and lead efforts to create rules-based international order.
On Nov. 17, Foreign Minister Yoshimasa Hayashi held talks with U.S. Trade Representative Katherine Tai, who was visiting Tokyo. Regarding economic security, they affirmed the importance of bolstering economic competitiveness and resilience in each country and advancing discussion on the issue.
The new U.S.-Japan Partnership on Trade initiative announced during Tai’s visit will help further strengthen collaboration between the two countries, leading to Japan and the U.S. becoming central to developing a new cooperation framework on economic security in the Indo-Pacific.
It is a big change that Japan and the U.S., which in the past had been distrustful of each other due to severe trade frictions, are now deepening their partnership to establish an international framework of cooperation.
Economic security is an extremely ambiguous and elusive concept and it is unclear what domains it covers.
On the other hand, if Japan and the U.S. limit their area of cooperation only to defense and fail to coordinate sufficiently in other areas such as advanced technology, artificial intelligence, energy, climate change and health security, their predominance in the global community may be lost.
The Kishida administration must build a new national security strategy not only through coordination between the defense and foreign ministries as in the past, but also by including policy domains of other ministries and agencies including the trade ministry, the Finance Ministry, the health ministry, the Internal Affairs and Telecommunications Ministry, the Environment Ministry and the Digital Agency.
At the same time, it is crucial for Japan to take the lead in multifaceted international cooperation.
Disclaimer: The views expressed in this API Geoeconomic Briefing do not necessarily reflect those of the API, the API Institute of Geoeconomic Studies or any other organizations to which the author belongs.