America needs Japan as an economic partner now more than ever

America needs Japan as an economic partner now more than ever
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China’s rapidly expanding economic role in Asia draws much attention, but Japan also has substantially increased its regional economic role. The U.S. — which appears to be retreating from its decades-long leadership in shaping economic developments in Asia — must revitalize its partnership with this longstanding ally, with which we share many common values and economic principles, to help restore our nation’s credibility and reputation for reliability in the area. 

To be sure, the U.S. needs to resolve its differences and establish a sound long-term relationship with China. This is strategically and economically important, but we cannot base our overall regional policy on relations with China alone. We need a broader Indo-Pacific economic strategy, and this requires collaboration with other East and South Asian countries, particularly Japan. 

Much of Asia has come to doubt America’s commitment, staying power and reliability. Pulling out of the Trans-Pacific Partnership (TPP) is one major reason; threatening longstanding security alliances is another. To re-engage, the U.S. should start by cultivating a closer partnership with Japan, a nation that is vital to our trade and security relations in the region. In Asia, close trade and investment ties are perceived as essential elements of deep, durable relationships, and 

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in many parts of the region where there are relatively few military alliances (compared to Europe), strong economic networks play foundational roles.

Bilateral and regional efforts realistically cannot be about containing or confronting China. A wide range of Asian countries have close commercial and financial relations with Beijing; indeed, many trade more with China than with the U.S. But most also are eager for diversification and balance — they’d especially like to have the option of predictable trade and financial ties with the Pacific’s two key market economies. 

Why is Japan so vital to this partnership? At a time when the U.S. seems to be losing interest in, or pulling back from, its commitment to ensure open, rules-based regional and global economies and a strong World Trade Organization (WTO), Japan is demonstrating support for these. 

Following the U.S. withdrawal from the TPP, Prime Minister Shinzo Abe took the lead in forging a new version among the remaining 11 members — the Comprehensive and Progressive Trans-Pacific Partnership. Last year, Tokyo also signed a historic free trade agreement with the European Union, a feat that has eluded the U.S. for over a decade.  

These agreements raised the quality of trading rules and enhanced market opportunities among signatory partners. They provide exporters in member countries lower tariffs in one another’s markets relative to non-members such as the United States — the price the U.S. is paying for disengaging. In the Japan-EU agreement, for example, the EU will drop its 10 percent tariff on Japanese imports and Japan will eliminate numerous impediments to the entry of European cars.   

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Japan also has been engaged with the Association of South-East Asian Nations, China and other nations in creating a Regional Comprehensive Economic Partnership to expand trade opportunities. Separately, it is negotiating a trilateral free trade agreement with China and South Korea, and developing closer ties with Beijing. 

Tokyo has launched its own version of China’s Belt and Road Initiative — called the Partnership for Quality Infrastructure. It will provide $50 billion for regional infrastructure in cooperation with the Asian Development Bank, which also will pledge $50 billion. 

At the recent G-20 Summit in Osaka, Abe led efforts to reverse the deterioration of the international trading system; set higher quality standards for global infrastructure development; and revitalize the weakening world economy. The leaders did not reach full agreement on all subjects, but Japan forged a workable consensus on several. It now has the opportunity to take the lead in meaningful follow-up.  

Japan is playing a key role in advocating multilaterally and regionally for greater market openness, rules-based trade and investment, and standards related to advanced technology competition while the U.S. seems reluctant to do so. The United States-Mexico-Canada Agreement is an important exception, but it risks getting bogged down in Congress.  

A successful outcome of Sino-American trade negotiations would play a critical role of shaping the rules, norms and practices of this bilateral relationship. It also would greatly influence future Asian and global trading orders. But these cannot be determined solely by a deal between the U.S. and China. Economic partnership between the U.S. and Japan, the world’s two largest free-market economies, in collaboration with other regional nations such as South Korea, Indonesia and Australia, also should be a key driver. If there is no U.S.-China deal, or if the confrontation escalates, this will be even more critical.    

Four priorities are critical to the U.S.-Japan partnership: 

A U.S.-Japan free trade agreement. Talks will begin shortly, but they could be more divisive than unifying if the U.S. pushes for a greater opening of the agricultural market than Japan’s domestic politics can accept. A mutually beneficial deal would be a historic achievement and set the stage for similar arrangements elsewhere.

Indo-Pacific cooperation. Trump, Abe and India’s Prime Minister Narendra Modi met briefly in Osaka to discuss this; the conversation was constructive, but taking practical steps forward requires sustained emphasis and the inclusion of other nations.

Collaborative strengthening of the global trading system. Top trade officials of the U.S., Japan and EU recently addressed the problem of distortions by non-market-oriented trade policies and practices, and how to rescue the teetering WTO. This effort demands greater attention and sustained commitment. Tokyo and Washington should agree on common objectives. U.S. support for Japan’s leadership to implement the G-20 resolutions on trade expansion and improving rules would complement these efforts.

Infrastructure. There are great opportunities for the new multibillion-dollar U.S. International Development Finance Corporation to work with Japan on Asian infrastructure projects (which also would promote jobs in this country). This would demonstrate constructive regional engagement over the next decade.

Washington’s imposition of steel and aluminum tariffs on Japan, and the threat of auto tariffs, is not the way forward; nor is talking about pulling out of our essential treaty relationship. Forging a successful common strategy requires that the U.S. remains a reliable partner for Japan and others in the region. We must recognize Japan’s regional role as key on many security and economic matters. And we must work together to support shared regional and global objectives.

Robert D. Hormats, vice chairman of Kissinger Associates, was undersecretary of State for Economic Growth, Energy and the Environment, 2009-13; assistant secretary of State, 1981-82; and a former ambassador and deputy U.S. trade representative, 1979-81. As senior economics adviser to three White House national security advisers from 1969 to 1977, he helped to oversee the U.S. opening to China. He is a former vice chairman of Goldman Sachs (International).