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Japan’s Quandary Over Free Trade

Oct 13, 2021
  • Zhang Yun

    Associate Professor at National Niigata University in Japan, Nonresident Senior Fellow at University of Hong Kong

Japan was surprised when China formally submitted an application to join the CPTPP in mid-September. Japan has long believed China is far from ready to join such a high-standard free trade agreement. Some Japanese politicians have also been negative about Chinese participation. After all, Japan’s initial idea was to regulate China by making new, higher-standard rules of free trade in the Asia-Pacific by forming the TPP along with the U.S.  After the Trump administration’s withdrawal from the TPP, Japan had to assume leadership and signed the CPTPP with 10 countries. But that was based on the assumption that the U.S. would come back, and that China wouldn’t join in the near future.

Regarding the Chinese application, Japan generally has three options: First is to begin negotiating with China and create new dynamism in the process for the U.S. to come back. Second is to wait for the U.S. to return, and refuse to negotiate with China. Third is to contact China without engaging in substantial talks, and wait for the U.S. to return. It now looks Japan may choose one of the latter two options — i.e. drag its feet.

Japan has indeed provided international leadership on CPTPP negotiations following the U.S. withdrawal. But if Japan takes up U.S.-centric thinking and waits for the U.S. return as its logical starting point, very likely it will cause the CPTPP to repeat the Kyoto Protocol’s failure, seeing its dynamism wane and Japan’s international leadership vanish.  

First, an Asia-Pacific free trade agreement without U.S. participation will surely be unrepresentative, but it would be unrealistic to anticipate that the U.S. will return to the CPTPP in the near future. America’s political sensitivity to the FTA is rooted in its conviction that its own economy is already free and open to a great extent and that other nations take advantage of that and benefit from unfair exploitation.

It was the assumption that the U.S. is the ultimate example and biggest victim of free trade that led the Trump administration to withdraw from the TPP, and the Biden government has made no substantial change since taking office. Japan is incapable of changing the political momentum in the U.S. and cannot persuade the U.S. to return to the TPP on its own. Similarly, Japan tried hard to fulfill the Kyoto Protocol, which was passed in late 1997, and demonstrated international leadership. After the George W. Bush administration withdrew, however, Japan was unable to get the U.S. to return.

Second, the gap between Japan’s expectation that the U.S. will return and participate in dual Japan-U.S. leadership of the CPTPP, and the fact that the U.S. won’t be back in the near term, will greatly undermine the original domestic enthusiasm for the CPTPP. One reason for Japan’s efforts to push the TPP ahead was to promote a domestic economic upgrade and to maintain economic vitality. Now that the U.S. is out and China is barred from getting in, other CPTPP members don’t provide sufficient motivation for Japan to reform.

After the U.S. withdrawal from the Kyoto Protocol, there had been hesitation in Japan, which has dragged its feet on domestic approval. Japan even bargained with Europe on emissions reductions using the U.S. withdrawal as an excuse. That was why Japan was given the satirical “fossil prize” for its passive response to emissions reductions.

China, the U.S. and Europe have cooperated actively since 2010 on climate change negotiations, and the Paris agreement reached in 2015 was basically maneuvered by those three parties. Japan has thus been marginalized in global climate diplomacy, where it once could have played a leadership role.

Third, if Japan sees the Chinese application for CPTPP membership from the perspective of China-U.S. competition, it will neglect the most important reason that the Chinese determination derives from its own need to seek external pressure for internal reform. A spokesperson of the Chinese Ministry of Commerce said on Sept. 30 that China had conducted a comprehensive evaluation of CPTPP rules and will make promises about high-level opening-up in the field of market access that will go beyond the Chinese side’s present treaty implementation practice.

The CPTPP is indeed a higher-level FTA, and a comprehensive one, which includes investment. The Chinese application reflects its tremendous determination and courage to continuously carry out self-reform and expand opening-up. Without seeing this, Japan will also lose the opportunity to build a new platform for communication and mutual trust through CPTPP negotiations.

Although the CPTPP has much high-standard content, China has much richer experience than the U.S. and Japan in such areas as e-commerce. The formulation of high standards in such areas would be unthinkable without Chinese participation. China-U.S. relations won’t stay unchanged, either. China and the U.S. had multiple rounds of discussion on a bilateral investment agreement in the early days of the Obama administration; China and Europe reached a comprehensive investment agreement at the end of last year. It’s not impossible for China and the U.S., China and Europe to work out something like the Paris agreement on climate change in contemplating new global trade rules.

It is natural for Japan, the world’s third-largest economy, to provide leadership in the new regime of global economic governance. But that calls for Japan to transcend its U.S.-centrism and give up its excessive faith in the myth of the CPTPP’s high quality if it wants to prevent a failure like the Kyoto Protocol.

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