Professor Yorizumi Watanabe discussed the motivations behind US-China economic tensions and the implications for Japan and Korea. He said the rationale behind the conflict is quite clear: the US has a very large trade deficit with China, and one of the promises that President Trump gave during the presidential election is that he would reduce the trade deficit with the world. There is also a kind of hegemonic challenge—or at least the perception of a hegemonic challenge—on the side of the United States, that China has been challenging in technology, particularly in 5G. The US is the primary alliance for Japan, and China is very important for its economic activities. Professor Watanabe suggested that Japan stick to its principles. Regarding international trade, all three countries have the WTO in common. The United States and China are both members so Japan should advise both to stick to the rules of the WTO, he said. I think the same would apply to Korea. Korea’s position is similar to Japan’s, so Professor Watanabe suggested that Japan and Korea work together to try to make the international rules as the primary avenue for resolving difficulties. An additional mechanism of note is the TTP, which addresses some of the gaps in the WTO Doha round. The absence of the possibility of making new rules—such as on investment, competition policy, discipline to state-owned enterprises, government procurement—all of these have been discussed in the TPP. The new rules might eventually be integrated into the WTO system even in Latin America or Africa, he said.
Q1. The conflict between the US and China has only been aggravated recently. 1) What do you think the rationale behind the trade war and how do you think it will pan out?
The rationale is very clear, because US has a very large trade deficit with China, and one of the promises that President Trump gave during the presidential election is that he would reduce the trade deficit with the world. China is running the largest trade with the US, so China would be the primary target for these trade concerns. Over the two of Mr. Trump’s presidency, I think $140 billion of trade deficit increased. Mr. Trump is under a lot of pressure, particularly as he’s faced with a second term of the presidency and he has to win the election in 2020. Another important element is there is a kind of hegemonic challenge—or at least the perception of a hegemonic challenge—on the side of the United States, that China has been challenging in technology, particularly in 5G. If they win completely, they fear that the winner will take all. This technology shift is really the concern on the part of the US. For China, it’s also very important to keep this high speed of development in terms of technology, so they cannot make a compromise with the US easily. I think there’s a tit-for-tat with the tariffs. For solutions, it will be nice to have some talks at the G20 in Osaka for some sort of “cease fire” for tariff escalation. I hope both the US and China will agree to a framework under which they can discuss this technology development related to 5G and others, so that the international economic situation might be remedied.
Q2. To Japan, the US is the sole ally in East Asia and China is an indispensable economic partner. So the current Sino-American hegemonic power struggle is throwing a huge challenge to Japan as well. What’s your view on the Japan’s standing and a potential strategy it can take?
As you said, the US is the primary alliance for Japan, and China is very important for our economic activities. Both countries are very important to Japan. Japan should stick to its principles. Regarding international trade, we have the WTO in common. The United States and China are both members so Japan should advise both to stick to the rules of the WTO. Whatever disputes we have, including imbalanced trade, we should discuss under the WTO framework. We have dispute settlement procedures in the WTO. Instead of a power-oriented approach, we should rely more on rule-based solutions, in a multi-lateral approach. Of course, the US started with those punitive tariffs, and China retaliated—both are playing power games. In the economic sphere, we have rules and institutions such as the WTO.
Q3. Korea is under much pressure between the US and China in their hegemonic power struggle. The US is asking Korea to join the Indo-Pacific strategy and the ban on Huawei, while Korea cannot ignore the economic and political impact China may inflict upon it. On the other hand, the US and Japan have described themselves ‘sharing a common destiny’. As a Japanese intellectual, how would you advise to Korea?
As I mentioned earlier, Japan should abide by the rules and principles. I think the same would apply to Korea. Korea’s position in terms of alliances is similar to Japan’s. Maybe Japan and Korea can work together in that sense and try to make the international rules as the primary avenue for resolving difficulties. Japan and Korea have a lot of things in common and we should improve our relations to have a more solid relationship with the US while enjoying our economic activities with China.
Q4. Trump administration, under the flag of America First, is driving the free-trade international order to the corner that has been upheld since WWII. The US withdrew from the Trans-Pacific Partnership and embraced protectionism. Japan, however, has successfully led the TPP to be launched without more ado. What do you think the TPP led by Japan represents? What can Korea expect from entering into the TPP in the future?
The importance of TPP is that it has a distinctive character in the field of trade. We did not have agreement in the WTO Doha round. The absence of the possibility of making new rules—such as on investment, competition policy, discipline to state-owned enterprises, government procurement—all of these have been discussed in the TPP. It could have provided the wide-range of new rules to cope with the new trade scene, including such areas as e-commerce. Even China could have joined TPP not in the immediate future, but maybe in the long term. Japan did the right thing to keep TPP alive and while waiting for the US to one day come back, the TPP should be further nourished and membership should be enlarged to give some sort of order to international trade and investment. Japan wanted to take initiative to bring in a rule-based trade regime in the Asia-Pacific. We did it in the Japan-EU FTA that came into effect this year, and we also have RCEP. The new rules might eventually be integrated into the WTO system even in Latin America or Africa.
Japan’s trade policy is really piling up the new instruments which certainly go against protectionism centered around the US. We keep encouraging the US to come back to this sort of rule-based approach in international trade. Every country has an “America First” type of approach, where national interests play a central role, but national interests can be complemented by common interests. That is how we establish peace and prosperity without any final confrontations. I believe in multilateralism.
Q5. The relationship between Korea and Japan has reached an impasse and the improvement seems quite far-fetched at the moment. What can you suggest for easing the tension between two countries?
TIt is such a difficult question. Back in 1998 we had the visit of President Kim Dae-jung in Japan, and he mentioned that all the difficulties of the 20th century should be resolved in the 20th century. He suggested to Japan to think about 21st century relations between Korea and Japan, including the possibility of a free trade agreement. We were really encouraged by this statement. Finally, we can move ahead. Both sides, we started the preparation for negotiations for the bilateral FTA. I was part of that—I felt quite honored to be part of it. On the Korean side it was KIEP and on the Japanese side it was JETRO. There was a KIEP-JETRO joint study group that started in 1999 for two years. We came up with a positive report, but unfortunately the FTO never came through. That approach is very important—we are still troubled with 20th century problems. I think we have to move on, and the younger generations they like each other more. The people-to-people contact has been moving forward. It’s really the political will that is missing. Both countries should be reminded that the political will is necessary to move on to the 21st century. In this regard, I’d ask the Korean government to think about the possibility to use the ICJ in Hague both on territorial issues and also on the forced labor during the wartime. Japan would be happy to bring it to international court, but we need the other country to approve it.
