In America's absence, Japan takes lead on Asian free trade

At a time when Japan is doing more than ever to uphold the post-war international system, it is an extreme historical irony that Imperial Japan's Greater East Asia Co-Prosperity Sphere is finally being achieved.

Japan's leadership towards getting, on March 8, signatures on the final agreement of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), also known as TPP 11, will be a big step towards Asian regionalisation without the United States.

By default, Japan's World War II ambition of Asian cultural and economic unity free of Western powers looks close to fruition.

Yet Japan's core plan had always been for TPP, and the Asia-Pacific, to include the US - until President Donald Trump's withdrawal.

Since the war, Japan has for the most part conceived the ideal regional framework to be an Asia-Pacific fusion in partnership with the US. Refusal to participate in initiatives excluding the US, such as the East Asia Economic Caucus, has been paired with support for US-inclusive frameworks, such as the Asia-Pacific Economic Cooperation and East Asia Summit.

The guiding principle was to keep the US in Asia. However, the inauguration of TPP 11 marks the creation of a new, Japan-led pan-Asianism.

The Japanese government is still hoping for a multilateral Asia-Pacific fusion order including the US. Japanese Deputy Prime Minister Taro Aso confided to US Vice-President Mike Pence earlier this month that Japan encourages a US return to TPP.


Japan's chief trade negotiator, Mr Kazuyoshi Umemoto (centre), with other Japanese delegates at the TPP senior leaders meeting in Sydney last year. Japan's core plan had always been for TPP, and the Asia-Pacific, to include the US - until President Donald Trump's withdrawal, says the writer. PHOTO: REUTERS

However, Mr Pence's response to Mr Aso's solicitation was to bring up the Trump administration's wish for a US-Japan bilateral free trade agreement - something unwelcome in Japan.

The sum total is the emergence of a new regional order without the US. Japan is looking to fill the vacuum in partnership with Asian countries. The immediate aim is not to oppose or contain China but instead to fill the American void in economic and rule-making terms. What becomes less clear in this emerging pan-Asianism is security.

In reality, opposition to US reintegration among CPTPP members is germinating. The Trump administration has made clear that its possible interest in returning to TPP is premised upon renegotiation of the deal favouring US interests beyond the original agreement. That would necessitate concessions that member countries would flatly refuse.

Were the US to find the original agreement terms palatable and attempt to return, that, too, would be tough.

CPTPP has suspended 22 TPP clauses that were swallowed by developing countries in exchange for US market access, such as investor-state dispute mechanisms and intellectual property and labour laws.

It is possible the Trump administration would push for extra clauses - for example, concerning currency - when returning to the TPP framework.

But with Japanese Prime Minister Shinzo Abe adamantly opposed, that is a lost cause.

Even if only the 22 suspended clauses are reactivated, the political costs for developing countries, such as Vietnam, could become unacceptably high relative to the less demanding CPTPP.

The US is highly unlikely to return to the deal during Mr Trump's first term in the White House. CPTPP countries look set to ratify the deal by next year.

After reaching an agreement in principle last year, Japan and the European Union are aiming for their Economic Partnership Agreement (EPA) to come into force by early next year.

Japanese focus will then most likely turn to the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement between Asean members and Australia, China, India, Japan, New Zealand and South Korea.

Japan's mission is to incorporate India through RCEP into the trade liberalisation of Asia. If successful, the economic gains of both the CPTPP and RCEP will be significant. But their real value is providing the frameworks to uphold the liberal international order and realise a free and open Indo-Pacific region.

Rule-making, rule of law, multilateralism and international cooperation are vital elements to support those two visions, facilitate market access, and conversely counteract market-distorting trade practices and state capitalism.

Therefore, for Japan to play its part, hop, step and jump - Japan-EU EPA, CPTPP and RCEP - it is without America.

Taking independent pan-Asian leadership has been geopolitically tricky for post-war Japan. Its initiative to set up the Asian Monetary Fund after the Asian financial crisis in the late 1990s was shut down by the US and then China. But with CPTPP, Japan has managed to shake off the legacy of its former attempt to take independent leadership in Asia. So far, neither the US nor China has opposed Japan's leadership.

Nevertheless, Japan's lurking fear is that pan-Asianism excluding the US could push America to be further inward-looking.

Deeper US engagement in Asia is indispensable to balance China. TPP desperately needs the US market to have strategic significance. Opinion in Tokyo is polarised on whether the US should be tethered to TPP by whatever means - even a bilateral deal with Japan or rebranding TPP to placate Mr Trump as part of a "Trump Pacification Plot".

The turmoil over US involvement is enough to tilt the Japanese government to hedge.

Motivated further by the tensions on the Korean peninsula, Mr Abe has been pushing to improve Sino-Japanese relations. The concentration of Chinese President Xi Jinping's power in China has unexpectedly facilitated Beijing's acceptance of friendliness towards Japan.

The stabilisation of relations is paving the way for mutual head-of-state visits, something unthinkable in 2010.

The sum total is the emergence of a new regional order without the US. Japan is looking to fill the vacuum in partnership with Asian countries. The immediate aim is not to oppose or contain China but instead to fill the American void in economic and rule-making terms.

What becomes less clear in this emerging pan-Asianism is security.

East Asia has become the region with the highest potential for geopolitical instability with global implications. With the existential threat on the Korean peninsula and a confident, assertive China, there is a need for more robust Japanese national security.

Yet Japan's central vision here, too, has and remains to be anchored in Asia-Pacific fusion through the US-Japan alliance. Since economics and security cannot be neatly partitioned, deep regional economic engagement by the US is essential.

For now, Japan's independent international leadership is an unprecedented post-war development with potential to shape the entire regional alignment in East Asia.

WASHINGTON POST

  • The writer is chairman of Asia Pacific Initiative, a Tokyo-based think-tank.
A version of this article appeared in the print edition of The Straits Times on February 24, 2018, with the headline 'In America's absence, Japan takes lead on Asian free trade'. Print Edition | Subscribe