Japan faces sizable challenges steering trade relations with China, U.S.

China has expressed interest in joining the Trans-Pacific Partnership (TPP), the 11-member trade agreement that went into force in 2018, while the United States has increasingly focused inward over the past few years.

Japan faces the difficult task of navigating the choppy waters between these two superpowers.

 

■ China takes the lead

Chinese President Xi Jinping captured the spotlight during his videoconference speech when he said that China is considering asking to join the TPP.

In his speech, Xi referred to the Free Trade Area of the Asia-Pacific (FTAAP) concept, an expansive single trade zone that APEC has discussed intermittently, saying the group “must continue to promote regional economic integration and establish an Asia-Pacific free trade zone at an early date.”

Prime Minister Yoshihide Suga also expressed interest in realizing the FTAAP, meaning that Japan and China are now aligned on this issue.

Earlier this month, 15 countries signed the Regional Comprehensive Economic Partnership (RCEP) agreement, including China, Japan, South Korea and member states of the Association of Southeast Asian Nations.

In light of Xi’s comments made at the APEC meeting, a Japanese government official said, “He’s aiming to increase China’s presence in the Asia-Pacific region.”

China’s stance has added significance because one of U.S. President Donald Trump’s first geopolitical moves was to withdraw the United States from the TPP framework discussions.

 

■ Question of feasibility

The hurdle is high for China to join the TPP.

Yasutoshi Nishimura, minister in charge of economic revitalization, who leads Japan’s TPP team, said at a press conference on Saturday that certain conditions must be met in order for China to join the TPP.

“We have to find out if China is ready to meet high levels of market access and rules,” Nishimura said in response to China’s announcement of its possible intention to join the TPP.

China’s domestic system needs to be more in line with international rules, such as eliminating preferential treatment for state-owned enterprises and prohibiting requirements that foreign companies must disclose confidential information.

The RCEP does not include a ban on demanding the disclosure of confidential information, such as that gleaned by internet service companies, and the agreement is considered less strict than the TPP.

Admitting a new member to the TPP also requires agreement from all current members. However, the TPP allows Vietnam to treat state-owned enterprises as exceptions.

“There are many items in the TPP that have been frozen due to the U.S. withdrawal, so there’s no problem,” a Chinese government official said regarding Beijing’s viewpoint.

 

■ Many forks in the road

Japan plans to step up efforts to persuade the United States to return to the TPP. Former U.S. Vice President Joe Biden, who won the U.S. presidential election, has taken a cooperative stance on trade rules. But Biden has stopped short of mentioning the TPP after commenting on the possibility of renegotiation more than a year ago.

On the other hand, one major reason why Japan joined the TPP discussions was because it would serve as a check on China’s growing influence. However, the importance of the Chinese market — with its 1.4 billion consumers and where Japanese companies have embedded supply chains — is increasing. Japan would benefit from bringing China into the fold of a high-level free trade agreement, one that abolishes tariffs and sets rules on investment.

At the APEC meeting, leaders adopted a declaration for the first time in three years. Trade friction between China and the United States derailed declarations in prior years.

The leaders confirmed a policy to aim for an “open, dynamic, resilient and peaceful Asia-Pacific community” by 2040. Japan’s navigation skills will be tested.