|

U.S. ‘quietly’ frustrated with ongoing Tokyo inaction on key policy issues

Japan's participation in TPP free trade pact touted as 'strategic' positioning for key U.S. ally amid rising developing markets

by Takashi Kitazume

Staff Writer

More than any specific policy recommendations, Japan needs to have the capability to make decisions and implement them far more quickly than today — whether on the security or economic policy fronts.

The United States, as Japan’s key ally, remains frustrated with the lack of progress on the Okinawa base relocation issue. The public disagreements that marred bilateral ties in the early days of the Democratic Party of Japan’s administration have simply made way for quiet frustration on Washington’s part.

The Trans-Pacific Partnership free trade pact will be a key area where Japan and the U.S. can support each other on trade and strategic objectives. But the window for Japan to take a leading role in the TPP negotiations may be rapidly closing.

These were among the views expressed by experts from American think tanks who took part in a symposium organized Nov. 11 in Tokyo by the Keizai Koho Center under the theme “How Japan can survive the 21st century.” Akihiko Tanaka, vice president and a professor at the University of Tokyo, served as moderator of discussions.

Initial hopes among Japanese and U.S. officials that Prime Minister Yoshihiko Noda could better control factional divisions within his own party and manage ties with the opposition camp than his predecessors were overshadowed by an even greater skepticism as to whether Noda — or even any Japanese prime minister — could actually implement necessary policy changes, said Bruce Klingner, a senior research fellow for Northeast Asia at the Heritage Foundation in Washington.

Klingner said discussions with Japanese lawmakers — in both the DPJ and the main opposition Liberal Democratic Party — suggested how the new prime minister — already the third since the DPJ took power in 2009 — will have to focus on surviving in office by not doing anything on key policy areas, including relocation of the U.S. Marine Corps Air Station Futenma in Okinawa, until he has a more solid footing within the party.

“Tokyo chafes at U.S. impatience and can’t understand why Washington does not understand why more time is needed to reach consensus on these very difficult issues. But to the U.S., the decades of Japanese failure to take any action to overcome those constraints makes them appear to be merely excuses,” Klingner said.

Japan-U.S. ties were strained after the DPJ took power in 2009 over then Prime Minister Yukio Hatoyama’s attempt to review the 2006 bilateral agreements to move the Futenma base within Okinawa as part of the reorganization of U.S. military facilities in Japan. Hatoyama eventually gave up on the attempt, but the relocation plan itself remains grounded due to strong local opposition, although the government plans to submit an environmental assessment report on the planned new facility to move the project forward.

“We no longer see the strong public disagreements that we saw during the last two years,” but that took place only after the DPJ essentially “abandoned its entire foreign and security policy platform on which it was first elected” to power in the 2009 general election, Klingner said.

The situation simply returned to where it was two years ago, but the previous status quo — more than a decade of stalemate under LDP rule — “was not that good either,” he said.

“There are still bilateral strains between Washington and Tokyo, but now they’re more covered with a polite face,” he said. Privately, U.S. officials remain “very frustrated with what is perceived as Japanese inaction” and some officials “privately question the viability of Japan as an ally” because “moving forward on the Futenma replacement facility is a critical function of the alliance and a reflection of Tokyo’s ability to fulfill its responsibilities as an ally,” Klingner said.

Klingner said the problem of inaction on key policy issues is “not the result of any single prime minister, or even a single party, but instead appears to be systemic.”

“Even before the March 11 triple disasters Tokyo was struggling with a stagnant economy, staggering public debt, deteriorating demographic situation and growing security threats from China and North Korea. And Japan was hindered in addressing those challenges by a political system unable to produce national leaders that are actually able to lead,” he said.

“Having prime ministers leave office when their approval ratings get down to about 20 percent prevents implementation of necessary but potentially unpopular policies,” Klingner said. “The frequent change of leadership is a symptom, and not the cause, of Japanese political problems. Both the DPJ and the LDP remain more focused on politics than on policies, and the result is policy stalemate and policy gridlock,” he said, noting that even the March 11 crisis “could not induce politicians to overcome their partisan and factional bickering.”

One of the key policy decisions that Noda has made since taking office was the one for Japan to join the negotiations for the U.S.-backed TPP free trade agreement. But while Noda made the decision in time for the Asia-Pacific Economic Cooperation forum summit in mid-November, opinions remain sharply divided within his own party as to whether Japan should actually join the pact.

Both Japan and the U.S. should work together to make TPP the “template for trade in the Asia-Pacific,” said Meredith Broadbent, a senior adviser to the Center for Strategic and International Studies in Washington and a former assistant U.S. trade representative for industry, market access and telecommunications.

“Most U.S. businesses, members of Congress and officials in the administration very much want Japan to join the TPP negotiations. They believe that Japan’s participation will be crucial in making TPP successful. But they are skeptical that Japan can make the necessary decisions to participate as a leader in TPP” given the shakiness of its political leadership, she said.

Broadbent also said the “window that’s open for Japan” to take the lead role in the TPP talks is closing as “developments in the global economy may make Japan appear to be less of a priority market.”

Both Japan and the U.S. are low-growth markets, and Congress — which holds a major sway over U.S. trade negotiations -may turn its attention more and more to the emerging growth markets like Vietnam, Malaysia, Egypt and Turkey “that will loom large as economic opportunities for the U.S.,” she noted.

“In Japan, many opponents of the TPP are saying that Japan should be negotiating with China in order to participate in China’s growth. By the same token, the U.S. may decide that it is important to get into high-growth, advanced developing country markets earlier in their stages of economic development, and that’s not Japan,” she said. “Right now, the U.S. is open to negotiating with Japan, but priorities could very well shift, especially if Japan seems ambivalent on this TPP negotiation.”

Philip I. Levy, a resident scholar at the American Enterprise Institute in Washington, said Japan has a wide variety of options on its international trade liberalization agenda — including keeping the status quo.

But Japan has to consider that there are also important political and strategic components — where Japan is positioning itself in the world -when it makes its trade policy decisions, he said.

One of the choices for Japan to pursue the liberalization agenda, he said, would be through the World Trade Organization. However, the current Doha Round talks “don’t seem to be going anywhere” after the negotiations have gone on for such a long time, and it is not clear who will play the leadership role to salvage the moribund talks, Levy said.

Japan also has the option of bilateral or regional deals, which the nation already has with some of its Asian trading partners and with the Association of Southeast Asian Nations, he said. “They have the great virtue of fostering ties between countries without the same commitments to liberalization (as the agreements like the TPP), but this limits the potential for using the agreements as vehicle for reform. Sometimes there are necessary reforms that you can use trade agreements as a vehicle to achieve, and if you go out and strike partial deals, you undercut this,” he said.

Levy also noted that the choices of how Japan pursues this free trade agenda can have implications for the shape of strategic alliances across the Asia Pacific. “When one thinks of deals with ASEAN plus three or ASEAN plus six, those can — at least from a U.S. perspective — signal a diminished role for the U.S. in the Asia-Pacific and can be potentially interpreted as a turn toward China and away from the U.S.,” he said.

The TPP option, Levy said, is “now the primary focus of U.S. trade policy.”

However, he also said the TPP talks — from a U.S. trade policy perspective -are highly unlikely to conclude before mid-2013. “Traditionally as the U.S. goes into an election year, it’s a difficult time to take on trade liberalization, even more so given the political climate” surrounding President Barack Obama’s administration, he noted.

And despite the ambitions among its original creators and countries already in the talks for a high-standard liberalization deal, “it’s not clear whether all the participants are ready to pay the price,” Levy said. “It’s my expectation that whatever results to come out from the TPP negotiations — assuming they conclude successfully — will not be a pure free trade,” he said. All the participating countries have political interests and face domestic challenges, and the current call for putting everything on the table is intended to avoid ruling out sensitive sectors too early in the talks, which would end up creating a “deeply-flawed pact,” he noted.

Rachel Swanger, associate dean at Pardee RAND Graduate School, said in following the TPP debate in Japan, she was surprised by the amount of “disinformation and fear-mongering,” part of which, she said, may be a hangover from the bitter Japan-U.S. trade frictions of the 1980s.

In a way, both opponents and proponents of TPP seem to cast it as something that could “determine the very survival of Japan,” she pointed out.

“The opponents assert that it’s going to result in the demise of everything Japanese,” including the nation’s agriculture, the medical care and health insurance systems, and turn Japan into an American clone, Swanger said. On the other hand, the proponents say that without TPP Japan’s survival is at risk — that Japan will be de-industrialized, industries would be forced to relocate overseas and Japan will be increasingly isolated in Asia, she said.

Swanger argued that whatever decision Japan makes on its participation in TPP, Japan is going to change. “I don’t think the change is going to be dramatic or immediate, but it will be gradual and it will be profound over time,” she said.

For example, the agriculture sector suffers from the small size of domestic farms, the advanced age of average farmers, the lack of productivity, and the lack of attractiveness of farming to the next generation, Swanger said.

“The pro-TPP camp argues that the solution is to open the market to allow for consolidation of land and for investments in the agriculture sector, and that this could raise productivity,” she said. But what if Japan says “No” to TPP? “I think chances are you will still see a gradual yet profound change over time in Japanese agriculture. It’s a fallacy that you can avoid change by not taking action. It’s the world around you that’s changing. Demographics alone are going to dictate that change is going to happen,” she said.

Meanwhile, James Lincoln, professor of international business and finance for the Haas School of Business at University of California, Berkeley, discussed the characteristics of business networking by Japanese firms as a major element for the nation’s survival in global competition.

In their postwar spectacular success, Japanese manufacturers’ strong business networks — which often relied on long-term and reciprocal ties among companies — were a competitive advantage, but in today’s rapidly-changing business environment such “strong-tie” networks can become a liability, the professor said.

Japanese firms should instead focus more on “weak-tie” networking that allow them to adapt more quickly and flexibly to the complex and dynamic networks of the global economy, Lincoln said, adding that not only language but cultural barriers must be broken for that to happen.