Mixed Signals
Japan's 'Arc of Freedom and Prosperity'

posted on September 4, 2007
by Greg Rushford

It's time to cast a gimlet eye on where Japan and the global trading system are headed. Serious changes are in the works. In recent years, Japan -- following the leads of the United States and the European Union -- has shifted its international economic priorities away from the multilateral World Trade Organization with its core principle of treating all trading partners equally. Tokyo's top international economic priority is now geared toward striking preferential trade deals with selected junior trading partners. While the rhetoric says “Free Trade” agreements, the reality is that these deals are meant to put those left on the outside at a competitive disadvantage.

Japan's military posture -- which is directly related to the economics -- is also undergoing gradual, more assertive, changes. This hardly suggests a resurgence of the Japanese militarism of the 20th century, and the vital U.S.-Japan security alliance which has kept the Pacific pacific for more than a half century is still at the core of Japanese national security thinking. But still, what sort of signals was Japanese Prime Minister Shinzo Abe intending to send two weeks ago when he went to India to honor the memories of Indian nationalists from the 1930s and 1940s who blamed America for starting World War II?

Whatever Japan's leader is thinking, this is sure a busy week for Japan on both the security and international economic fronts, which are undergoing the most important policy shifts in the 62 years of the postwar era. Let's take a closer look.

War games and economic alliances

Today, the Japanese navy -- along with naval forces from India, Singapore, Australia and the United States -- begins five days of war games in the Bay of Bengal. If China has gotten the whiff of encirclement, such seems to be the general idea. And in Tokyo yesterday, Japanese and Indian trade negotiators met for the fourth round of talks aimed at inking a preferential Japan-India trade deal by year's end.

The naval exercises follow a swing through the region late last month by Abe, who stressed the importance of securing vital Pacific trade routes (perhaps 60 percent of international trade flows through the Indian Ocean and the Strait of Malacca, through which also comes some 90 percent of oil destined for Japan.) Abe has said that Japan envisions “an arc of freedom and prosperity” that would create stronger security and economic ties among democracies in a “broader Asia.” America and Australia would be included in the broader Asia -- but not China.
[Also this week, leaders of 21 member countries that comprise the Asia-Pacific Economic Cooperation forum, including Chinese president Hu Jintao, will be meeting on trade and security issues in Sydney. On Saturday, Abe will have a breakfast with President George W. Bush and Australian president John Howard, where so-called “trilateral” security ties among the three democracies will be on the agenda, along with trade.]

Undermining the WTO

The Japan-India Free Trade Agreement, which officials in both countries say they intend to complete by year's end, would be Japan's ninth FTA. Japanese ambassador to New Delhi Yasuki Enoki boasted earlier this year that the deal would mean that the two countries “can corner 60 percent of the Asian GDP.”
Some free trade. The estimated $100 million industrial corridor connecting New Delhi and the port and financial center of Mumbai that will be built with major Japanese assistance is likely very good news for Japanese construction companies like Komatsu. But how will that play for American workers in Peoria, Illinois, the headquarters of Caterpillar Inc.? Caterpillar has global operations, including both Japan and India, but builds its giant yellow bulldozers in the U.S.
More broadly, Japan's web of preferential trade deals with selected junior trading partners are aimed at securing for the world's second largest economy preferential access to raw materials like oil and natural gas from Indonesia and Brunei, and export platforms for Japanese multinationals spanning from southeast Asia, across the subcontinent, and on to Mexico and Chile on the other side of the Pacific. Make no mistake: These deals are meant to give a competitive advantage to the likes of Nippon Steel, Hitachi, Suzuki and Sony – and inflict economic pain upon the likes of Acer, General Electric, and Samsung.

No longer is the World Trade Organization, with its multilateral rules that call for treading all trading partners equally, at front and center of Japanese international economic policy.

Emerging trade blocs

If the shift to preferential trade recalls the days of the Greater East Asia Co-Prosperity Sphere, the Japanese have a ready excuse: we are just following the lead of the Americans. As recently as the 1980s, whenever Japanese or other Asians (most notably, Malaysia's Mahathir Mohamad) would talk about carving up special trade zones, they would soon hear from someone in the U.S. government who would offer discrete, firm reminders that the business of distorting trade flows simply isn't acceptable in respected international trading circles.

First, Japan watched in 1993 as the North American Free Trade Agreement gave U.S. automakers and other manufacturers access to Mexican and Canadian markets that was denied to Japanese firms. Japan's first response came in an FTA that was struck with Singapore in 2000. (Singapore, hardly a major player in agriculture exports, was happy to go along with Japan's demands that rice be excluded from the deal, thus setting a precedent for the politically powerful Japanese rice lobby that Tokyo has used successfully in all subsequent FTAs.) Then in 2001 George W. Bush's first trade negotiator, Robert Zoellick, unleashed the torrent. For the first time in U.S. history, America jumped into the preferential-trade game with a gusto. The Japanese followed suit.

The U.S. now has finalized 11 FTAs, nine of them in the Bush administration. Responding, Japan now has eight FTAs --with Mexico (2004), Malaysia (2005) the Philippines (2006) and Chile, Brunei, Thailand and Indonesia this year. These deals are part of more than 400 preferential trade agreements worldwide -- Jagdish Bhatwati's famous “spaghetti bowl” of trade-distorting noodles -- that now amount to more than half of global trade flows.

The Japanese are also following the Europeans, who have been masters of this game since Victoria was Empress of India and now have 21 FTAs that account for roughly a third of world trade. China, seeing where the world's three largest economies have been headed, is looking at preferential trade with some 20 junior partners. The World Trade Organization and its core principle of not discriminating among trading partners is being dismantled, piece by piece.

Mixed security signals

Japan's increasingly assertive security moves, at least, are easier to defend, although here, too, hardliners from Tokyo have been sending mixed signals about their true intentions.

The encouraging news is that Japan today is a peaceful democracy with legitimate security and economic interests in keeping sea lanes open. Anyone looking for disturbing signs of an emerging Japanese militarism, even in response to clear nuclear provocations from North Korea, would see instead an admirable restraint. Shortly after he was sworn into office last September, Abe deftly moved to restore Japan's strained relations with the Chinese by visiting China to rebuild trust. Since then, the Japanese have also conducted naval exercises with the Chinese navy, and mutual port calls by the Maritime Self-Defense Force and the Chinese navy are in the works. And China's minister of defense, Cao Gangchuan, has just concluded a five-day visit to Tokyo that began on August 29. It was the first time in nine years that a Chinese defense minister has visited Japan. And although China might not welcome enhanced trilateral security ties between the U.S., Australia, and Japan, it is inconceivable that these three democracies are going to start carving up the Middle Kingdom.

But in such matters, tone is often as important as the substance. In this regard, Japan has been sending diplomatic signals aimed at China that recall a darker era. Tokyo's relationship with Beijing was stalled when Abe came into office, thanks to predecessor Junichiro Koizumi's repeated visits to the Yasukuni Shrine, which honors Japanese war veterans -- including war criminals. A visit to Yasukuni's creepy website quickly gives an idea of why other Asians are so offended by such visits from top Japanese officials. Remember the Sino-Japanese war that led to the 1910 cruel annexation of Korea? “For Japan that was in a period of modernization a partnership with neighboring Korea was indispensable,” according to the Yasukuni version of historical “truth.” Remember 1937 and the invasion of Manchuria by imperial Japan? How about Pearl Harbor? Self defense, the Yasukuni Shrine asserts.

Abe, who visited Yasukuni before he became prime minister, refrained from doing so on August 15th, the 62nd anniversary of Japan's World War II surrender. But then he went to India for a three-day visit, where he honored the memories of two Indians who had sided with Japan during World War II.

The Japanese prime minister flew to Kolkata, where he met relatives of Subhash Chandra Bose and Radhabinod Pal. Bose broke with Mahatma Gandhi by advocating violence to rid India of British rule, and eventually made his way on a Nazi submarine to fight on Japan's side during World War II. According to an August 23 report by Elizabeth Roche of Agence France-Presse, the Japanese prime minister looked at photos of a meeting that Bose had with Adolf Hitler in Berlin in May 1942.

Abe also praised the memory of Pal, who as a judge on the war crimes tribunal that was convened by the victorious allies after the war, took the position that “the only crime that Japan committed was that it had lost the war.” America had started the war, in Pal's view.

Japan's official position is that it accepts the results of the International Military Tribunal for the Far East and has become a truly pacific nation. But in his remarks in India, Abe clearly sent a different message. “Many Japanese have been moved deeply by such persons of strong will and action of the independence of India like Subhash Chandra Bose,” Abe declared in a speech. “Even to this day, many Japanese revere Radhabinod Pal.”

Exactly what kind of a “broader Asia” do Abe and his hardcore nationalistic political allies have in mind with their war games, their search for preferential trading blocs outside of the WTO's multilateral trading system, and their sometimes unsubtle diplomatic signals that have the whiff of imperial Japan? No doubt, there are some hard men in Beijing who have already drawn their own conclusions.