Japanese Economy Minister Talks IPEF, TPP, China in Washington
Japan's economy minister, while acknowledging that complete decoupling is possible, said that dependence on China leaves countries open to economic coercion, broken supply chains and economic insecurity.
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Yasutoshi Nishimura, minister of Economy, Trade and Industry, was speaking at the Center for Strategic and International Studies on Jan. 5, and emphasized that economic interdependence has increased global risk. He said that at the end of the Cold War, nations believed that increasing the degree of mutual economic interdependence would assure China's peaceful rise. "It was on the basis of this assumption in 2001 we approved China's accession to the WTO," he said. "Our assumption was unmistakably an illusion."
Nishimura said, "by making economic growth possible, the free trade system ended up increasing the legitimacy of authoritarian regimes."
He alluded to a past example of China's economic coercion, when China cut Japan's supply of rare earth minerals, but said Japan feels that risk more than ever now.
"We must not be overly reliant ... on only one specific country for goods and technologies that are indispensable for industries and our daily lives," he said. "Building up our economic security is a matter of great urgency."
Nishimura told the audience that when he did graduate work at the University of Maryland 30 years ago, there was great tension between the U.S. and Japan over semiconductor and automotive trade, and other students were quite vocal about it. "At that time, the United States said: 'Stop your industrial policy," he said through an interpreter during a Q&A following his speech. He added with a grin, "But now it's the United States' turn to have your own industrial policy."
Nishimura noted he'd talked to Commerce Secretary Gina Raimondo earlier in the day, and hailed the Chips Act she pushed for. He talked about Japanese investments in semiconductor manufacturing, including one factory that is a joint venture with IBM. He said Japan and the U.S. should coordinate their subsidies for biotechnology, artificial intelligence and quantum computing.
"Diversifying our supply of critical minerals is also a major issue," he said, and said countries should consider what minerals can be extracted through recycling mobile phones and computers.
He made a veiled reference to the Inflation Reduction Act, which also seeks to move the supply chain for critical minerals out of China, but preferences mining and processing in countries that have a free trade agreement with the U.S. It's not yet clear if Japan will be counted among them, though an early indication from Treasury suggested it will look beyond those with comprehensive FTAs, which Japan does not have.
"When these issues are addressed by each country, the important thing is to never to allow ourselves to fall into protectionism," Nishimura said, including treating domestic products preferentially. He also said that countries should avoid providing "ever greater subsidies in order to compete with like-minded countries for industrial facilities."
If such actions are taken, he said, it would "weaken the solidarity of like-minded countries ... [and] play into the hands of authoritarian countries."
A lobbyist from Toyota asked him to more directly talk about protectionism linked to climate goals, but he avoided answering the question.
He did speak favorably about the Indo-Pacific Economic Framework, saying it is aiming to "address new challenges such as boosting supply chain resilience and building a clean economy," and said it will be "of great significance for both the United States and partner countries in the region."
He said Japan will "spare no effort to conclude IPEF negotiations."
Nishimura noted he would be talking with U.S. Trade Representative Katherine Tai on Jan. 6, but not about IPEF -- rather about how to combat forced labor.
Nishimura also said that because IPEF has no tariff reductions on either side, it is not a path back to the Trans-Pacific Partnership.
"Because it doesn't include market access improvement or tariff reduction, IPEF will not be a replacement for TPP," he said. He acknowledged there are no signs from the administration that it would consider rejoining the TPP, but he said through an interpreter, "We will keep on taking every opportunity for saying that: Please come back to TPP."