Japan’s new trade conundrum amid the pandemic
Shihoko Goto,
Deputy Director for Geoeconomics, Asia Program,
Woodrow Wilson Center,
Washington DC, USA
Until the end of 2019, the scorecard for Japanese Prime Minister Shinzo Abe’s trade policy was rather impressive. Even as the United States under President Trump quickly shifted to pursuing a more protectionist trade policy and abandoned the ambitious Trans-Pacific Partnership agreement, the other TPP member countries including Japan remained commitment to the deal. The new TPP, or the Comprehensive and Progressive Trans-Pacific Partnership agreement, came into effect by the end of 2018 in no small part to Tokyo’s commitment to the agreement. Japan also was able to sign a bilateral trade agreement with Washington in 2019 that did not jeopardize its critical automotive industry, whilst keeping relations with the Trump administration as smooth as possible.
Events in recent months, however, have upended the global economy and the trade agenda worldwide. Even though the infection rate in Japan is relatively low at under 2,000 at the time of this writing in late March, Japan’s international trade relations including that with the United States have changed drastically as a result of the pandemic.
From the beginning of the coronavirus outbreak in China earlier this year, the vulnerabilities of supply chains that were too heavily invested in one country or too specialized in procurement became evident. Those weaknesses had already been made apparent by the escalating trade war between the United States and China, with third countries like Japan being hurt by their rivalries because production was so heavily dependent on China. COVID-19 has also made the lack of inventories, which until now had been a hallmark of efficiency, a liability. Carmakers Nissan and Honda were one of the many companies hard hit by the closure of their factories in Hubei province where some of their critical parts were produced and thus led to a slowdown in overall automobile output. Companies had already been impacted by the escalation of U.S.-China trade tensions and rising tariff barriers between the two sides, and the virus only made clear that reconsideration of the supply chain to be more resilient to upheavals including natural disasters and political upheaval was critical moving forward.
As the coronavirus spread far beyond China and became a global pandemic, the impact of COVID-19 on the world economy and trade relations has become even more acute. The most apparent, of course, is the closure of borders and the restrictions in movement of people. Amid fears of contagion, countries have either restricted or sealed themselves off entry of foreigners. In the case of Japan, it decided in late March to impose quarantines for two weeks on U.S. citizens as well as those from the European Union and other areas. The United States, on the other hand, has banned entry of citizens from the Schengen area, which includes Finland, as well as the UK and Ireland. Washington has not, however, placed any restrictions on Japanese nationals entry the United States as of yet. The border closures are seen as drastic but necessary measures to keep the coronavirus from spreading, even among staunch allies, but they are hardly likely to enhance diplomatic relations at a time of a global health crisis. Moreover, amid efforts to secure the necessary medical equipment and medication, export restriction of much-needed supplies is only fanning the flames of distrust and rivalry still further.
The United States is currently struggling to keep the rate of infection from escalating still further. China, in contrast, is reportedly seeing its infection rate flatten and Beijing has been on an active campaign to extend its assistance across the globe to support countries in the midst of fighting COVID-19. In the case of Japan, there is growing fear that the country will face a second wave of infection and the nation is preparing for the possibility of a rapid increase in contagion. China is well aware of Tokyo’s concerns, and has offered numerous grass-root gestures of goodwill including providing 160,000 facial masks to the citizens of Kita-Kyushu, which had previously sent 260 masks and 70 sets of protective gear to the people of Dalian in February.
Such friendly gestures can hardly offset the historical rivalry and fundamental distrust between Tokyo and Beijing. Still, Prime Minister Abe is unlikely to join the Trump administration’s efforts to use the pandemic to label China as the enemy. Rather than bringing the world’s two biggest economies together to fight a common threat, COVID-19 has exacerbated the geopolitical tensions between Washington and Beijing. Few countries have actively come to side with the White House, however, with Japan being no exception.
The pandemic has already altered the global trade landscape. As countries look to recover the economic carnage, trade barriers will no doubt be used as a means to protect domestic growth. Trade relations between Japan and the United States will be no exception.
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