EU-Japan Economic Partnership and EU Global Strategy
Executive Deputy Director of Center for EU Studies, Shanghai International Studies University
The EU-Japan Economic Partnership Agreement coming into force on February 1, 2019 has brought into place the largest bilateral free trade framework of the world to date which shall include three tenths of total global economy and four tenths of global trade. The rules system of the agreement shall have profound impact on the running direction of international trade and even that of global politics. At present, contradictions accumulated in the process of globalization tend to intensify, forces of de-globalization and anti-regional integration populism, protectionism and nationalism rise rapidly, and the existing world economic system has encountered serious challenges. The establishment of EU-Japan economic partnership is an important
measure taken by the European Union (EU) to respond to the new situation, reflecting the overall consideration of the EU on the layout of its global strategy.
The Course of Evolution of PostCold War EU-Japan Relations
The international strategic pattern, the transatlantic relations between Europe and the United States and European regional integration are three important variables affecting the development of EU-Japan relations. Since the end of the Cold War, the framework of the EU’s Japan policy has undergone three profound readjustments, each having much to do with the three variables.
Between 1991 and 1995, Europe-Japan relations underwent the first readjustment after the Cold War. With the disintegration of the Soviet Union, the collapse of bipolar pattern, and the US becoming sole superpower, European integration moved consequently into fast track. At the same time, Japan developed rapidly into the world’s second largest economy in the 1990s. The European Community (EC) took the opportunity of its Hague Declaration of 1991 and European Commission Report on Relations with Japan in May 1992 proposed to vitalize European manufacturing exports to Japan, while calling on Japan to reduce its “structural” trade barriers and open its market to European products and investment.
The second readjustment on EuropeJapan relations came about between
2001 and 2003. As the disintegration of the Soviet Union led to a huge power vacuum in the “fragmentation belt” that ran from North Africa to the Middle East and to Central Asia, US military involvement in Afghanistan and Iraq was strongly opposed by the EU. At the same time, the IT revolution and the post-Cold War peace dividend helped the process of European integration to further deepen and accelerate. US-EU contradictions and the rise of the EU’s international status affected the EUJapan relations in a profound way. As such, based on its Action Plan for EUJapan Cooperation of 2001, the EU announced the establishment of EU-Japan Strategic Partnership.
The third readjustment on EU-Japan relations happened between 2010 and 2015. The global financial crisis of 2008 and the European sovereign debt crisis of 2009 opened the Pandora Box of the present round of changes on the international pattern. As a series of external and internal crises such as terrorist attacks, refugee wave and the rise of antiEuropean integration populist forces alternately impacted the EU, the centrifugal tendency within the EU was on the increase, and meanwhile there were increasing signs that the EU tended to be marginalized in the changing pattern of the international system. The internal and external pressures firmed up the EU’s determination to start and continue to advance the negotiations on EU-Japan economic partnership, and the EU began to emphasize more and more on that Japan shared “identical” values with the EU and its outstanding strategic value in the international pattern.
Strategic Motivations for the EU to Insist on Reaching the EU-Japan Economic Partnership Agreement
The pattern of interests for the framework of EU-Japan economic partnership is less than balanced, the concessions made by the EU to Japan being more than Japan’s satisfaction of the EU’s interests. Upon the request of Japan, the EU shall remove all tariff and nontariff barriers on Japanese car products whereas Japan shall not open its market of agro-products and public procurement as requested by the EU, especially
that the Japanese public procurement market only “opens a seam” to the EU. Then, why should have the EU been willing to reach the agreement with Japan by making more concessions?
In the eye of European policymakers, trade policy has never been a pure and simple economic policy but an important tool and means for the EU to promote its values and achieve its strategic intent. The action of the EU to establish EU-Japan economic partnership is absolutely not purely based on consideration of economic interests but on the implied strategic intent of the EU to shape the future situation in the long run. To put it in concrete terms, the EU’s eagerness in setting up the framework of EU-Japan economic partnership is compelled by strategic motivations.
First of all, the EU wishes to acquire new development dynamics with the help of this framework in order to deal with the multiple crises it faces. The Domino effect from the international financial crisis of 2008 and the following debt crisis has made the EU keep struggling to cope with never ending crises and challenges. On economic plane, Europe has dipped into an economic slowdown lasting for nearly a decade since 2009. On strategic plane, the outbreak of the Arab Spring and the occurrence of the Ukrainian Crisis have left the EU with a peripheral geopolitical pattern tending to be fragmented. Within Europe, polarization between the rich and the poor in European societies is worsening. As the gap in level of development between its member states widens continuously, the centrifugal tendency increases. Under such circumstances, the multiple crises of sovereign debt, terrorist attacks, the “Brexit”, and refugee wave have come one after another, and as such it is necessary for the EU to search for new external dynamics to accelerate its economic growth and to keep its international status. The framework of EU-Japan economic partnership can provide such dynamics.
Secondly, on global plane, the EU expects to respond to the new round of readjustment on the world economic system and the international strategic pattern with the help of the framework of EU-Japan economic partnership, especially to maintain and consolidate the existing international multilateral trading system and the framework of global economic governance. With the rise of China and other emerging economies, the Obama administration of the US launched in early 2013. Both the negotiations for the Trans-Pacific Partnership (TPP) facing the Asia-Pacific and the Transatlantic Trade and Investment Partnership (TTIP) facing Europe in an attempt to reshape the pattern of the world economy, with the Asia-Pacific becoming the focus of its layout. To avoid being marginalized, the EU began to push forward three international economic negotiations in early 2013, namely the TTIP talks with the US, the EU-Japan Economic Partnership Agreement talks with Japan and the EU-China Investment Agreement talks with China. As the EU felt that there were great resistances in its talks with the US and China, it believed that it might be
easier to make substantial progress in its talks with Japan. Therefore, it had rapidly quickened the pace of the talks for the EU-Japan Economic Partnership Agreement since late 2015.
Upon taking office in early 2017, the Trump administration of the US began to practice a governing philosophy of economic nationalism, state mercantilism, and trade protectionism, deliberately attempt to dismantle the multilateral trading system and the global economic governance framework as represented by the World Trade Organization (WTO), and replace the existing multilateral system hopefully with several US-led bilateral cooperative frameworks in order to reshape a US-led world economic order. However, as the existing multilateral trading system and the global economic governance structure are the bedrock for its survival and prosperity, the EU has to try hard to counter balance the challenge of the Trump administration and maintain the existing system. As a result, the EU eventually reached the EU-Japan Economic Partnership Agreement with Japan.
Third, on bilateral plane, the EU has revealed its strategic consideration of responding to the rise of China with the help of the framework of EU-Japan economic partnership. Over the years, the EU has gained advantage from both sides in its relations with China and Japan. In 2013, the EU established bilateral “strategic partnerships” respectively with China and Japan. In early 2013, it respectively launched the talks for the EU-Japan Economic Partnership Agreement with Japan and the talks for the EU-China Bilateral Investment Agreement with China. Since 2013, the EU has conducted bilateral leaders’ meetings and summits of business leaders almost once a year respectively with China and Japan, maintaining parallel contacts with both countries. However, the original balance of power was broken by the rise of China, and besides, China had a strong momentum in vying with the US in global high-tech competition as represented by the AI and the 5G, where the EU was in relative disadvantage. Since 2015 and with a changed balance of power between China and Europe, the EU has stopped placing itself in an equidistant position between China and Japan.
EU policymakers believe that in the present pattern of interests as shaped by globalization, the EU has got the short end of the stick while China taking the long one. In September 2017, the EU released the State of the European Union Address. On December 20 of the same year, it came up with a report on China’s economic “distortion”. On June 7, 2018, its unprecedentedly severer anti-dumping and anti-subsidy rules came into force. On February 20, 2019, it adopted a foreign investment screening regulation. All of the above illustrate a very negative attitude toward China. On March 12, 2019, the EU Commission published a report EU-China: a Strategic Outlook , which defined China as “an economic competitor in the pursuit of technological leadership” with the EU and “a systemic rival promoting alternative models of governance”.
Affected by a very negative mental state like this, the EU’s policy positions toward China and Japan have become more differentiated: on global strategic plane, delicate differentiation happens to the coordinates and attitudes toward the two pairs of strategic relationships between the EU and Japan and between the EU and China. At present, the EU leadership refuses to recognize China’s status as a market economy, being candid about the fundamental differences between China and Europe. On the plane of bilateral economic relations, the EU harbors a vigilant mentality toward China’s Belt and Road Initiative, featuring superficial approbation and real misgivings, and it takes a questioning stance to the 16 plus one mechanism. However, its expectations for Japan are on the increase. On strategic security plane, the EU has conducted coordination with Japan in the areas of anti-terrorism, prevention of piracy, and maintaining the third party security, but refrains from talking much about China-EU strategic security cooperation. Though EU policymakers are equivocal about it, the EU has revealed its intent of responding to China’s rise with the help of EU-Japan economic cooperation.
Basic Features of EU Global Strategy Operating Model
The EU still sticks to the philosophy of economic globalism, traditional liberalism, and cultural pluralism as represented by European regional integration. However, the multiple crises of terrorist attacks, refugee wave, the “Brexit” and the rise of populism have already drawn the EU into predicament and dilemma. Social cleavages between the rich and poor, between grassroots and elite, between local people and foreign ethnic groups, and among different religious groups intensify, the thinking of populist Euroscepticism proliferates, and US-EU relations deteriorates. All of the above forces the EU to respond to and even acquiesce some of the interests of populism and nationalism, to acknowledge that globalism and European integration give rise to polarization between the rich and poor, confrontation between social strata, and imbalanced regional development while bringing about economic prosperity, and therefore to readjust its foreign policy. EU-Japan economic partnership is one of the important links of the present layout of EU global strategy, from which one can see clear features of the layout of EU global strategy, namely opportunism, pragmatism and betting on both sides of a game.
First of all, the EU bets on both sides of the game between the multilateral trading system that is based on the framework of global economic governance and the “new generation” of free trade agreements that embody bilateral trading framework, namely between multilateralism and bilateralism. On the one hand, in its State of European Union Address of September 12, 2018, at the G20 Buenos Aires Summit by the end of November of the same years, and in the joint statements of both of the China-EU leaders’ meetings of July 2018 and April 2019, EU top policymakers are still committed to safeguarding multilateralism in international trade as
represented by the WTO. On the other hand, the EU is more active than ever in advancing negotiations for bilateral free trade agreements. On top of the signing of the EU-Japan Economic Partnership Agreement , the EU also in 2018 signed respective drafted free trade agreements with Singapore and Vietnam, and launched bilateral free trade talks with Australia and New Zealand.
In fact, at present, both EU policymakers and European strategic research community are reflecting on the defects of globalization, and both display an increasingly shillyshally attitude. In September 2017, the EU Commission released Reflection Paper on Harnessing Globalization, acknowledging that globalization has brought about unprecedented challenges, and believing that it is necessary to build “smaller coalitions” to cope with the situation. Bruegel, a leading think tank in Brussel, came up with a policy contribution on March 13, 2019, which clearly warns that it is likely for the current multilateral trading system to collapse, and the EU should prepare itself for both eventualities. The above signs indicate that the confidence of the EU and the European strategic research community in the multilateral trading system is markedly weakened, and they are considering alternatives to the present system.
Secondly, the EU is engaged in betting on both sides of the game between defending the concept of free trade for economic openness and supporting the concept of “fair trade” for the stability of its internal market and industrial system, namely between Global Europe and Fortress Europe. Since early March 2019, the EU has put forward its own plan on WTO reform and at the same time, former EU Commissioner for Trade Dr. Malmström made several speeches on “progressive trade policy” since March of the year, putting on a rival show to the contrary of President Trump’s policy of economic nationalism. In this context, the framework of EU-Japan economic partnership stands for the model of the “new generation” of free trade frameworks. However, the EU has set up a series of premises for “free trade” such as “reciprocity” and “a level playing field”. The EU believes that without such premises, trade is “unequal” and thus it is no longer necessary to consider “free trade”. On September 13, 2017, former President Juncker of the EU Commission remarked in his State of European Union Address, “We are not naïve free traders”. From then on, the EU quickened the pace of adopting a series of new regulations, enhanced the anti-dumping, anti-subsidy, and safeguards mechanisms such as antidumping and countervailing duties by a large measure and set up fast an investment screening mechanism on EU plane. On US-EU economic relations, the EU frequently talks about “free trade”, but on China-EU economic relations, it time and again talks about the concept of “fair trade”, protruding its shillyshallying mentality.
Thirdly, the EU wavers between the US-EU-Japan triangle and the ChinaUS-EU triangle, running with the hare and hunting with the hounds, that is, betting on both sides of the game between the US and Japan as the world’s most important economies and China, the world’s most important emerging economy. On the one hand, the EU entertains the strategic consideration of uniting with the US and Japan in common efforts to keep China down. Between early December 2017 and January 2019, top trade officials of the US, Japan and the EU held four meetings and issued trilateral joint statements, slamming China without naming it. On January 21, 2019, the research department of the European Parliament issued a briefing paper which was candid about the fact that a US-Japan-EU coalition against China is in the making. On the other hand, the EU intends to maintain the present multilateral trading system and the framework of global governance, where it shares the views or have similar views to China, and therefore it wishes to resist the de-globalization measures of the Trump administration with the help of China. At the same time, the EU still wishes to further advance its trade and investment with China, in order to inject dynamics to European economic growth. Hence, the EU tries hard to avoid taking sides between China and the US, hoping that it can both maintain traditional alliance with the US and continue to advance economic cooperation with China.
Conclusion
As the EU and Japan are respectively the world’s second and fourth largest economies, the establishment of a bilateral free trade framework will have major impact on the current international pattern and balance of power. At the same time, the EU takes EU-Japan economic partnership as the model of the “new generation” of free trade frameworks, and hopes that this framework will create a new system of rules for bilateral and regional mutually beneficial trade mechanisms in the future. As such, this framework will have a far reaching effect to the direction of the development of international econ0mic institutions. Furthermore, the EU regards its trade policy as a means to promote its values and achieve its strategic intent. Therefore the EU-Japan economic partnership can reflect important features of the present EU global strategy in terms of cognition, intent and operating model.
In fact, the multiple internal and external crises the EU faces have not been solved radically. Internally, forces of populism are on the rise, and social cleavages widen. Externally, it faces the situation of a deteriorating US-EU relations and an intensifying world competition on new technologies. Being so affected, the EU is compelled to pay more attention to instability and risks of the multilateral trading system and reflect on negative factors of globalization and regional integration. At present, in the EU’s China related policymaking there are both intension to enhance cooperation and promote further progress, and the mentality mistrust and misgivings. As the framework of EU-Japan economic partnership continues to develop, and as EU-Japan relations evolve, there will also be strong instability in China-EU relations in the future.