United States President Donald Trump is also pursuing his “America First” economic policy, which abandons multilateralism in favour of bilateralism. This policy is premised on the ability to use economic might to negotiate deals in which the United States has a clear advantage. To bring parties to the negotiating table, the United States has imposed illegal (as per international trade rules) tariffs on a variety of goods, with the (so far false) promise that such duties would be lifted once a deal has been signed.

China and the United States’ nationalistic economic policies pose a direct challenge to the rules-based multilateral trading system. There is a serious risk that it could collapse, replaced by either a new Cold War (the West versus China and its BRI sphere, for example) or, even worse, a complete decoupling of the world’s major economies (everyone goes home and shuts their borders).

Japan’s Strategy

Either scenario would be bad news for the global economy, but the decoupling one would be the worst. In this case, while China, the European Union and the United States would survive relatively well, because of the size of their economies, Canada and the rest of the world would not; they would have to align with one of the major economies in question. Canada would surely side with the United States. This, of course, would establish Canada as a mere satellite of the United States.

Japan is in the same boat. A closure of the world economy, coupled with China’s control of land and sea in Asia, would cripple Japan’s economy. This is why, like Canada, Japan is working hard to reform the World Trade Organization (WTO). In particular, Japan is cooperating with the European Union and the United States to address the particular challenges that China’s non-market policies and practices present for the WTO’s existing rules.

Japan’s concerns for Chinese and US behaviour also explain why it made sure, with Canada’s support, to keep the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP, formerly the TPP) alive when President Trump pulled out, with the hope that the United States would ultimately rejoin. The TPP was initially launched by the United States as a means to keep Asia-Pacific countries closely linked to the West and to make it easier for them to resist China’s gravitational pull. In its current bilateral trade negotiations with the United States, Japan is offering much less than what the CPTPP offers, thereby keeping the latter as the better deal on offer for the United States.

Strategically, the CPTPP offers an important alternative to the China-led Regional Comprehensive Economic Partnership (RCEP) to countries in the Asia-Pacific region. It is interesting to note that Japan is also a negotiating member in RCEP.

The CPTPP’s survival is part of Japan’s Free and Open Indo-Pacific Strategy (FOIP). Japan developed the FOIP to make sure that sea routes from the Mediterranean Sea through the Indian Ocean and into the Pacific Ocean remain free and open so that Japan can continue exporting and importing, which is vital for its economy. The FOIP’s ultimate goal is to make sure that China is not the only game in town for BRI countries.