Selling free trade

Bogged down by an unfavorable political situation in Tokyo, the Kan government has few avenues for policy innovation. In recent weeks, however, it seems that the Kan government has decided to consider joining the Trans-Pacific Strategic Economic Partnership (TPP), a multilateral free trade agreement that currently includes only Chile, New Zealand, Singapore, and Brunei, but which the United States, Australia, Peru, Vietnam, and Malaysia are negotiating to enter.

The DPJ sent mixed signals on trade during the 2009 campaign: the initial draft of the party's manifesto stated that the party would "conclude" an FTA with the United States, but, criticized by farmers' groups, the party softened its proposal to "begin negotiations with the United States" and added a clause that it would only conclude an FTA with the US if domestic agricultural production could be safeguarded. Since the DPJ took power, trade has more or less vanished from the agenda — until now.

Following Kan's declaration in his policy speech that his government is considering TPP, Maehara Seiji, the foreign minister, has emerged as the government's leading advocate for greater trade openness, arguing in his speech earlier this month at the Foreign Correspondents' Club of Japan that since Japan's foreign policy is only as effective as its economic strength, diplomacy that enhances Japan's economy should be the government's top priority. (To make the point he pointed to South Korea's superior competitiveness as something that Japan should emulate.) To that end, he outlined a three-pillared approach that included (1) building a free trade system, (2) diversifying sources of food and natural resources as a hedge against risk, and (3) ensuring that Japan has the technology and infrastructure necessary to export.

When it came to concrete proposals to expand free trade, however, Maehara balked. He said that taking steps to join the TPP would be a test for Japan, but did not promise anything. He talked about trade negotiations with the US either bilaterally or within a multilateral framework, but offered little in the way of specifics. Given the thorny politics of free trade in Japan, Maehara's circumspection comes as little surprise, and the debate that has occurred within the government since his speech has been similarly tentative. To this point the government is still collecting opinions on the matter and has not decided whether it will pursue negotiations to join the TPP. Genba Koichiro, head of the national strategy office, said that the government will make its decision late next week. It has the support of Maehara and Kaieda Banri, the minister for economic and fiscal policy, as well as Sengoku Yoshito, the chief cabinet secretary, who said that TPP could be coupled with measures to support farmers harmed by imports (the logic behind Sengoku arch-rival Ozawa's income support plans). But these advocates are of course opposed by the ministry of agriculture, forestry, and fisheries — and by Nokyo, the peak association for agricultural cooperations, whose chairman has declared the TPP will mean the destruction of Japanese agriculture. The PNP, the DPJ's partner in government, and the Social Democrats, its erstwhile partner, have also come out against TPP, and Hata Yuichiro, chair of the DPJ's upper house parliamentary strategy committee, has said that he opposes joining the trade agreement "at this time."

Given the opposition arrayed against TPP, it is perhaps wise that the Kan government has not committed to the policy and is instead floating trial balloons. However, I wonder if there will ever be a good time for a Japanese prime minister to pursue an ambitious trade agenda. By proceeding cautiously now, did the government simply give its opponents time to mobilize and thus ensure that once again the issue will be postponed? It strikes me that if Japan is ever to participate in an ambitious free trade agreement like TPP (or the hypothetical US-Japan FTA), the only way it will ever get done is if the prime minister owns the issue, building a coalition in favor of free trade and selling the policy to the public in the same way that Koizumi sold postal reform. As the political economist Helen Milner once wrote (I'm paraphrasing), for economists, the puzzle is why states would ever done anything other than free trade — for political scientists the puzzle is why states would ever practice anything but protectionism.

If the government decides next week to make joining TPP a priority, it better be prepared for a three-pronged fight: among political parties in the Diet (remember that the government needs to cobble together upper-house majorities to pass legislation), among interest groups, and in the court of public opinion. The trade agreement will not sell itself. The government will have to commit to it fully. Anything less and the government is likely to suffer yet another defeat.

After the showdown

Japanese Prime Minister Kan Naoto and Wen Jiabao, his Chinese counterpart, have met briefly in Brussels on the sideline of the ASEM summit, marking an end to the bilateral standoff following the collision between a Chinese trawler and Japanese Coast Guard vessels in the vicinity of the disputed Senkakus.

As expected, Japan and China reiterated the importance of the strategic, reciprocal partnership initiative. High-level talks and cultural exchanges will resume. All in all, it is difficult to say what has changed strategically as a result of the dispute. That China will fiercely resist any perceived change to the status quo in its maritime disputes? That China has greater leverage at its disposal? That countries — not just China — don't like having their nationals held by other countries, particularly when, Sourabh Gupta argues, there may have been little basis for Japan's holding the Chinese fishermen in the first place? 

Meanwhile, the conventional wisdom that the US is the biggest winner from the dispute is probably overstated. The allies will not find it any easier to resolve the Okinawa dispute, which continues to loom over the alliance. More importantly, however, the dispute appears to have merely reinforced the DPJ government's basic approach to China: having little choice but to forge a working political relationship with its neighbor, Japan will redouble its commitment to building constructive relations with China. In short, the dispute, rather than signaling that Japan must change course entirely, may simply lead the Kan government to try harder. 

The basic idea that has animated foreign policy under the DPJ from the day it took office — that Japan, living in a region dominated by a rising China and a declining but still powerful US, needs to find a way to navigate between and live with both power — remains intact.

That being said, the dispute with China has obviously had consequences within Japan, not least for the Kan government's public approval ratings. Despite having received a remarkable bump in his support after defeating Ozawa — nearly twenty percent in some polls — Kan's numbers are back to around fifty percent thanks to his government's perceived mishandling of the dispute. Peter Ennis makes a strong case that the Kan government actually handled the issue well, getting the assurances it needed out of the US while resisting Chinese pressure long enough for the government to claim that the captain's release was the result of a decision by the prosecutor's office in Naha and not the central government. But the Japanese people apparently do not see it the same way. In Yomiuri's poll, for example, eighty-three percent of respondents were not convinced by the prime minister's claim that there was not political intervention. The same poll found a ten-percent increase in the number of respondents who said foreign and security policy should be a top priority for the Kan government; in early August only four percent said it should be a top priority. Whether this change in the public mood is more than temporary remains to be seen, but the drop in the government's approval ratings give Kan that much less room to maneuver as the prime minister tries to coax the opposition parties to cooperate with the government.

Indeed, the LDP has rushed this issue to the top of the agenda as the autumn extraordinary session of the Diet begins. The party has declared that the "abrupt" release of the captain was the worst foreign policy failure in postwar history. The LDP is sure to build its response to the Kan government around this issue, together with the latest Ozawa indictment, meaning that the largest opposition party has two tangential issues with which to attack the government — with the sanction of the public, thanks to the public opinion polls showing that these issues matter — and put off talk of cooperation on an economic agenda. The LDP will of course get an assist from the Japanese media, particularly its more conservative precincts, which appear to have found their voice again after a dismal couple of years during which their issues vanished from the agenda as the global financial crisis unfolded and then the LDP was unseated by the DPJ.

The dispute with China not only has given ammunition to an LDP desperate to obstruct the Kan government and force an early election — it has also provided an opening for dissent within the DPJ, stirrings of which could be found in the petition signed by forty-three DPJ members, including Nagashima Akihisa, and submitted to Sengoku. The petition goes out of its way to soften its criticism of the government, but it does suggest that China policy could create some space between the government and the ruling party. However, since Kan's cabinet has been united on the issue, grumbling within the DPJ can be safely ignored for now.

So did Kan lose? I cannot agree with Ennis entirely that the government handled the dispute well. The government's biggest mistake was stressing that it was a matter for the Japanese legal system to handle. This stance may well have contributed to China's raising the stakes on the issue (because it could not accept this stance without tacitly acknowledging Japanese sovereignty) but it also ensured that the rule of law would be tarnished in the event of a Japanese climb down. If the Japanese government was indeed prepared to allow the legal process to run its course I suppose this position would have been acceptable, but I doubt that Tokyo really was prepared to wait that long (unless the Kan government was actually caught off guard by Beijing's response). The Kan government should have treated the issue like the diplomatic dispute it was from the very beginning instead of staking the credibility of Japanese institutions on the outcome. That it did so at least partially explains the public's opposition to the government's handling of the issue.

By holding out for as long as it did Japan may well have forced China to think twice about how hard it will push Japan in the future, perhaps won Japan more support from other countries locked in disputes with China, and provided an opportunity for Japan and other countries to take steps to mitigate China's economic leverage (as in the case of rare earth elements), but these gains may have come at the expense of Kan's credibility at home. Without public support, the prime minister, already the head of a de facto minority government, will find it that much more difficult to move an agenda centered on fixing Japan's economy, which in turn is critical to maintaining Japan's influence in the region (as argued by Maehara Seiji, Kan's foreign minister, at the Foreign Correspondents' Club of Japan Tuesday). Whatever the medium-term benefits to Japan from the dispute, it may not have been worth the short-term costs for Kan.