Kan tries again on trade

When the DPJ was campaigning to unseat the LDP in 2009, its manifesto included a pledge to "conclude" a free-trade agreement with the United States. The agricultural lobby flexed its muscles, and shortly after releasing its manifesto the DPJ issued several "clarifications," changing its pledge to reach an FTA with US to a pledge to "begin negotiations." Kan Naoto insisted that it would not conclude any agreement that harmed Japan's farmers. While the party claimed otherwise, the issue was effectively dropped for the duration of the campaign and the DPJ's first year in power.

After his victory over Ozawa, Kan, now prime minister, brought the issue of trade openness back onto the agenda in the form of Japanese participation in the Trans-Pacific Partnership. Simply put, Kan's initial attempt to clear the way for Japanese involvement in TPP was stymied by the agricultural sector — with help from members of the DPJ. The lobby argued that participation would devastate Japanese agriculture, and forced the government to make a weak commitment to "study" participation, a climb down considering the soaring rhetoric with which the PM announced that his government would study participation in his policy speech at the start of the autumn Diet session.

However, with the start of a new year and a new Diet session, Kan, far from being chastened by the earlier defeat at the hands of the agricultural lobby, is positioning his government to begin the campaign anew. As Corey Wallace notes, the "themes" of this reshuffle were tax and pensions reforms and TPP. Regarding TPP, the most significant change was the appointment of Kaieda Banri as minister of economy, trade, and industry. Moreover, Hachiro Yoshio, a former farmer, was replaced as Diet affairs chairman by Azumi Jun. Combined with Maehara Seiji's staying on at the foreign ministry — Maehara has repeatedly called attention to the importance of economic openness for Japanese foreign policy — Kan managed to put into place a team that will be committed to the fight for free trade. His cabinet quickly agreed to TPP participation as a basic policy of the latest Kan government.

The question is whether Kan will be able to translate this ambition into reality. At the very least, the Kan government (and the DPJ) appear to have found their purpose. After fumbling around in search of a major issue or two to devote its energies to, the DPJ-led government has decided to tackle two rather pressing issues, which, combined with the challenges in Japan's bilateral relationships, passing the budget and budget-related bills, and managing life as a de facto minority government will be more than enough to keep the Kan government occupied. 

But in pursuing an open Japan — Kan's New Year's message was devoted to his goal of a third opening, a "Heisei opening" that would mean not just a Japan open to more imports but open to cultural, intellectual, and social exchanges across borders  — the Kan government arguably faces an even steeper battle than Koizumi faced when he took on the postal system, meaning the postal workers and their allies in the LDP. Between the rural bias in parliamentary representation (which, given the size of the DPJ's parliamentary caucus, inevitably means that there will be battles within the DPJ), the opposition of local governments in rural areas throughout Japan, and the outsized power of Nokyo, the Kan government faces formidable and perhaps insurmountable obstacles to bringing Japan into TPP. 

A basic understanding of international political economy is that free trade falters because its costs are concentrated while its benefits are diffuse. Plenty of states have joined free-trade agreements, suggesting that this fundamental tenet may not be all that fundamental. But what can the Kan government do to overcome the determined resistance of the agricultural lobby and its allies? For starters, the government needs to build a coalition of its own to rival the anti-TPP coalition. Business peak organizations like Keidanren will be indispensable partners for the Kan government if it is as serious about TPP as it says it is. Given the frosty relations between the DPJ and big business, the "anti-business" planks of the DPJ's manifesto, and the party's ties with organized labor (and big business's traditional ties with LDP), building this coalition will take some work, although this meeting between Kaieda and Keidanren's Yonekura Hiromasa is an encouraging start.

But it will take more than the help of friendly interest groups for the government to succeed. Ultimately, TPP may be the first big test for the DPJ's parliamentary-cabinet system. On paper, the DPJ's new policymaking process ought to (1) enable the government to coordinate its strategy on TPP across the relevant ministries (METI, MAFF, MOFA, etc.), (2) keep all cabinet ministers on board with the policy, (3) silence opposition within the ruling party, and (4) make strong, direct appeals to the general public about the necessity of the government's program. It is not a perfect analogue, since the upper house, now controlled by the opposition parties, gives the opposition parties procedural weapons they lack in the UK. However, the Kan government still has considerable tools at its disposal. The question is whether it uses them. As Andy Sharp argues at The Diplomat, it may well take a Koizumi-style PR blitz for the Kan government to win on this issue. It needs to hammer home why TPP — and greater openness more generally — are good and necessary for Japan. The idea that trade policy is an arena where groups with "objective" interests derived from their position in the global economy is overstated. Even among urban residents, thought to be the natural constituency for free trade, support cannot be taken for granted. The policy will not sell itself; an pro-TPP interest coalition needs to be constructed. The government's plan to convene town halls across Japan in February and March to explain the benefits of the policy are a good first step. But more talk will be needed. And side payments in one form or another will be unavoidable.

There is considerable risk in taking on TPP at the same time that the government will be debating a consumption tax increase linked to pensions payments, which, if not handled properly, could produce public opposition that could overwhelm the patient work of building a consensus on TPP. Nevertheless, as the Kan government and the DPJ begin a new year in power, they seem to be finding their bearings on policy. This government may yet leave a positive legacy.

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.

Meet the new daijin, same as the old daijin

On Friday morning, Prime Minister Abe summoned forty-eight-year-old Akagi Norihiko to Kantei and requested that Akagi serve as Matsuoka Toshikatsu's successor at the Ministry of Agriculture, Forestry, and Fisheries (MAFF). Akagi, a Tokyo University graduate, MAFF old boy (OB), and grandson of an agriculture minister in the cabinet of Abe's grandfather Kishi, was first elected the same year as Matsuoka (1990) and served in a similar succession of posts in LDP policy organs as Matsuoka.

In other words, he's a younger, more elite version of the late Mr. Matsuoka. (I say more elite because, as I wrote in this post, Matsuoka was not a Todai grad, not a ministry generalist OB, and not a hereditary politician.)

There are no indications that the policies Akagi will pursue will be any different from Matsuoka, and there are already signs of inappropriate monetary dealings between Akagi's koenkai and groups seeking contracts from MAFF. As Abe made clear when appointing him, Akagi will, like Matsuoka, seek to promote further reform of Japanese agriculture, work to the target of one trillion yen in agricultural exports, and act as a tough negotiator in WTO negotiations. In other words, agricultural mercantilism and favoritism on behalf of companies and farmers supporting the LDP.

Akagi's accession to the cabinet is a clear illustration that the problem is much bigger than Matsuoka: the problem is systemic. No cabinet-eligible LDP politician has clean hands.

Is the Bush administration thinking about the China relationship?

With the Bush administration's recent move to press a suit against Chinese violations of intellectual property in the WTO sparking fears of a full-blown Sino-American trade war, I must ask the same questionI asked when the US Commerce Department announced tariffs on Chinese glossy paper: is this administration pursuing a coherent strategy in Asia, or is it just making things up as it goes along? Does the US really expect that friction on trade will not have consequences for Sino-American cooperation in other areas, most notably in the six-party talks?

The US, of course, should not hesitate to press China on matters of concern, but it must choose its battles wisely; with Congress breathing down the administration's neck on the economic relationship with China, I fear that prudence is becoming an altogether rare quality in US China policy. Moreover, I do not think the administration has made an effort to counter the public scapegoating of China and explain to the American public the substantial benefits of the relationship. That is a point made by the authors of a new Council on Foreign Relations study on the relationship with China. As co-author Carla Hills said at a press conference announcing the report, "We recommended that the president describe to the American public the various benefits that we derive from that relationship and that we state that our interests are furthered by a responsible and cooperative China that adheres to international norms, a prosperous and peaceful China that fuels global growth, and an equitable China that is accountable and cares about issues like the environment."

Whether this will happen is any one's guess, but I doubt that President Bush is particularly eager to defend China publicly.

Maintaining the US-China relationship requires work, and it requires vision. Neither country can afford to wait until January 2009 for either.

Japan feels the heat

Based on the coverage in Japan's newspapers, it seems that Japan was blindsided by the US-ROK free-trade agreement. Perhaps Japanese observers did not quite believe that negotiators would be able conclude an agreement before time ran out. Of course, the agreement's passage in both the US and South Korean legislatures is hardly a foregone conclusion, as the Japanese media has noted, but the prospect of Korean companies -- especially automakers -- having preferential access to the US market seems to have stirred the Japanese government to action.

The FT reports today that Japan has announced that it is interested in ramping up talks with South Korea on a Japan-South Korea FTA, and quotes Abe has saying that even an FTA with the US should be considered. The FT also notes, however, that Korea is more interested in trade negotiations with the EU than with Japan.

Perhaps another sign of the deficiencies of the Japanese government's foreign policy making; Tokyo seems utterly incapable of shaping the regional environment, and is continually being outflanked by its neighbors, allies, and rivals, whether on trade, security, or in the six-party talks.