Japan and Trump Trade Policy
How will the Trump Administration shift economic and security ties with Japan?
February 10, 2017
Japan’s Prime Minister Shinzo Abe is now readying his government for a possible bilateral FTA with the United States. Indeed, this will be on the agenda when Abe meets with Trump soon (likely February 10).
While Tokyo is incredibly stubborn when it comes to protection of its agriculture and services sectors, not to mention its motor vehicle industry, Abe is in a position of great weakness vis-à-vis the United States.
Abe is desperate to win Trump’s support for the U.S.-Japan Security Alliance, in the face of an assertive China and a volatile North Korea. This was also on the agenda when the new US Secretary of Defense, James Mattis, visited Japan in early February.
Security costs money
Japan’s burden-sharing of the Alliance has also been questioned by Trump, as Japan only pays about half the costs of the more than 50,000 U.S. military staff in Japan.
Moreover, Japan only spends 1% of its GDP on its Self Defense Forces, while the U.S. military spending represents 3.5% of U.S. GDP.
While Japan should lift its game and finance more of its national security, with a national public debt of close to 250% of GDP, its room for maneuver is limited.
And Japan is also cornered because of its dependence on the U.S. market, which absorbs some 20% of Japan’s exports (a little more than China does).
TPP draft as springboard
There may well be very rapid movement on a Japan/U.S. FTA, as the now-ditched TPP provides an excellent blueprint for beginning negotiations.
Once he has dealt with Japan, Trump will likely pass over the other TPP partners. The United States already has FTAs with Australia and Singapore.
Canada and Mexico will be tackled in a NAFTA re-negotiation, which will likely take the TPP template as its starting point.
And the other TPP signatories are really just peanuts, except perhaps Vietnam, which would be a useful ally against China. Elsewhere in Asia, Trump will likely push to renegotiate the United States’s FTA with Korea.
Trump will likely expect Japan to pick up more of the cost of the US security arrangement.
Apart from Japan and Vietnam, most TPP countries have other US trade deals or are insignificant.
TPP may be dead but the failed draft will likely be the starting point for bilateral US trade deals.