September.12.2020 KIP Forum "Emerging U.S. Trade Policy Approaches to China and their implications for the International Trading System"
Mr. Noriyuki Shikata, Assistant Minister / Director-General of Economic Affairs Bureau, The Ministry of Foreign Affairs, JAPAN 

For the September Forum, we invited Mr. Shikata who is a KIP board member and has been appointed to the position of Director-General of Economic Affairs Bureau of the Ministry of Foreign Affairs since this July. Based on the theme he has researched during his stay at Harvard University during the last academic year as well his experiences during the prior two year assignment at the Embassy of Japan in China, he delivered the cutting-edge insights regarding the ongoing US-China trade friction. At the end of the Forum, we discussed the role of Japan in the deepening US-China confrontation, including policy recommendations.

Mr. Noriyuki Shikata

Mr. Noriyuki Shikata holds a B.A. in Law from Kyoto University and Master in Public Policy (MPP) from Harvard Kennedy School of Government. Most recently, he was at Harvard conducting research on an emerging U.S. policy toward China and the Indo-Pacific. His other prior positions include: Deputy Director General, Asian and Oceanian Affairs Bureau; Director, Economic Treaties Division, International Legal Affairs Bureau; and Director, Second North America Division, North America Bureau; Envoy Extraordinary and Minister Plenipotentiary, Deputy Chief of Mission, Embassy of Japan in China. Mr. Shikata has also been a Visiting Professor at Kyoto University’s Graduate School of Law/Public Policy. He is currently Assistant Minister / Director-General of Economic Affairs Bureau, The Ministry of Foreign Affairs.

Speech summary

The September Forum was held in a new format at FCCJ, due to the impact of the COVID-19, in conjunction with the On-line participants. This time, Mr. Shikata, also a KIP Board member, gave a lecture in English under the title above, based on the research he has conducted at Harvard University. Introduced by Mr. Shikata, Ms. Tangtang Yang, a third-year student at the University of Chicago, also joined the Forum as a discussant.

Firstly, Mr. Shikata gave an overview of the chronology of the US policy and trade strategy towards China since the normalization of diplomatic relations in the 1970s. In so doing, he concisely described the context in which the current trade policy under the Trump administration was constructed. He shared his research focus, comparing the Clinton administration that decided to support China’s accession to the World Trade Organization (WTO) to the Obama administration that led a high-level of trade liberalization through the Trans-Pacific Partnership (TPP), highlighting how the trade policy towards China under the Trump administration has shifted from the conventional policy paths. Mr. Shikata noted that many of China’s unique business practices, or so-called ‘China Inc.,’ such as a large role of state-owned enterprises (SOEs) in the economy and the influence of the Chinese Communist Party on the market, which President Trump sees as problematic, have already been pointed out during the Obama administration. A series of US policy measures, in such fields as currency, intellectual property rights, and WTO dispute settlement, were implemented prior to the Trump administration. Nevertheless, with China's economic rise, the current US government recognized that China had not become a "market economy" as it had originally aimed to be. Thus, a number of measures have been taken to address various unresolved issues and barriers for U.S. companies to enter the Chinese market. He covered in detail about the situation up to now, analyzing that the first phase of the trade agreement between the United States and China that was reached in January 2020 may not be seen with optimism given the status of its implementation as well as the current situation that additional tough measures could be taken against China by the US government.

With almost 50 days to go before the U.S. presidential election, Mr. Shikata also talked about the candidates’ perspectives on China, the current landscape of international trade governance, the China-led ‘Belt and Road Initiative’ and developments in economic diplomacy in the Indo-Pacific, including the Japan-UK Economic Partnership Agreement (EPA), which reached Agreement in Principle on the eve of the Forum. He also explained the roles of Japan and the United States in reviving the global economy in the wake of the current COVID-19 pandemic.

In the Asia-Pacific region, there are several regional trade agreements such as Regional Comprehensive Economic Partnership (RCEP), which are expected to be concluded within this year despite India’s drop-out from negotiations, and the China-Japan-ROK(Republic of Korea) Free Trade Agreement (FTA) that are currently under negotiation, to ultimately realize the Free Trade Area of Asia-Pacific (FTAAP) which is a APEC-wide vision for a future free trade area. In addition to the importance of WTO reform, Mr. Shikata highly evaluated the significance of concluding the TPP, from which the United States withdrew shortly after the inauguration of the Trump administration. It came into effect as the Comprehensive and Progressive TPP (CPTPP) thanks to the endeavors of Japan and other member countries, and achieved a high-level rule-making over trade and investment issues. He also touched on the importance of the Free and Open Indo-Pacific (FOIP) vision as well as the strategic potential of CPTPP as an economic pillar under the FOIP, and the prospects for the future return of the United States to the TPP.

Ms. Yang of the University of Chicago pointed out the Chinese views that "China’s violation of the rules", which the United States accuses of, is not necessarily based on the internationally accepted WTO rules, but is the U.S. measures based on its domestic laws. Besides, she made the case that none of the Chinese senior officials mentioned the possibility of ‘de-coupling’ of the two countries. She also argued that the TPP, which has been dominantly promoted by the United States and nearly concluded in the Obama administration, is viewed with caution in China as a policy tool that could force various challenging domestic reforms.

In the Q&A session after the presentation, a wide range of topics was discussed, including signs of further domestic institutional change due to China’s rapid economic rise under US-China frictions, differences in perceptions and definitions of ‘Market Economy,’ the aims of the Trump administration’s China policy, and the role of countries other than the superpowers like the United States and China in stabilizing the international economic order. While touching on the possibility of further tough US policies in the future to secure domestic job and national security in the United States, Mr. Shikata noted that within the Trump administration, there are various perspectives on trade and monetary policy. In the context of WTO reform, he also highlighted some important issues that Japan can possibly collaborate with others such as the treatment of developing country status and differences in the views between the United States and Europe in terms of reform of the dispute settlement system.

In the latter half of the Forum, we had a group discussion on ‘Japan’s Role in the U.S.-China Conflict’ including policy recommendations. A group of participants at the FCCJ suggested that Japan should not act as a single country but should work with other like-minded countries that share key values to reach out to the United States and China, respectively. In order to achieve this policy aim, they proposed enlargement of the geographical scope of the FOIP concept as a concrete measure. A group of on-line participants suggested that although China currently seems to be isolated from the international society due to such issues as human rights and Hong Kong, since the size of Chinese economy cannot be ignored, Japan should continue to engage Chinese side through various channels to help China steer domestic reform particularly from the business perspective, while separately addressing these problematic issues surrounding China.

In response to these discussions, Mr. Shikata kindly gave his comments on each group. For instance, he agreed that Japan’s diplomatic vision of the FOIP should continue to be widely conveyed to the world. As the United Kingdom, which decided to leave the EU, and Japan reached agreement in principle on the bilateral EPA, the UK’s future participation in the CPTPP would broaden the scope of FOIP, and it is desirable to strengthen the linkages among countries with common universal values. He also noted the importance of engaging the United States and China in the ‘Data Free Flow with Trust (DFFT)’ initiative that was proposed by Japan on the sideline of the G20 Osaka Summit in 2019. Regarding the long history of business ties between Japan and China, Mr. Shikata showed a sympathetic view on the possibility of Japan’s unique role in tapping into the deepening confrontation between the United States and China, referring to the historically deep-rooted relations between Japan and China which was highlighted in a recent book by Professor Ezra Vogel of Harvard University. Overall, Mr. Shikata shared many insightful points of view based on the discussion of each group.

Coincidentally, a few days after the Forum, WTO panel issued its first-ever report regarding US tariffs on Chinese goods, finding that high tariffs on China imposed by the United States are inconsistent with international trade rules. Although the future development will be even more uncertain, as the Trump administration immediately responded criticizing the decision, it was an excellent opportunity for us listening to a comprehensive and concise explanation of the very timely and complex international trade system. I would like to sincerely appreciate Mr. Shikata’s kindness for taking time out of his busy schedule to give a presentation to the KIP members.

(Yuma Osaki, Crawford School of Public Policy, The Australian National University (PhD candidate))