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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 subjects he has researched for the last three years in China and the United States as well as at Harvard University, 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 of 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, a member of the KIP Board and the Director-General of the Economic Bureau of the Ministry of Foreign Affairs, gave a lecture in English on the title above, based on the research he has conducted in the last three years in China and the United States as well as 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 normalisation 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 China’s accession to the World Trade Organization (WTO) to the Obama administration that led a high-level of trade liberalisation 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 the existence of state-owned enterprises (SOEs) and the influence of the Chinese Communist Party on the market, which President Trump sees as problematic, have already been pointed out since the Obama administration. A series of measures, such as currency, intellectual property rights, and WTO dispute settlement, was implemented in the past. Nevertheless, with China's economic rise, the current US government recognised 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 entre in the Chinese market. He covered in detail about the situation up to now, cautionary analysing that the first phase of the agreement between the United States and China that was reached in January 2020 cannot be seen with optimism given the fact that hard-line measures being taken against China.
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 was politically agreed upon 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 pandemic.
In the Asia-Pacific region, there are several regional trade agreements such as Regional Comprehensive Economic Partnership (RCEP), which are expected to conclude within this year despite India’s drop-out, and the China-Japan-South Korea Free Trade Agreement (FTA) that are currently under negotiations, to ultimately consolidate the Free Trade Area of Asia-Pacific (FTAAP) which will be a future integrated framework at this region. In addition to the importance of WTO reform, Mr. Shikata highly evaluated the significance of the materialisation of 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 endeavours of Japan and other member countries, and achieved a high-level of rule-making over trade liberalisation. He also touched on the importance of the Free and Open Indo-Pacific (FOIP) concept 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 that China’s violation of the rules, which the United States accuses of, is not based on the internationally accepted WTO rules, but is merely the U.S. insisting based on its domestic laws. Besides, she made the case that none of the Chinese high figures 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 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, the prospects for 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 stabilising the international economic order. While touching on the possibility of further hard-line policies in the future to secure domestic job and national security in the United States, Mr. Shikata noted that even within the Trump administration, there are different perspectives on trade and monetary policy. In the context of WTO reform, he also highlighted some issues that Japan can possibly mitigate and collaborate with others such as the treatment of developing country status and differences in the direction 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 the issues, such as human rights and Hong Kong, since the size of its economy cannot be ignored, Japan should continue to engage in various channels to help China steer domestic reform separately from these issues particularly on the business side.
In response to these discussions, Mr. Shikata kindly gave his comments on each group. For instance, he agreed that Japan’s diplomatic message should be conveyed to the world through the FOIP concept. As the United Kingdom, which decided to leave the EU, and Japan have agreed 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 between countries with common values. He also noted the importance of involving 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 the deep-rooted relations between Japan and China which highlighted in a recent book by Professor Ezra Vogel of Harvard University. Overall, Mr. Shikata shared many insightful points of view that extend 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))