Section 3 Economic Diplomacy

Overview

(Recognition of the Economic Situation and Japan's Economic Diplomacy)

Although the world economy has been on a recovery trend in 2017, the recovery has not been a complete one; the downside risk is still present in the medium-term, and it is necessary to establish a robust foundation for the economy precisely at this time when the economy is improving. Based on this recognition of the economic conditions, Japan has set out a strategic target that aims, in its economic diplomacy, to maintain and strengthen an international economic system that is free and open, and founded upon the rule of law. Alongside this, it has moved forward on the four dimensions of negotiations, namely the Trans-Pacific Partnership (TPP) Agreement, the Japan-EU Economic Partnership Agreement (EPA), Regional Comprehensive Economic Partnership (RCEP), and the Japan-U.S. Economic Dialogue. The four dimensions of Japan's economic diplomacy are not dealt with separately as individual issues; rather, they have been tackled based on the basic strategy of expanding a network of free trade across the world with Japan as a central hub, and at the same time, creating a virtuous cycle where the dimensions are deeply linked to one another, and where the conclusion of one negotiation gives impetus to other negotiations. Based on this strategy, in 2017, Japan-U.S. economic relations advanced smoothly through the establishment of the Japan-U.S. Economic Dialogue, an agreement in principle was reached for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP11), and negotiations of the Japan-EU EPA were finalized. Furthermore, in March 2018, Japan signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP11 Agreement).

Japan has developed its economic diplomacy with the aim of further accelerating the promotion of economic diplomacy as one of the priority areas of Japan's diplomacy, centered around the following three aspects: (1) rule-making to bolster free and open global economic systems by promoting the mega-EPA as described above; (2) supporting the overseas business expansion of Japanese companies through promotion of public-private partnerships; and (3) promoting resources diplomacy along with inward investment towards Japan.

(1) Promotion of Economic Partnerships

The promotion of high-level economic partnerships constitutes one of the pillars of the Growth Strategy, which aims to raise the FTA ratio to 70% (18.9% in 2012) by 2018. The Trans-Pacific Partnership (TPP) Agreement signed in February 2016 establishes new trade and investment rules in the Asia-Pacific, and creates a huge economic zone. The inauguration of the President Trump's new administration in the U.S. in January 2017 saw the U.S. declare its withdrawal from the TPP Agreement. However, under Japan's leadership, 11 countries signed the TPP11 Agreement in Santiago, Chile, in March 2018. Furthermore, negotiations of the Japan-EU Economic Partnership Agreement (EPA) were finalized in December 2017. While aiming for the signing and entering into force of these agreements, Japan aims to continue contributing to global rule-making on trade and investment by carrying out various negotiations in parallel, including the Regional Comprehensive Economic Partnership (RCEP) and the Japan-China-ROK FTA.

(2) Multilateral Trade Liberalization (WTO)

The multilateral trading system centered on the World Trade Organization (WTO) plays a vital role in negotiations aimed at trade liberalization as well as putting existing rules into practice, including disputes settlement. With regard to WTO negotiations that have been stalled for many years, efforts are ongoing to explore approaches towards revitalization, including addressing issues that are current and relevant to the times. At the 11th WTO Ministerial Conference (MC11) held in December, a ministerial declaration based on consensus among the WTO Members was not issued. However, with respect to issues such as e-commerce and fisheries subsidies, post-MC11 work programmes were decided upon, and ministerial statements by like-minded Members were issued. In the fields of e-commerce, micro, small and medium-sized enterprises (MSMEs), and investment facilitation. Such efforts by like-minded Members point to a new approach in the WTO. In particular, with regard to e-commerce, Japan demonstrated its leadership in the discussion process, and 71 Members, including the U.S., EU, and developing countries, participated in the joint statement.

(3) International Discussions Led by Japan

Concerning the G7 Summit, where the leaders of developed countries meet to discuss policy cooperation, the G7 Taormina Summit was held in May under the Presidency of Italy. Half of the G7 leaders, including the U.S. President Trump, were participating in the G7 for the first time, marking an “era of change” in the G7. At the same time, candid discussions were held on the matters of securing peace and stability in the world, as well as realizing inclusive growth in the global economy, against the growing severity of problems such as the issues of North Korea, terrorism and violent extremism, and refugees. In addition to deepening the personal relationships of trust between the respective leaders, the leaders concurred that the G7, as a driving force of an international community established based on rules and the sharing of fundamental values, will stand more united than ever before to address these issues.

At the G20 Hamburg Summit (Germany) held in July, the leaders engaged in a frank exchange of opinions on topics under the theme of “Shaping an interconnected world,” including the question of how the G20 can work together to address various downside risks while strengthening growth amidst global economy that remains at a moderate level alongside the presence of such risks of a downward turn. Concerning the response to problems such as the global economy, trade, and excess capacity, which were also regarded as issues of importance at the G7 Taormina Summit, Prime Minister Abe and other Japanese representatives lobbied strongly for the causes, contributing to agreement among the G20 on the relevant commitments to these issues. With the support of the G20 leaders, it was decided that Japan will assume G20 Presidency in 2019.

Asia-Pacific Economic Cooperation (APEC) is an economic cooperation framework in which 21 countries and regions from the Asia-Pacific Region participate. At the APEC Economic Leaders' Meeting in Da Nang, Viet Nam, in November 2017, extensive discussions took place on a wide range of topics, including deepening regional economic integration, strengthening MSME's competitiveness and innovation in the digital age, and promoting sustainable, innovative and inclusive growth. Prime Minister Abe commented about Japan's proactive stance for establishing “free and fair” trade rules, as well as Japan's initiatives such as the “productivity revolution,” the “human resources development revolution,” and “digital trade,” to the world.

The Organization for Economic Cooperation and Development (OECD) is the “world's largest think tank,” covering a wide range of economic and social issues. At the Ministerial Council Meeting held in June, discussions were held on the theme of “Globalization.” Japan emphasized the importance of maintaining and strengthening the multilateral trading system, ensuring level playing field, and developing “quality infrastructure with open and fair access,” all of which were reflected in the outcome documents of the meeting. In this way, Japan contributed to discussions in the OECD. Coinciding with the Ministerial Council Meeting, a signing ceremony was held for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”).

(Supporting the Overseas Business Expansion of Japanese Companies through Promotion of Public-Private Partnerships)

(1) Support for Japanese Companies' Overseas Business Expansion

The Government of Japan places great importance on promoting the overseas businesses of Japanese companies to incorporate the vigorous economic growth in foreign countries, including emerging countries, and to promote the steady growth of the Japanese economy. Concerning the support it offers for overseas business expansion of Japanese companies, Japan has been engaged in nationwide efforts towards the achievement of concrete Government goals, such as, for example, “achieving the Government's target of approximately 30 trillion yen in infrastructure exports by 2020” and “one trillion yen in exports of agricultural, forestry, and fishery products and food by 2019.”

Against this backdrop, the Ministry of Foreign Affairs has been working closely with diplomatic missions overseas, which serve as the liaison for Japanese companies in each country. It is also developing systems to support businesses in the respective countries, such as by establishing offices to support Japanese businesses and assigning officers in charge of infrastructure projects as well as business support officers (in charge of the food industry) at the relevant diplomatic missions overseas. The diplomatic missions overseas provide various consultation services, and support overseas expansion by Japanese companies in ways such as providing support for activities to promote Japanese products through the utilization of the diplomatic missions' facilities, and organizing seminars to help Japanese companies ensure that they are compliant with the local legal systems. In FY2016, the number of consultation cases received by Japanese embassies and consulates-general around the world reached 53,675, exceeding the 46,762 cases from the previous year. This number is expected to continue rising.

(2) Import Regulations on Agricultural, Forestry, and Fishery Produce as well as Food Products Produced in Japan

The Governments of the ROK, Singapore, Taiwan, China, Hong Kong, Macao, and Russia are maintaining the import restrictions, including import suspension, they have placed on agricultural, forestry, and fishery produce as well as food products produced in Japan, due to the Great East Japan Earthquake and the accident at TEPCO's Fukushima Daiichi Nuclear Power Station. MOFA has been disseminating accurate information promptly to the Governments and general public of these countries and regions, and has been tirelessly urging them to abolish the restrictions as soon as possible based on scientific evidence. After 2017, six countries, namely Qatar, Ukraine, Pakistan, Saudi Arabia, Argentina, and Turkey, have abolished such regulations, while the U.S., EU, and others have further relaxed restrictions.

(Promoting of Resources Diplomacy along with Foreign Direct Investment in Japan)

(1) Energy, Mineral Resources and Food Security

For Japan, which is dependent on other countries for many resources, efforts to secure a stable and cheap supply of resources remain important. MOFA is making use of various means of diplomacy in an effort to strengthen comprehensive and mutually-beneficial relationships with resource-producing countries, and to engage in strategic resource diplomacy such as by diversifying the supplier countries. In light of the structural changes arising in the energy industry worldwide in recent years, a new vision was launched in July 2017 after numerous reviews on the approach for new energy and resource diplomacy policies in the future (See Column “Japan's New Energy and Resource Diplomacy - Unveiling the “Global Vision” -”).

As for food security, faced with the possibility of global food shortages in the future, Japan has been implementing initiatives to secure a stable food supply through balancing the world's food supply and demand by increasing the world food production. Taking the opportunity of Food and Agriculture Organization (FAO) Director General Graziano's first visit to Japan in four years in 2017, Japan put effort into further strengthening its relationship with the FAO. (See Column “Strengthening Relations with the Food and Agriculture Organization of the United Nations (FAO)”).

(2) Sustainable Use of Living Marine Resources

As one of the responsible major fishing and consuming countries in the world, Japan has a basic policy of proper conservation and management and sustainable use of living marine resources. As such, Japan plays an active role as a member of many Regional Fisheries Management Organizations (RFMOs), which are the most important international organizations to decide and enforce conservation and management of fisheries resources. On the whaling issue, although the international situation remains difficult, Japan is making persistent efforts to deepen understanding among the international community, based on scientific evidence and international law, under the basic policy that diversity in culture and customs should be respected in the sustainable use of whale resources.

(3) Promotion of Foreign Direct Investment in Japan

The Council for Promotion of Foreign Direct Investment in Japan, formed in 2014, has been spearheading government-wide initiatives to find or attract investments, or realize the necessary systematic reforms in aiming to achieve the goal of doubling foreign companies' direct investment in Japan to 35 trillion yen by 2020, as addressed in the Government's Growth Strategy.

As an initiative to make use of diplomatic resources, MOFA has been engaging proactively in calling for investments in Japan and holding events to promote it through “contact points for Direct Investment towards Japan,” established at 126 diplomatic missions overseas. Additionally, a variety of strategic initiatives have been implemented both domestically and internationally through top-level sales carried out by government officials, and cooperation with related organizations such as the Japan External Trade Organization (JETRO).