Section 3 Economic Diplomacy

1 Overview of Economic Diplomacy

In the international community, as competition among nations arises in the fields of politics, economy, and the military, the balance of power in the international arena is changing in an increasingly rapid and complex manner, while uncertainty over the existing international order is growing. The novel coronavirus disease (COVID-19) pandemic caused a rapid worldwide economic downturn through the suppression of economic activity. Since then, although the global economy as a whole has shown signs of a gradual recovery as the impact of COVID-19 has waned, prices are now soaring due to a combination of a recovery in demand and the impact of the situation in Ukraine. The outlook remains uncertain due to volatility in financial and capital markets, ballooning governmental debt arising from COVID-19 countermeasures, rising maritime transport and other logistics costs, and rising energy and commodity costs.

Against this backdrop, Japan continued its attempts to expand and develop a free and fair economic order. One and a half years after the launch of the Indo-Pacific Economic Framework for Prosperity (IPEF) negotiations, significant progress has been made, including the signing of the IPEF Supply Chain Agreement, and the substantial conclusion of the negotiations of the IPEF Clean Economy Agreement, and the IPEF Fair Economy Agreement. Regarding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the first accession negotiations since the agreement entered into force were concluded with the UK, and the Protocol on the accession of the UK to the CPTPP was signed in July.

At the World Trade Organization (WTO), the cornerstone of the multilateral trading system, efforts were made to strengthen the functions of the WTO regime, including acceptance of the Fisheries Subsidies Agreement, conclusion of text negotiations on the Agreement on Investment Facilitation for Development being pursued by like-minded countries including Japan, progress toward making new rules in the areas of e-commerce and services domestic regulation respectively, and participation in the Multi-Party Interim Appeal Arbitration Arrangement (MPIA).¹

Based on the above recognition, Japan will continue to accelerate its efforts to promote economic diplomacy, one of the priority areas of diplomacy, by focusing on the following three aspects: (1) rule-making and initiatives at international organizations to expand the free and fair economic order, such as the promotion of economic partnership agreements and the maintenance and strengthening of the multilateral trading system; (2) support for Japanese companies' overseas expansion by promoting public-private partnerships; and (3) resource diplomacy and inbound tourism promotion.

• 1 MPIA: Multi-party Interim Appeal Arbitration Arrangement
  An interim mechanism launched by like-minded members to substitute the functions of WTO's Appellate Body, which ceased to function since 2019, with the dispute settlement system provided for in the WTO Agreements.