Photo: TOSHIFUMI KITAMURA/AFP/Getty Images
At least three times in the past six years, Japan has stolen a march on the United States as a global economic rule-maker. In 2015, then-prime minister Shinzo Abe announced a “quality infrastructure” initiative that was the first credible answer to China’s Belt and Road Initiative (BRI). Two years later, after the United States pulled out of the Trans-Pacific Partnership (TPP), Tokyo persuaded the other 10 remaining TPP members to move ahead with a tweaked version of the high-standard regional trade deal. And in 2019, Abe presented his vision of “data free flow with trust” as the basis for global rules in a critical and largely ungoverned dimension of today’s global economy.
Like clockwork, two more years have passed, and Japan has put another economic policy idea on the table. In forming his cabinet early this month, new prime minister Fumio Kishida created the first-ever ministerial post for economic security, appointing third-term Liberal Democratic Party (LDP) member Takayuki Kobayashi to the role. Kishida defined Kobayashi’s mission as working “to ensure we have the strategic technology and supplies, prevent technologies from flowing out of the country, and create a self-sustaining economy.” To advance these objectives, the ruling LDP plans to submit economic security legislation to the Diet next year.
In substance, Kishida’s goals align closely with those of the Biden administration, which has emphasized strengthening the domestic economic foundations of national security, as well as protecting and promoting critical technologies and supply chains. But while the term “economic security” has been bandied about in Washington for several years, there has been little effort to give it coherence. The Biden administration may not be ready for a “secretary of economic security,” but it should jump on the opportunity to work with Tokyo to refine and promote the concept of economic security in the Indo-Pacific region and beyond.
Two words of caution. First, economic security should not be an excuse for protecting domestic markets, companies, or even workers from competition. The Biden administration’s “Buy American” and reshoring policies have a superficial appeal, but will come at a steep price if implemented literally—not just to downstream buyers and consumers but to workers displaced by resulting inefficiencies. Similarly, Kishida’s reference to a “self-sustaining economy” sounds uncomfortably like the arguments Tokyo used to make to justify barriers to imports of agricultural products in the name of “self-sufficiency.”
A second caveat is that economic security is not assured by hunkering down and trying to prevent all risk. Russian hacking, Chinese technology theft, and supply-chain disruptions are all real threats, but they are best addressed through targeted policy responses that mitigate the risk while also preserving the basic openness and market orientation of the U.S. and Japanese economies. An overly defensive posture can harm legitimate economic activity and stifle growth and innovation.
To be sure, hardening the country’s defenses against cyberattacks, technology leakage, and other external threats is a key element of economic security. In the past few years, Washington and Tokyo have both tightened their investment-screening and export-controls regimes and upgraded cybersecurity protections. Further alignment of these policies between the two countries and with other allies and partners is essential to ensure that adversaries cannot exploit gaps in these defenses. Recent U.S.-Japan cooperation to protect and promote critical technologies through the Quad and Group of Seven (G7) has been promising and should be built out further. Allies also need to find a way to work together in brushing China back when it engages in economic coercion. But again, these defensive measures need to be used in targeted ways that preserve broader economic openness.
Rather than retreating into a defensive or protectionist crouch, both countries should take a confident, offensive approach to economic security. Job one is investing in the domestic foundations of economic security. This is the goal of the Biden administration’s “build back better” initiative and proposed investments in infrastructure, research and development, and the U.S. workforce. In his own take on strengthening Japan’s economic security at home, new prime minister Kishida has made clear that he wants to temper his two predecessors’ single-minded focus on growth by putting more emphasis on wealth redistribution and “a new form of capitalism.” (The details of both government’s approaches can be debated and will be the subject of future commentaries.)
Beyond their individual efforts at home, Washington and Tokyo should work together to uphold and update the rules and norms of the global economy. Others—not just China but the European Union—are trying to shape those rules in their own image, and the United States and Japan need to play the game with just as much vision and vigor to ensure the rules continue to align with their interests. This, too, is a key element of economic security.
Three substantive areas are especially important for Tokyo and Washington to take forward their joint work on global economic rulemaking. One is infrastructure, where the two sides should put meat on the bones of the G7’s Build Back Better World initiative and the Blue Dot Network and work to realize some concrete projects. A second area is the digital economy, where a good start would be for both countries to join the Digital Economy Partnership Agreement (DEPA). And a third is trade, where Washington and Tokyo share a compelling interest in getting the United States back into a successor agreement to TPP.
Washington and Tokyo need regular conversations to coordinate their positions on these issues. The Competitiveness and Resilience (CoRe) Partnership agreed to in April by President Biden and former prime minister Yoshihide Suga was a good start, but there has not been much visible follow-through yet. The two sides should create a high-level bilateral forum—call it the “U.S.-Japan Economic Security Dialogue”—to discuss ways to operationalize bilateral cooperation on economic security. Reporting to the White House and Kantei (prime minister’s office), the forum should be led by senior officials of relevant agencies: the State and Commerce Departments on the U.S. side, and the Ministry of Foreign Affairs (MOFA) and Ministry of Economy, Trade, and Industry (METI) on the Japanese side. (Other agencies such as the Office of the U.S. Trade Representative and Treasury Department could be pulled in when appropriate but should mainly work with their counterparts along parallel tracks.) All of this could be supported by a track 1.5 group of nongovernmental experts from both sides.
The new Kishida administration’s initiative in moving forward a tangible economic security agenda should get serious attention in Washington. It highlights both the importance of a well-targeted economic security strategy in the United States—one based on confidence rather than fear—and the opportunity to work with the world’s third-largest economy and leading U.S. ally in Asia to push out economic rules and norms that advance the interests of both countries.
Matthew P. Goodman is senior vice president for economics at the Center for Strategic and International Studies (CSIS) in Washington, DC.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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