U.S.-Japan Economic Dialogue: Two Steps Forward, More Needed

November saw a flurry of economic diplomacy at the top levels of the Biden administration. The president himself met with fellow leaders at the Asia-Pacific Economic Cooperation (APEC) forum and reiterated U.S. plans to launch a new “Indo-Pacific economic framework” (IPEF). On a trip to Africa, Secretary of State Antony Blinken talked up the Build Back Better World (B3W) plan for global infrastructure investment, the Group of Seven’s (G7) answer to China’s Belt and Road Initiative. And Commerce Secretary Gina Raimondo and U.S. Trade Representative (USTR) Katherine Tai did parallel tours of Asia, announcing a slew of new economic dialogues with partners there.

My colleagues and I will offer more thoughts on the B3W and IPEF in upcoming writings. Here I want to touch briefly on the two new economic dialogues with Japan set up by Raimondo and Tai, assessing these against approaches recommended in recent Economics Program writings and events.

First up was a new Japan-U.S. Commercial and Industrial Partnership (JUCIP), announced in Tokyo on November 15 by Secretary Raimondo and Koichi Hagiuda, Japan’s minister for Economy, Trade, and Industry (METI). Through JUCIP, the two sides will work to “strengthen the competitiveness, resiliency, and security of both economies; to address shared global challenges such as climate change; and to achieve prosperity and maintain a free and fair economic order.” The wide-ranging agenda will include promoting two-way investment and business ties, battling market-distorting practices, strengthening supply-chain resiliency, protecting critical technologies, and encouraging development of clean energy and sustainable infrastructure. 

What is interesting about the JUCIP agenda is that it goes beyond traditional trade and investment issues discussed between commerce ministries to include important elements of economic security. As I wrote last month, the United States and Japan share a strong interest in hardening their defenses against cyberattacks, leakage of critical technologies, and threats to supply chains, as well as in upholding the rules and norms of the international economy. Together with investments in their own domestic economic strength, U.S.-Japan collaboration in these areas is critical to advancing the two allies’ individual and collective economic security.

USTR Tai’s visit to Tokyo came right on the heels of Raimondo’s and featured the announcement of a second bilateral dialogue, the U.S.-Japan Partnership on Trade. The USTR press release offered fewer specifics than the Commerce Department’s, but topics covered in the trade forum—which will be co-chaired by USTR, METI, and Japan’s Ministry of Foreign Affairs and convene for the first time early next year—will include “third country concerns, cooperation in regional and multilateral trade-related fora, addressing labor and environment-related priorities, a supportive digital ecosystem for all, and trade facilitation.”

Even setting aside the awkward acronym (the U.S.-Japan “POT”?), the trade partnership will likely disappoint those hoping for a deeper, more formal trade arrangement between the United States and Japan. At a CSIS event earlier this month, Charles Freeman, senior vice president for Asia at the U.S. Chamber of Commerce, noted, “To the business community, it doesn’t make much sense that with one of our closest allies and strategic partners, we don’t yet have a comprehensive economic partnership” to match those that the European Union and United Kingdom have with Japan. Nevertheless, the USTR forum could be useful if it serves as a channel for both addressing bilateral trade irritants and coordinating U.S. and Japanese responses to China’s market-distorting industrial policies and other “third country concerns.”

Overall, the Commerce and USTR dialogues are long-awaited and potentially useful first steps to take forward the U.S.-Japan “CoRe Partnership” announced by President Biden and former prime minister Yoshihide Suga in April. As hinted at by both Raimondo and Tai during their Asia tours, that broader partnership with the largest U.S. ally in the region will in turn be key to the success of the Indo-Pacific economic framework now being developed by the Biden White House.

But given the stakes for the IPEF as the emerging centerpiece of the Biden administration’s economic strategy toward a critical region (again, more on this to follow), the two Japan dialogues announced this month are insufficient. Japan is too important to U.S. strategic goals in the Indo-Pacific to be managed through separate initiatives led by two agencies whose policy remits are significant but limited. As I argued last month, the White House and Kantei (prime minister’s office) need to play a coordinating role within and between the two governments to ensure a broader U.S.-Japan conversation about economic security and greater alignment of policies to achieve that goal.

Japan’s newly elected prime minister, Fumio Kishida, is reportedly angling for his first visit to Washington in the next couple of months. That would be an opportune occasion to roll out a broader economic coordination mechanism of the kind just described.

Matthew P. Goodman is senior vice president for economics at the Center for Strategic and International Studies (CSIS).

This commentary is part of a project on U.S.-Japan economic relations generously supported by Merck & Co.

Commentaryis 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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Matthew P. Goodman

Matthew P. Goodman

Former Senior Vice President for Economics