The Private Sector in Japan’s State-Led Liberal Strategy

Abstract

The Private Sector in Japan’s State-Led Liberal Strategy Kristin Vekasi (bio) When Donald Trump won the 2016 presidential election, it was immediately evident that Japan’s already difficult regional choices would become even more fraught. As China’s economic and political power has surged over the past three decades, Japan has had to make difficult choices about balancing between coordinating with a close neighbor and cooperating with its powerful security ally. Saori Katada’s book Japan’s New Regional Reality: Geoeconomic Strategy in the Asia-Pacific is an important contribution to understanding Japan’s navigation of its geoeconomic situation. Many scholars emphasize deepening the U.S.-Japan alliance as key to Japan’s future stability and prosperity,1 or have found that Japan has deepened security ties in order to keep the United States in the region and hedge against China’s rise.2 Katada makes an important new contribution to this discussion, showing how Japan’s “state-led liberal strategy” has opened up new political space for the country to achieve its interests (introduction and chapter 1). She provides important nuance to our understanding of Japan’s geoeconomic strategy, particularly with evidence suggesting that it could be a “pivotal state” in the region. Japan’s maneuvers within the U.S.-China nexus are particularly evident in trade policy. Over the past decade, the two major attempts at regional integration have been the U.S.-led Trans-Pacific Partnership, which excluded China, and the Regional Comprehensive Economic Partnership, which excludes the United States. Japan’s role in both of these efforts demonstrates the characteristics of the state-led liberal strategy: regional integration, promotion of rules and standards, and formal institution building. Katada argues that while Japan overall leans toward the United States, its state-led liberal strategy has also allowed Japan to influence the direction of Chinese regional policy by guiding the types of rules, standards, and institutions [End Page 139] that have started to characterize Asian regional economic partnerships. One of the strengths of the book is that it gives Japan more agency and credit for its regional policy and places its strategy in an interesting domestic political economy story about new and “disembedded” relationships between the Japanese government and business. As all good pieces of scholarship do, this book introduces important new avenues of research. The voices and roles of the private sector are somewhat muted in the text. In the chapter on trade strategy, for example, Katada argues that the state, rather than the economic interests of the private sector, are driving Japan’s regional free trade agreement (FTA) strategy—a point of departure from the more integrated and bilateral strategy of the country in the past. She offers two points of evidence that are worth further interrogation as they provide additional insight into Japan’s strategy: a low FTA utilization rate and a seeming lack of eagerness to swiftly negotiate an FTA with China, despite early desire to do so from the business community (chapter 5). FTAs often have low utilization rates, in part because many are “cut and paste” agreements rather than completely novel texts. They try to cover a broad swath of industries in the context of ongoing negotiations, even if those industries are not key in that specific bilateral economic relationship. A UN Conference on Trade and Development report found that European Union FTAs have comparatively high utilization rates, with the amount of actual trade covered ranging from 40% to an astounding 90%. However, this does not reflect the actual number of companies utilizing the agreement, which analysts hypothesize is likely low, with small and medium-sized firms not taking advantage of new trade opportunities.3 Similarly, with the Association of Southeast Asian Nations (ASEAN) the smaller firms that make up the majority of the Southeast Asian economies rarely utilize FTAs.4 All of this is to say that the low utilization rates by Japanese firms of the freshly negotiated agreements does not necessarily indicate passivity or a lack of representation of their interests at the table. Most-favored-nation rates in Asia are already low, and so the benefits of newly negotiated trade agreements often take time to surface...