EU-Japan summit to set G20 agenda

Japan’s Prime Minister Shinzo Abe topped off on Saturday a busy diplomatic week after two days with Donald Trump in the United States. The Thursday before, he and top European leaders met in Brussels for the EU-Japan summit which not only deepened their bilateral strategic partnership, but also set the agenda for June’s G20 summit in Osaka.

Thursday’s discussions were broad-ranging on issues from climate change to connectivity. However, one topic stood out above all else: the future of international trade and the rules-based economic order.

Japan, which remains the world’s third-largest economy after the United States and China, and Europe’s second-largest export market in Asia, has recently stepped up its leadership of the international trade agenda. And with it having the G20 presidency this year, this issue will be a key one at the Osaka summit in June which could cause tensions with this Trump administration given its protectionist leanings.

This same issue was a source of contention at last year’s G20 in Argentina, and also in 2018 in Germany which saw a clash between Trump and Chancellor Angela Merkel. The latter pushed for a strong G20 reaffirmation of international trade, while the US president secured a partial victory in inserting language in the end-of-summit communique that countries can protect their markets with “legitimate trade-defence instruments”.

The reason why trade was so central to the Brussels summit was the coming into effect in January of the EU-Japan free trade agreement. Both sides on Thursday took stock of implementation of this mammoth deal that covers around a third of global GDP and almost 650 million people.

Boon for EU exports

The accord took years to agree with the headlines captured by the scrapping of duties on 97 per cent and 99 per cent of Japanese and European imports respectively. This could be a particular boon for key EU exports to Japan such as dairy and food products, while Japan’s automakers may be big winners too.

Beyond the numbers, however, the co-host of Thursday’s summit — European Commission President Jean-Claude Juncker — has stressed that the EU-Japan trade treaty is also so important because it rests on “values and principles”. In part, this relates to the fact that the agreement is the first to be struck by Brussels which includes language upholding the Paris climate agreement.

Specifically, there is a commitment to support the Paris treaty by making a “positive contribution” to reducing climate change by cutting greenhouse gas emissions. This follows a move by the European Commission to try to ensure, going forward, that all EU trade bargains include reference to the key climate deal.

Yet, it is not just on the European front that Japan is making waves on international trade. In March last year, Tokyo was at the vanguard of 11 Asia-Pacific and Americas nations which signed the so-called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

And, in this context, the United States (after reversing course under Trump and deciding not to join CPTPP) began earlier this month negotiations for a bilateral trade agreement with Japan, a topic that was a central theme of Abe’s discussion with Trump on Friday and Saturday. The Washington-Tokyo negotiations come in a context in which, despite political tensions over the bilateral economic relationship, US-Japan trade topped $300 billion (Dh1,101 billion) last year, with Japanese firms having invested nearly $500 billion in the US market.

This underlines that one of the ironies of the timing of Japan renewing its international credentials on trade issues is that it comes in a context when the United States is widely perceived to be rolling back its global leadership of this agenda. Washington, for instance, has not just pulled out from entering into CPTTP, but has also been slapping tariffs on several key nations, including China.

Yet, it is not just the United States, but also another long-standing Japanese ally, the United Kingdom, which is also perplexing Tokyo right now on the economic front. UK ministers are on damage limitation exercises with Japanese counterparts after reportedly angering Tokyo with their tactics over securing a new post-Brexit trade treaty.

And this comes after Japan had already decided against replicating in any post-Brexit UK trade treaty the terms of the agreement Tokyo reached with the EU. Japan is instead reportedly seeking a tougher stance amid the alarm of many firms headquartered in the country, who employ some 140,000 UK-based employees, over the prospect of a no-deal Brexit withdrawal in 2019 or beyond.

This underlines the apparent hollow prospectus of many Brexiteers who, while wishing to see a “global Britain”, will through their commitment to London leaving the EU, exclude the nation from the benefits of the EU-Japan deal. This agreement has created exactly the type of free trade area ‘beyond Europe’ that is one of the key ambitions of multiple leading Brexiteers.

Taken overall, last week’s Brussels summit yet again burnished Japan’s international trade leadership credentials. And in the growing context of uncertainty over the future of the multilateral trade system, rules-based economic order and liberal democracy itself, Tokyo will leverage this dialogue at June’s G20 to help promote an agenda around commitment to multilateralism over bilateral deals, and internationalism over nationalism at a time of growing populism.

Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics