Does Japan’s participation in the TPP create predicaments for
China?
Dannan Wei (s1623044)
Pre-master of Asian Studies
Leiden University
Thesis
Supervisor: Lindsay Black
Date: 17/07/2016
Abstract
The TPP is one of the most well-known FTAs in the world, which accounts for 40% of the world total trade amount. According to some scholars, the TPP is an instrument to contain China led by the US, rather than a high-standard FTA. In addition, Japan, as the traditional alliance of the US and the vital trade partner of China, also participates in the TPP, following negotiations. This thesis focuses on Japan’s participation in the TPP and its impact on China. The problem that this paper will endeavor to solve is whether Japan’s participation in the TPP creates predicaments for China. The studies of the TPP differ from the aspect of various countries. By analyzing and comparing the studies inside and outside of China, I hold the view that China is facing an economic predicament and, because of China’s economic influence, a political predicament that is, by contrast, less severe. However, if China’s economic influence decreases due to the economic problems that it faces, the political predicament will be hard to avoid.
Key words:
TPP; The Sino-Japan relation; The US-Japan alliance; Regionalism; East Asia; Asia-Pacific; FTAContent
INTRODUCTION...3
LITERATURE REVIEW...6
CHAPTER 1. THE SINO-JAPAN RELATION...11
1.1THE SINO-JAPANRELATIONBEFORETHE TPP...11
1.2 JAPAN’S TPP PROCESS...12
CHAPTER 2．IS IT AN ECONOMIC PREDICAMENT FOR CHINA?...14
2.1 A PREDICAMENTINTHE 21STCENTURY...14
2.2 CAN CHINACOUNTERWEIGHTTHE JAPAN’S TPP STRATEGY?...18
2.3 CONCLUSION...21
CHAPTER 3. IS IT A POLITICAL PREDICAMENT FOR CHINA?...24
3.1 ACLOSER JAPAN-US ALLIANCE: THESECURITYTHREATTO CHINA?...24
3.2 ANEWSECURITY JAPAN-US LEDREGIONALINSTITUTION: THEREGIONALLEADERSHIPISSUE...28
3.3 THE TPP ASA FTA: CANTHE TPP REALLYCONTAINAGREATPOWER?...30
3.4 CONCLUSION...31
CHAPTER 4. CONCLUSION...33
Introduction
In 2006, the Trans-Pacific Partnership (TPP) began as an unimpressive regional free trade agreement (FTA), which was established by the P-4: New Zealand, Singapore, Brunei, and Chile. Indeed, even the participation of the US during the Bush administration did not contribute greatly to the global attention it received. It was not until the Obama administration promoted the TPP positively, that the TPP began to draw the world’s attention. Although the terms of the TPP are unprecedented and controversial, they did not prevent the TPP from becoming one of the most well-known free trade agreements in the world. The number of TPP Member States has increased from the initial four in 2006, to twelve in 2016. Among all Member States, Japan drew the most attention for its participation. Its road has been rough but continuous and persistent, and under the current government, the Abe cabinet has begun to accelerate the negotiation of the TPP. Japan has the third largest economy in the world and its participation means much to the TPP. Not only would Japan’s participation make the TPP total economic aggregate account for 40% of the global GDP, but also it would see the TPP as the biggest FTA in the world, surpassing the North American Free Trade Area (NAFTA) and the European Union (EU)1. However, China as the second largest economy and
a dominant country in Asia, is unable to become a TPP member, due to such problems as the transparency of government, opaque and discriminatory domestic policies, distortive production subsidies and management of its exchange rate, etc. At least in the short term, the high-requirements of the TPP shut the door on China’s entry. Many discussions have been promoted. After all, contemporary China is a country that cannot be ignored in the global economy, and particularly in Asia. China is also the biggest trade partner of Japan and the US. Nevertheless, the TPP, as the regional economic cooperation organization, did not include China. Thus, many scholars believe that it is because of the US’ “return to Asia” strategy that they intend to exclude China. The goal of excluding China is to build a new
1 “日日日 TPP 日日”. 日日日日日日日, Accessed November 15th, 2010 http://japan.people.com.cn/35463/43434/207945/index.html. [Japan.People.Com.Cn, “Japan’s road to TPP”]
Asia-Pacific order with limited Chinese influence. Indeed it has been said that the TPP is “a political strategy tool covered by an economic front.”2
During the past few decades, China has grown, not only economically, but also in regional status. China began to promote regional integration in an attempt to build regional order without the US. In Japan, the Hatoyama Yukio government promoted the Hatoyama vision of building the East Asian Community, expressing positivity in Sino-Japanese diplomatic relations and the transfer of core foreign policy to East Asia. On the contrary, Japan-US relations have worsened because of the Futenma military base problem. In the past years, the US has experienced serious economic recession and a fading influence in Asia. There is now a power vacuum, and China wants to fill it. In the regional cooperation, in Northeast Asia, China concentrates greatly on the China-Japan-Korea FTA (CJK FTA); in Southeast Asia, China develops the relation with ASEAN by promoting “10+1” or “10+3”. The US has limited influence in these areas of regional integration. However in turn, with China’s rise, the sense of crisis in neighboring countries has also increased, especially with the development of China’s military. It is arguable that it has become a source of military threat in neighboring countries, the repercussions of which can be seen from the increasing territorial disputes around China. Thus, the US implemented the concept of “rebalance” in its Asia strategy to balance China’s power in the region. The TPP, the “China excluded” organization, is regarded as a vital instrument.
In Asia, Japan’s status is special. On one hand, the Sino-Japan relations are one of the most influential relations in Asia, as well as being the nation that impacts the regional stability most. While China has complex historical problems with Japan, it is also its biggest economic partner. On the other hand, Japan has been the most important ally of the US in Asia since the postwar period. Therefore, Japan’s attitude towards the TPP, the new regional order led by the US, works much against China. Since the pro-China Hatoyama government fell from power due to the Futenma military base problem, the new administration has concentrated on “rectifying the deviation” 3in diplomatic policy, re-strengthening US-Japan relations. The
steady TPP process that overrides all resistance from various sectors in Japan is the signal of strengthening the Japan-US relations and searching for a more pivotal position in the 2 “Japan’s road to TPP”
3 日日日日“日日 TPP :日日日日日日“日日日日”日日日日日日日日日”日日日日日日2012 日 6 日日23[Yuechun, Jiang, “Joining TPP: The consideration and influence of Japan’s reaction to U.S ‘return to Asia’ strategy”, Contemporary World, No.6 (2012): 23]
Asia-Pacific region. Also, a strong alliance like Japan contributes much to the US “return to Asia” strategy.
With China faced with a neighbor country that cooperates closely with the US, some scholars argue that a political and economic predicament is created for China. This thesis will study the discourse, both in China and the West, and the Chinese official attitude, to analyze whether Japan’s TPP decision creates a predicament for China. The analysis will be based upon the existing research, official documents and relevant reports. The first section will look at the economic, political and inter-regional relations between China and Japan. The second section discusses the economic impact of Japan’s TPP on China and the third section will cover the political impact on China. The paper will conclude by answering the question of whether Japan creates a predicament for China based upon the discourse both inside and outside of China.
Literature Review
Owing to its short history, the literature on the TPP and Japan’s participation is not as prolific as other international organizations. Studies have been conducted both within China, and externally, on Japan’s impact on the State, however, the discussion is very diverse from country to country.
In general, it is clear that Japan would benefit a lot from the TPP, based upon the research of many scholars. They agree that Japan should not miss the “TPP bus”. On one hand, Solis and Katada, and Akimoto Kenji share the opinion that Japan’s agriculture is very fragile, that TPP is a chance for agriculture reform. The friction with vested interest groups is inescapable but it is necessary for the entirety of Japan’s economy. Chiang says that the TPP increases Japan’s significance and gives Japan a new prominence in the region4. Represented by Kabir Seghal,
some think that the TPP is a great chance for Japan’s economy since it can help Japan to open the US market further.5 On the other hand, some Chinese scholars hold an opposite view:
Weiwei Zhang and Bing Shao think that the TPP may hurt Japan’s economy; they think that the TPP costs too much and Japan will not gain relevant payback. Jiang Yuechun also says that the TPP may bring a disaster in the insurance system, employment rate, and the GDP6.
Liu Changli believes that the Japanese government should face the fact that agricultural reform is like a “mission impossible”7; it is too difficult and may cause more damage than
good. Nevertheless, more scholars hold the view that Japan would benefit from the TPP. Unlike the controversial debate on the influence to the Japanese economy, the majority of scholars share the same views on the influence upon the Chinese economy, which is that the TPP would bring about a negative influence upon China - especially with a Japanese participation in the TPP. Solis and Katada have mentioned in their research that no other States would experience economic consequences as negative as China does.8 Among these
scholars, some utilized model simulation to analyse the economic data and hypothesise possible consequences. Areerat and Kameyama built the general equilibrium model to study the influence of the TPP on the Northeast Asian countries.9 Wan Lu establishes the GTAP
4 Min-Hua Chiang, “The potential of China-Japan-Korea free trade agreement.” East Asia, No.30(2013):210
5 CNBC, “Three reasons to support TPP agreement”,
http://www.cnbc.com/2015/10/07/three-reasons-to-support-the-tpp-agreement-commentary.ht ml, accessed October 7th, 2015
6 Jiang, “Joining TPP”: 22]
7日日日日“TPP 日日日日日日日日日日日日日日”, 日日日日日日2011 日 3 日日18[Changli Liu, “The content, characteristics of the TPP and the Difficulties for Japan to participate”, Northeast Asia Forum, No.3 (2011):18]
8 Mireya Solis, Saori N. Katada, “Unlikely Pivotal States in Competitive free trade agreement diffusion: the effect of Japan’s trans-pacific partnership participation on Asia-Pacific Regional Integration”, New Political Economy, No.20 (2015): 165
9 Todsadee Areerat, Hiroshi Kameyama, etc,”Trans Pacific Strategic Economic Partnership With Japan, South Korea and China Integrate: General Equilibrium Approach” American
model to simulate the TPP environment and concludes with similar findings to those of Areerat and Kameyama. According to Wan, China would experience the decline of GDP, foreign trade, trade balance, and equivalent variation.10 Ni Yueju uses the contrasting analysis
of the revenue of the China-Japan-Korea (CJK) FTA and the TPP to prove that the CJK FTA would create more profits than the TPP to China, Japan and Korea, whilst the TPP would bring economic loss to China.11 Meanwhile, some Chinese scholars, such as Fan and Wang,
draw the similar conclusion based upon the theory of the trade diversion effect.12 China’s
official attitude is inexplicit from the official speech. On the contrary, only a few Chinese scholars such as Chen Jiyong and Wu Song hold the view that China would not be affected greatly by the TPP. Chen and Wu do not believe that the TPP would work in practice because of the inapplicability of the Heckscher-Ohlin Theory13; Li and Yin believe that the
cooperation within East Asia can compensate for the loss due to the absence of the TPP;14 Ni
purports that China may still attract Japan with a large economic cooperation space15. In fact,
for many scholars, this shared opinion is based upon the CJK FTA itself. Kuo, Chan, and Chiang are more optimistic about the CJK FTA due to the economic interdependence and complementarities than the TPP16; Zhang and Shao think that Japan still has the possibilities
to focus more on the cooperation with China.17 Song and Wen regard the CJK FTA as a strong
instrument that the Chinese government can use to balance the TPP.18 Akiyama also believes
Journal of Economics and Business Administration 4 (2012): 44
10 日日, ”日日 TPP 日日日日日日日日日—日日 GTAP 日日日日日”, 日日日日日2011 日日日日日65Lu Wan, “The study of economic influence of US’s TPP strategy—Based on GTAP model”, Contemporary Asia-Pacific Studies, No.4 (2011): 65
11 日日日“日日日日日日日日日日—日日日 FTA 日日 TPP?”日日日日日2013 日日日日日87[Yueju Ni, “CJK FTA or TPP? Japan’s choice of FTA strategies”, Contemporary Asia-Pacific, No.1 (2013): 86]
12 日日日日“日日 TPP 日日日日日日日日” 日日日日 2014 日日日日日[Fuping Fan,”The influence to China of Japanese TPP strategy”(MA thesis., Xiangtan University, 2014): 34]
13 日日日日日日日“TPP 日日日日日日日日日日日日日日日日日日日日日”日日日日日日日日日日日日日日日日日2014 日日 67 日日6[Jiyong Chen and Song Wu, “The uncertainty of the balance of East Asia economy of TPP and China’s counterweight”, Wuhan University Journal (Philosophy and Social Sciences), Vol 67 (2014): 6]
14 日日日日日日日日“日日日日 TPP 日日日日日日”日日日日日日2015 日日日日, 164[Shuling Li and Jiyuan Yin,”The necessity of China’s participation of TPP”, Zhejiang Journal, No.5 (2015): 164]
15 Ni, “CJK FTA or TPP?”, 87
16 Chiang, “The potential of China-Japan-Korea”:209; Sarah Chan and Chun-Chien Kuo, “Trilateral Trade Relations among China, Japan and South Korea: challenges and prospects of regional economic integration”, East Asia, Vol.22 (2005): 45
17日日日日日日日“日日日日 TPP 日日日日日日日日日日日日日日日”日日日日日日日日2012 日 5 日日35[Weiwei Zhang, Bing Shao, “Japan’s political consideration in TPP and China’s countermeasure”, Modern Japan Economy, No.5 (2012): 35]
18 Guoyou Song and Jinyuan Wen, “China’s free trade agreement strategies.” The Washington Quarterly, No.35(2012):112
that the CJK FTA is still attractive to Japan, however, doubts are expressed as to whether Japan can join due to the competiveness between China and the US.19
When it comes to political perspective, the opinions also come to a divergence. On one hand, almost all scholars admit that there exists a certain political rhetoric attaching to the US and the TPP. Auslin believes that for the US, the TPP is a counterweight to China’s growing domination in regional trade flow. Japan’s participation can be taken as a tool against China’s rise and may encourage other Asian countries20. Some Chinese scholars share the same view
put forward by Auslin. Song & Wen mention that the TPP agenda is a tool for the US to return to Asia, constraining China’s rise and ensuring its rule-maker position in the region21.
According to Chiang, the TPP is the US’ “return to Asia” strategy and can provide a platform for solidarity since the US has not gained a great deal of regional influence in past years22.
Akiyama says that the TPP is a fight for regional leadership between China and the US.23
Nevertheless, what is argued is the political influence of Japan’s participation. For Japan, it is widely believed that Japan would gain much from the TPP. Solis and Katada say that an improvement of the Japan-US relationship, and Japan’s security environment, are the main reasons for Japan to join the TPP24. According to Auslin, Solis and Katada, it’s also a golden
chance for Japan to be a pivotal country in the region; Japan, therefore, cannot miss this opportunity. The TPP membership would help Japan develop its credibility. Auslin also agrees that strengthening the Japan-US alliance is one of the reasons why Japan needs to getting it right, in terms of the TPP. The TPP would position Japan at the center of US-Asia policy in the coming decades and would see it become a key player in Asian.25 As for China,
most Chinese scholars mention the negative effect of the TPP on China. Xiuliang Xu and Dai Tongliang observe the increase in intensive military cooperation after the Senkaku/Diaoyu Island collision between Japan and the US as a consequence of Japan’s participation in the TPP.26 Also, Liu and Jiang observed that Japan has aligned itself to the US’s interest to 19 日日日日, “TPP 日日日日”, 日日日日,2012 日 3 日: 25[Akiyama Kenji, “TPP and Northeast Asia”, Japan Studies, No.3 (2012): 25]
20 Michael Auslin, “Getting it right: Japan and trans-pacific partnership”, Asia-Pacific Review, No.19(2012):27
21 Song and Jinyuan Wen, “China’s free trade agreement strategies.” 107 22 Chiang, “The potential of China-Japan-Korea free trade agreement.”: 210 23 Akiyama “TPP and Northeast Asia”, 26
24 Solis and Katada, “Unlikely Pivotal States”:165 25 Auslin, “Getting it right”: 29
26 日日日日日日日: “日日日日 TPP 日日日日日日日日日日日日日日日日日”,日日日日日日日,2015 日日 8 日,93[Xiude Xu and Tongliang Dai,“The Influence of Japan's Joining in TPP Negotiation to Related Economic Entities and China's Countermeasures”, Pacific Journal, No.8 (2015), 93.]
guarantee its security through the TPP27. Fangyin Zhou believes that China’s regional
influence can be impacted if another great power is introduced in Asia.28 With regard to the
views of scholars from other countries, the opinions vary. Scott and Jeffery doubt that whether an FTA can contain a great power, with Auslin sharing a similar opinion.29
In addition, there are also discussions about the impact on East Asian regionalism and integration. For instance, Solis and Katada have discussed the fact that Japan has caused concerns to both Northeast and Southeast Asia. ASEAN is worried about losing the “driver seat”, whilst China worries about its trade with Japan.30 Akiyama mentions that one of the
US’ intentions is to dissolve the East Asian unity, which may form a threat to its hegemony in the future31. Auslin does not address this directly; he writes that other countries want the
US-Japan alliance to balance out China’s influence, which could contribute to further distrust in the region32. Chiang mentions that China now promotes regional cooperation positively,
focusing on a China-centered regional integration; Japan’s pro-American choice would impact the fragile regional cooperation.33
Finally, some Chinese scholars ask the question whether the TPP can be established in the end. Zhang and Shao, and Guo and Song, all doubt the availability of the TPP due to its unprecedented high standards. They write that there are serious counterviews, even within the US government. Currently, the TPP is still under on-going negotiation, and consequently there are some concerns raised as to the outcome of the TPP. Another vital factor is the heated argument in Japan. Firstly, neither the Democratic Party of Japan (DJP) nor the Liberal Democratic Party of Japan (LDP) reached consensus in its own party34. Moreover, Kato
Yoshikazu observes that discussion on all levels - from politicians, governmental sectors,
27 Jiang, “Joining TPP”: 37
28 日日日日“日日日日日日日日日日日日日日日日日日日日日”日日日日日 2012 日日日日日10[Fangyin Zhou, “China’s rise, the changing East Asian structure and the development direction of East Asian order.” Journal of Contemporary Asia-Pacific Studies, No.5 (2012): 10]
29 Jeffery J Schott and Julia Muir, etc. Understanding the Trans Pacific Partnership (Washington DC: Peterson Institute for International Economics, 2012), 58
30 Solis and Katada “Unlikely Pivotal States”: 168 31 Akiyama, “TPP and Northeast Asia”, 22
32 Auslin, “Getting it right”: 29
33 Chiang, “The potential of China-Japan-Korea”: 204 34 Jiang, “Joining TPP”: 39
economists, entrepreneurs, and the layman - the discussion is drastic35. Other scholars also
widely report this phenomenon. As the TPP is still a topic before the Japanese congress, whether it would work in practice is as yet unclear and yet to be seen.
In short, in former studies, the TPP is analyzed for its political and economic impact. Compared with other FTAs, not only is its economic impact analysed but so is its political impact. China have not participated, or been excluded from the TPP, though Chinese scholars work a great deal on the TPP, presenting studies from their perspectives. After reviewing the relevant and former research literature, the trend is that current research analyses the impact on China in rather comprehensive ways. There are those who believe that Japan want to gain both political and economic achievements through the TPP, making it a multi-functional tool for Japan. Meanwhile, the discussion about the impact on China is different from person to person.
Chapter 1. The Sino-Japan relation
1.1The Sino-Japan relation before the TPP
China and Japan have been closely related since ancient times. During the neoteric era, however, this close relationship gradually transformed into hostility. The Sino-Japanese War from 1894-1895 and the second Sino-Japan War during WWII caused the deep-rooted historical problem and animosity, through nationalism, towards one another. With the end of WWII, came the beginning of the Cold War. China and Japan once again stood in the two opposite camps, which also laid the foundation of the differences of their future regional strategies. During the Japanese “lost generation” period, China began its high-speed developing period, surpassing Japan in the 21st century and becoming the second largest economy in the world. Economic cooperation also developed rapidly between China and Japan due to their economic complementarity. The Sino-Japanese relations in the new century 35日日日日日“日日日日 TPP 日日日日日日日日日日”日日日日日日2015 日 12 日 7 日日002[Kato Yoshikazu, “The drastic domestic debate of Japan’s TPP strategies” Leaning Times, December 7th, 2012, 2 ]
are, on the surface, more competitive in the areas of regional leadership, rather than being openly adversarial. In the areas of regional integration, China and Japan have differing regional strategies. Since the US-Japan Security Treaty was signed after WWII, Japan has relied upon the US in many respects, particularly in security. The US-Japan relationship is the keystone of Japan’s diplomatic strategy. As well as this, Japan’s geographical location in Asia led to Japan focusing more on its Asia-Pacific strategy rather than Asian integration. On the other hand, China was the only hegemon in Asia for a long period of time. Even though China experienced a century of decay, it is still accustomed to the Sino-centric Asia. Thus, the Chinese regional strategy is “pro Asian”, and is trying to build an Asian order without a regional power since its rise. Although the Sino-Japanese relations are more competitive than hostile, the historical problems and national sentiment can still be intensified easily. At the time of the Senkaku/Diaoyu Island dispute, all of China was engulfed with anti-Japanese sentiment. Nowadays, in regional cooperation, Japan has fallen behind China and Korea in FTA processes. Trade from the Japanese FTA only accounts for 16% of Japanese total trade, and even though Japan has signed FTAs with many countries, the target countries are often small, either in their economic scale or in their trade with Japan. The FTA, with its main trade partners such as the US, the EU, or China, progresses but little. Japan is experiencing a decline in its regional influence, whilst China has a view to forming a new hegemony. Generally, and considering the current Sino-Japanese relations, the TPP strategy is imperative for Japan, even as it is under hot discussion.
1.2 Japan’s TPP process
After the pro-China Hatoyama resigned, Japan returned to its Asia-Pacific way. Prime Minster Kan Naoto declared the concept of an Asia-Pacific Community in the Yokohama Declaration at the 18th APEC summit36. Within the region, compared with “10+3”, Japan
promotes the “10+6”, which contains additionally India, Australia and New Zealand. In November 2010, Kan expressed the intention of participating in the TPP formally. Kan regards the TPP as the third opening for Japan after the “black boat” and Meiji restoration, a turning point for Japan’s economy and reform. However, the plan was postponed due to the strong resistance from the Ministry of Agriculture Forestry and Fisheries (MAFF) as well as in the wake of the earthquake in 2011. The second vital moment on Japan’s TPP road was the announcement of accession in the TPP negotiation in November 2011, announced by Prime 36 “Japan’s road to TPP”
Minister Noda Yoshihiko. The Noda administration took their strong intentions for the TPP into action. Comforting agricultural groups, transferring objectors and negotiating with other TPP Member States, the Noda administration promoted the TPP process intensively. Consequently, the TPP proceeded rapidly when Noda was in office. In July 2013, Prime Minister Abe Shinzo announced that Japan had finally become one of the TPP Member States.37
The Japanese government and the Prime Ministers have changed three times in three years, and from a host of different Parties. Although Japan’s unstable political situation worsens the TPP process, every government has promoted TPP policies despite strong domestic resistance, which highlights the importance of the TPP to Japan. Even though Japan’s fragile agricultural sector may face a huge threat in terms of tariff elimination with the TPP, Japan believes it would benefit overall from the traditional interest, such as exports, as well as non-traditional interest like security and international relations.38 Therefore, the TPP has
become another tool to construct the Asia-Pacific Community but not the East Asian Community; the cooperation in the Pacific Rim but not the cooperation inside East Asia. The TPP, as an emerging FTA and the centerpiece of Asian-Pacific strategy, which is led by its traditional alliance, is pivotal for Japan.
37 “Japan’s road to TPP” 38 Ni, “CJK FTA or TPP?”: 87
Chapter 2．Is it an economic predicament for China?
2.1 A predicament in the 21
stcentury
2.1.1 International comments
Although most scholars do not think that the TPP is a zero-sum game in East Asia, they still believe that Japan’s steps to a US-led Asian trade agreement may bring actual disadvantages to China. Even though China has its own FTA strategies, the impact from Japan’s decision is enormous.
It can be argued that the TPP is likely to result in a great impact on non-Member States based upon the model simulation. Being the second largest economy in the world, it is unlikely that China will be excluded. Since Japan has an abundant overall volume of trade and an already competitive trade relationship with China, its participation makes the TPP more dangerous to China. In their research, Solis and Katada have discussed that no other State would experience the economic consequence as negatively as China does, it would suffer the brunt of trade diversion effects with an expected income loss of 15 billion dollars39. There are also
scholars like Areerat who have employed a general equilibrium approach to simulate the TPP with Japan, with China or with Korea separately to calculate the economic consequences. From the model simulation, the result suggests that the original TPP without Japan, China or Korea would result in a 509 million dollar loss to China. The TPP, with Japanese participation but without China or Korea, which reflects the current situation, would cause a 1915 million dollars loss to China.40
Table: 2-1 Change of Equivalent Variation (EV)41
39 Solis, Katada, “Unlikely Pivotal States”: 165 40Areerat, ”Trans Pacific Strategic Economic Partnership”: 44
China’s current FTA policies would also be affected. For example, China is now pushing the CJK FTA for a further advancement in constructing a China-centered regional economic integration in Northeast Asia.42 But participation in both the TPP and the CJK FTA is difficult
for Japan considering the political contradictions and the cost of each agreement. From Japan’s perspective, a TPP without China in the initial negotiation would be one that could be used later as leverage against its main rival in the region. Also, it would be inevitable for China to abide by the common standards established by both the US and Japan, two of the largest economies in the world.
2.1.2 Comments inside China
Chinese scholars Song and Wen predict worsening consequences for China based on two factors: the direct trade loss because of competition, and the impact on trade strategy and environment. In 2012, China’s trade volume with TPP members accounted for 15.2% of the entire volume, whilst the TPP, with Japan and Korea combined, accounted for 34.3% of China’s entire export amount. These percentages demonstrate the significance of Japan’s decisions and their effects on the Chinese economy. The first challenge faced by China is the trade diversion effect. The Global Trade Analysis Project (GTAP) model of the elimination of tariffs suggests that the economic conditions of all Member States would benefit under the TPP, especially for Japan.43 China’s exports are not indispensable to Japan, thus when
compared with other TPP Member States that do not have tariffs, China would lose its competitiveness in the Japanese market. For example, in mechanical and electrical products and light industry products, China is already in a position where it must compete with four TPP Member States: US, Canada, Australia and New Zealand. Major competitors in the textile industry are the US and Canada44, which has been demonstrated by Chinese scholars
using the Gravity Model. In sum, the trade diversion effect is inevitable. Even though the trade between China and Japan will still develop, its scale and importance would likely be 42 Chiang, “The potential of China-Japan-Korea free trade agreement.”: 210
43 Song and Wen, “China’s free trade agreement strategies.” The Washington Quarterly, No.35(2012):107
44 Fan,”The influence to China of Japanese TPP strategy”: 34
USD million change in real GDP
TPP TPP+J TPP+K TPP+C Japan -340 6637 -3093 -713 China -509 -1915 14358 -1688 Korea -92 -582 -1402 4495 USA 337 3788 399 2178 EU -874 -3086 -4816 -1816
diminished. Japan has acted as the most important investor and technology supplier for East Asia since the 1970s and Southeast Asian TPP countries like Vietnam and Malaysia would compete for Japan’s investment with China. With the domestic restructuring of the Chinese economy, its long-held advantage—cheap labor—is not as competitive, evident with a previous comparison made with many emerging Southeast Asian countries. Moreover, there has been a growing emphasis amongst the TPP members on the improvement of the
investment environment, which also weakens China’s comparative advantage. All these changes will gradually make these countries more attractive to Japanese enterprises. The Minister of Economy, Trade and Industry in Japan published the White Paper of Trade in 2013, stating that “because of the rising welfare, the appreciation of RMB and the other investment risks like boycotts of Japanese goods, China is losing its attraction as a
manufacturing industry base.” Indeed it was held that, “ASEAN countries may be better than China in terms of the investment environment”. The White Paper also pointed out that factory construction in other TPP Asia-Pacific countries is becoming more and more profitable.45
Thus, China is becoming less attractive compared to the other Asia-Pacific countries in terms of the investment environment for Japanese enterprises. Southeast Asia is a rising competitor for the replacement of China’s position as the world factory. In short, China is facing strong competition from inside Japan’s market and the investment from Japan. In addition, Japan would become increasingly stronger in competing with China in the US market if the tariffs between Japan and the US were to be eliminated under the TPP framework. The US has been one of China’s two biggest trade partners for many years, so the risk of China losing even a fraction of the US market is too severe to bear.
Table 2-2 : The economic impact of Japan’s participation of TPP and the elimination of tariff between Japan and US46
45 Fan,”The study of Japan TPP strategy”: 34
46 Wan, “The study of economic influence of US’s TPP strategy”: 68
Country Percent Change in real GDP (%) Percent change in export (%) Percent change in import (%) Change of term of trade (%) Change of trade balance (USD million) Change of Equivalent variation (USD million)
China -0.31 -0.42 -0.45 -0.2 -375.39 -775.96 US 0.06 1.1 0.81 0.17 -496.96 1877.07 Japan 0.34 2.3 3.24 0.44 -2378.59 6851.6 TPP7 0.55 1.05 1.63 0.32 -1540.93 2359.59 EU -0.16 -0.11 -0.21 -0.04 2671.19 -1434 Korea -0.30 -0.31 -0.39 -0.18 44.79 -521.07 HK and -0.23 -0.22 -0.27 -0.12 92.96 -339.09 14
Apart from a direct loss in trade with Japan, China’s overall trade strategies and environment would also be impacted by Japan’s TPP decision. The CJK FTA would bear the brunt. China, Japan and Korea account for 22% of the world’s population, 20% of the world’s GDP and 70% of Asian GDP.47 Economic complementarity among the three countries makes this FTA
highly attractive to China. Since the proposal promoted by the Chinese government in 2002, its process has been slow and arduous. After the TPP negotiation, Japan postponed the CJK FTA. Now the final formation of the CJK FTA has become an unknown quantity. Even if Japan were to also participate in the CJK FTA, the TPP has already helped Japan in its vulnerable industries, making it possible for Japan to use the high-standard terms in the TPP to lead the CJK FTA. China has lost a vital tool in the Asia-Pacific region economic
cooperation. The economic scale of the TPP has risen by 7% since Japan’s participation. For ASEAN countries, the possibility of neglecting their FTAs with China is rising, with more tempting TPP terms becoming available. In fact, the trade of ASEAN with Japan and the US is worth far more than the trade with China. If the terms of tariff elimination or cancelling the control of trade of service applies, the countries that are both ASEAN members and TPP members - such as Malaysia, Singapore, Vietnam and Brunei - would focus more on the trade with other TPP Member States. It could counteract some trade with China, changing the regional trade flow.
2.2 Can China counterweight the Japan’s TPP strategy?
2.2.1 China’s implicit official attitude
While the majority of scholars believe that China is now facing an economic predicament, there are also some optimistic views that the TPP would not actually cause much damage to
47 日日日“TPP 日日日日日日日日”日日日日日日日 2014 日日日日日 Can Wang, “The influence of TPP to China’s foreign trade”(MA thesis., Shanghai Normal University2014): 69
China. A small percentage of Chinese scholars are still optimistic about the TPP, and some Chinese official departments have given some neutral comments about the TPP also.
Nevertheless, the overall attitude of Chinese official departments towards the TPP is implicit. The comments from China’s official departments on the TPP do not present any outright concerns or dissatisfaction. Neither the Ministry of Foreign Affairs nor the Ministry of Commerce has mentioned the possible negative effect on China. The minister of the Ministry of Commerce, Gao Hucheng, commented at a State Council Information Office press
conference that “we do not believe that the TPP is aimed at China, RCEP is not aimed at the TPP either. On the contrary, we think they are parallel.” He mentioned the TPP with PCEP, treating the TPP as a normal trade agreement in the Asia-Pacific region, such as APEC; “China would be open to all transparent, comprehensive free trade agreements. But we still need time to evaluate TPP”48. The Foreign Ministry Spokesperson, Hua Chunying,
commented on Japan’s TPP strategy in a regular press conference, stating that:
“In the Yokohama APEC summit in 2010, we have reached consensus that no matter whether it’s 10+3 or 10+6 or TPP, every FTA should be regarded as a feasible approach to realize the FATTP”. 49
China’s Prime Minister Li Keqiang expressed the same opinion in the speech of the opening ceremony of Boao Forum for Asia. 50
2.2.2 The positive comments from Chinese scholars
Unlike the Chinese official departments, only a few of China’s scholars express a positive attitude towards the impact of the TPP and Japan’s participation with China. On the one hand, these scholars doubt whether the TPP will ever happen; they do not believe that all TPP Member States are sufficiently prepared for the TPP regulations, even Japan. The first barrier that the TPP countries need to face is that the TPP terms do not fit with the Heckscher-Ohlin
48 “日日日日日日日 TPP 日日日日日日 RCEP 日日日日”日日日日日日[“Minister of Commerce: the TPP is parallel with the RCEP”, China’s government. ] http://www.gov.cn/xinwen/2016-02/23/content_5045240.htm
49 “日日日日日日日日日日日日日日日日日日日日日日”日日日日[“Minister of Foreign Affairs: the relevant trade terms should follow the terms from WTO”, People.cn.]
http://politics.people.com.cn/n/2015/1008/c70731-27673797.html
50 “日日日日日日日 TPP 日日日日日”日日日日[“Li Keqiang: China is open to the TPP”, Sina News. ] http://news.sina.com.cn/w/2014-04-10/110729902879.shtml
Theory[51],[52]. In East Asia, Japan is far more developed than the other TPP Member States, so
the standard is also different to other countries. If it is inevitable to apply the high-standard TPP rules to all Member States, the huge gap of factor endowment and economic scales would bring negative impacts upon the Member States. Secondly, many TPP Member States also lack the proper conditions to apply the TPP rules. For instance, the rules about labor standards and the uniform institution both emphasize the improvement of the overall standard of membership countries. For developed countries with relatively mature institutions like Japan and the US, this may be easy to achieve, but for most developing countries like Vietnam, it is a long-term process and runs the risk of backfiring on the TPP as a collective. Developing countries also need to face the high adjustment costs, which may be too high to afford. Last but not the least, TPP policies may strike a blow to the protective industries. Protective industries exist in almost all countries; for Japan it is agriculture, while for the US it is the automobile industry. Taking Japan as an example, it is difficult for Japanese
agriculture to achievemechanization due to its labor, territory area and topography. Agriculture has always been the traditional protective industry. Japan’s agricultural
department believes that the elimination of all tariffs is a catastrophe for Japan’s agriculture. Thus, Japan’s agricultural groups, on the most part, strongly oppose the government’s TPP decision.
On the other hand, although some scholars admit that there are negative influences for China brought about by Japan’s TPP decision, they still believe that these difficulties do not present a severe challenge and can be overcome in many ways. With a population of more than 1.3 billion people, these scholars believe that boosting domestic demand in China is an effective way to counter the outside pressure53 and to reduce the dependence on foreign trade. Another
solution is to form other China-led free trade agreements to compete with the TPP. It is believed that the profits created by the cooperation within East Asia can compensate for the 51 The Heckscher-Ohlin theory (H-O) theory is one of the four critical theorems of the Heckscher-Ohlin model, developed by Swedish economist Eli Heckscher and Bertil Ohlin. It states tat a country will export goods that use its abundant factors intensively, and import goods that use its scare factors intensively. In the two-factor case, it states: “A capital-abundant country will export the capital-intensive good, while the labor-abundant country will export the labor-intensive good.” (Wassily Lenotief, Domestic Production and Foreign Trade—The American Capital Position Reexamined, Economia Internazionale, Proceedings of the American Philosophical Society,Vol. 97, No. 4 (1953), 332 )
52 Chen and Wu, “The uncertainty of the balance”: 6 53Fan,”The influence to China of Japanese TPP strategy”: 34
loss due to the absence of the TPP54. Currently, it seems that the RCEP and the One Belt One
Road are taking on this role. An additional choice for China is to incentivize Japan to participate in the CJK FTA. According to the economic data, based upon the GTAP model, the CJK FTA would gain much more from the real GDP and welfare than the TPP
agreement.55 In addition, whether the focus is upon exports or imports, the total trade amount
of China and Korea with Japan is higher than the total trade amount of the other 11 countries. China has been ranked first in Japan’s foreign trade in terms of both exports and imports for many years while Korea ranks third and fourth, respectively.56 The CJK FTA is also stronger
than the TPP in the trade intensity perspective. The CJK FTA would also create more welfare for Japan than the TPP would, which is also proposed by Japanese scholars.57 Therefore,
attracting a Japanese focus on the CJK FTA, through economic incentives, seems more feasible for China.
Table: 2-3 The effectiveness of macro-economy of CJK FTA58
EV (USD million) GDP increase (%) Export increase (%) Import increase (%)
Japan 20374 0.41 4.77 6.71
China 6294 0.83 10.5 14.21
Korea 151470.41 3.99 9.77 12.69
2.3 Conclusion
Both Chinese and Western scholars have published their arguments on the impact of Japan’s TPP decision. The majority holds the view that Japan’s TPP decision could lead to an economic predicament for China while a few scholars purport otherwise. By comparing their works and official announcements, and analyzing the existing model simulations built by different scholars, I draw the same conclusion as the former that Japan’s TPP decision will lead to an economic predicament for China.
Firstly, and despite the influence of the TPP, since Japan itself has been one of the most important trade partners with China, every movement by Japan can cause a significant impact. The direct economic effect of the TPP is the trade diversion effect. The strict policy of the tariff brings an obvious trade diversion effect on non-TPP Member States whilst 54 Li and Yin “The necessity of China”: 164
55Areerat, ,”Trans Pacific Strategic Economic Partnership With Japan”: 4
56 日日日日“日日 TPP 日日日日”日日日日日 2014 日日日日日 Taixing Wu, “The study of Japan TPP strategy” (PhD, diss., China Foreign Affair University, 2014): 166
57 Ni, “CJK FTA or TPP? ”: 87 58 Ni, “CJK FTA or TPP? “: 88
causing trade creation effects on Member States. The TPP also has terms that the whole industry chain should be completed within TPP Member States. The developing TPP Member States have a similar export productions category to China, so they can become the perfect substitute of China. Under the TPP policy, China is facing the danger of losing the Japanese market. Meanwhile, the competition with Japan in the US market makes the situation worse. This ubiquity of effect makes it extremely difficult for China to deal with.
From the official Chinese perspective, not many challenges brought by Japan’s TPP strategy are mentioned. Meanwhile, the RCEP and other FTAs are more “popular” in China’s official announcements. In my opinion, it is a signal that the Chinese government has also recognized the potential threat of the TPP. It is possible that the Chinese government wants to emphasize the positive effect and understate the negative effect to maintain the people’s confidence. Therefore, instead of advertising the impact of the TPP, the Chinese government promotes the “self-centered” FTA more frequently.
Some Chinese scholars further doubt the possibility of implementing the TPP. Although the entire formation of the TPP is high in costs and controversial, particularly to some developing countries with unsound policies, its implementation is irreversible. What the TPP presents is not only a normal agreement, but also a brand new developing mode of FTAs in the future, and the centerpiece of the US’ “return to Asia” strategy. Even if the TPP has difficulties, such as with productive industries, with positive promotion by the US and the cooperation of other great powers like Japan, Canada and Australia, the establishment of the TPP is inevitable. The US and Japan have reached an agreement in the tariff problem of their disadvantageous industries, from which the determination of promoting the TPP can be seen. The process may be time-consuming and costly, but the TPP would be established in the end. Some other scholars believe that China has several countermeasures against the TPP, but the effectiveness is doubtful. For instance, reducing the pressure by expanding the domestic market seems to be accepted by many scholars. Indeed, due to the huge population base and the potential domestic market, China is able to reduce its dependence on foreign trade to some degree. Nevertheless, in the overall situation of economic globalization, the domestic market cannot replace the status of trade. Expanding the domestic market has been the key solution in China’s policy, but it is not capable in all cases. The difficulties that China has to face in expanding its domestic market—the deficient ability of supply or the insufficient consumption demand—are not easier than facing the challenge brought by the TPP.
Another solution is to utilize the CJK FTA to attract Japan, motivating Japan to work more in regional cooperation. In the current model simulations, the CJK FTA can bring more economic benefits to Japan than the TPP does. However, an FTA is not solely for the purposes of the economy, but also the result of politics. Thus, the utilization of economic “temptation” alone cannot motivate Japan to promote the CJK FTA. The CJK FTA may bring more traditional interests to Japan, but it would not bring the non-traditional interests59 as
much as the TPP would. I will discuss the political and diplomatic consideration of Japan’s TPP in detail in the next section. The TPP also has more Member States and a wider regional influence than the CJK FTA, which means that there are more possibilities (and room for flexibility) in foreign trades.
In conclusion, Japan’s TPP strategy has created a predicament for China’s economy in many respects. The direct loss is the possible loss in trade competition caused by the trade diversion affection, while the indirect loss is the impact to China’s trade strategies in Northeast and Southeast Asia. It can be argued, and is the position of this paper, that the counterweight proposed by some scholars would not work as they expect - the solutions are neither realistic nor effective enough to counterbalance the TPP.
59 From the economics, the traditional theory of a FTA is the economic interest such as the trade diversion effect, the increasing returns to scale, the market competition. From the plutonomy, the non-traditional interest is also needed to be considered besides the traditional interest. For example, the coordination of the government policy, the export of democracy, the global and regional strategy of the great powers, and the security problems. The Domino Theory of Regionalism from Richard E. Baldwin is one of the magnum opus. (Ni, “CJK FTA or TPP”: 84-85)
Chapter 3. Is it a political predicament for China?
3.1 a closer Japan-US alliance: the security threat to China?
3.1.1 the US background: the “return to Asia” strategy
It seems that scholars have reached a consensus on the political intention of the TPP.
Although the TPP is a trade agreement, some scholars have already expressed views that the TPP would have profounder political implications, than economic. It must first be understood that the TPP is a free trade agreement led by the US.As Ann Capling and John Ravenhill found in their research, the US already has PTAs with four of the TPP parties, and the other four participants are of minimal economic importance60. Notwithstanding its limited
commercial importance in the short term, the TPP has become the centrepiece of US trade policy towards the Pacific and a key element in Washington’s determination to “return to Asia”. Keeping the US engaged in the region would be somewhat reminiscent of its history in the region. Since the financial crisis broke out in 2008, the major economies such as the US and the EU were influenced by debt problems and unemployment rates, so serious, that their economic growth rate slackened significantly. In contrast, China and other Asian-Pacific emerging economies became the most active economies in the world. Wesley has stated that since the trade and investment flows demonstrate that China has emerged as a major driver of regional economic integration, it is developing and using significant soft power resources, mainly based on widely shared perceptions about the growth potential of its economy and the seeming inevitability of its rise to regional pre-eminence in building its regional influence.
60 Ann Capling and John Ravenhill, “Multilateralising regionalism: what role for the Trans-Pacific Partnership Agreement?” The Pacific Review, No.4 (2011): 559
Also, Beijing has made important diplomatic gains in the Asia-Pacific region.61 On the other
hand, as Capling and Ravenhill have mentioned, confronted with two proposals for East Asian architecture that would exclude the US – 10+3 and 10+6 – together with growing concerns about increasing Chinese economic and strategic dominance, the Obama
administration has seized the TPP as a part of a broader strategy to re-engage with the region and to contain China’s influence.62 The American government is reluctant to see its influence
weakening in Asia, therefore the Obama administration returned to Asia in a high-profile manner. President Obama announced in 2009 that he would be “America’s first Pacific president”63, which proved the determination of US’s “return to Asia” strategy. Chinese
scholars share similar opinions, for instance, Yanan Ma used the balance of power theory of Michael Sheehan to illustrate the US’ strategy. She believed that the participation of the US in East Asia used to contribute a balance of power in the region.64 But in the past decade, the US
has been entangled with the War on Terror and the debt crisis, whilst China led the imbalance of power in Asia. This led to the Secretary of State, Hilary Clinton, declaring the “New America movement” which contained the leading role in the Asia-Pacific region, whilst in the same week seeing the US form a truce with Iraq. Song and Wen regarded the TPP not only as an FTA to boost the American economy, but also as the instrument that the US could use to counterbalance China’s growing influence in Asia. The TPP agenda is to constrain China and can impact regional integration65. Obama himself has also said that:
“The world has changed. The rules are changing with it. The United States, not countries like China, should write them. Let’s seize this opportunity, pass the Trans-Pacific
Partnership and make sure America isn’t holding the bag, but holding the pen”.66
The TPP thus became the core part of the US’ Asian strategy both in terms of the economy and politics. In fact, the core impact of Japan’s TPP decision is to form a stronger Japan-US alliance, which could influence China with regard to security and regional leadership.
61Michael Wesley, “The dog didn’t bark: the Bush and East Asian Regionalism”, in Bush and Asia: America’s evolving relations with East Asia, ed. Beenson M.(London and New York: Routledge, 2007): 70
62Capling and Ravenhill, “Multilateralising regionalism”, 559
63 “'America's first Pacific president’”, Politico, accessed November 13th, 2009, http://www.politico.com/story/2009/11/americas-first-pacific-president-029511
64日日日日日日日日日日日日日日日日日日日日日日日日日 2013 日日日日日 Yanan Ma, “America’s ‘return to Asia’ strategy and its impacts on China”,(MA thesis, Lanzhou University, 2013): 37
65Song & Wen “China’s free trade agreements”: 115
66“President Obama: The TPP would let America, not China, lead the way on global trade”, The Washington Post, accessed May 2nd, 2009. https://www.washingtonpost.com/opinions/president-obama-the-the TPP-would-let-america-not-china-lead-the-way-on-global-trade/2016/05/02/680540e4-0fd0-11e6-93ae-50921721165d_story .html
3.1.2 Japan’s response and a guarantee
Considering the historical grudge, many scholars have doubted whether there is no real regionalism, which exists in East Asia, especially in Northeast Asia. From 2010, Sino-Japan relations began to deteriorate. Chinese scholars in particular, focus heavily on the Senkaku/Diaoyu Island dispute. The Senkaku/Diaoyu Island dispute between the two nations led to an explosion of security antagonism. Understandably, Japan wants the US to return to Asia, counterbalancing the power of China, particularly as the US has always been Japan’s traditional alliance partner after WWII. For Japan, the US-Japan alliance is the foundation of Japan’s diplomatic strategy. Beeson called Japan’s enduring reliance on the US, as its principal ally and security guarantor, the obstacle of Asian regionalism.67 Chinese scholars are
more sensitive towards the US-Japan security relation.
Japan’s attitude towards the TPP is connected with strengthening the Japan-US alliance. The TPP membership has helped Japan develop its credibility in the region; it has the power to increase Japan’s security power.68Liu commented that while the US wanted Japan’s
participation to extend the TPP’s global influence and to assist itself in establishing a US-centered new order in the Asia-Pacific area, the Japanese government saw its intention and thus coordinated positively in order to strengthen the alliance.69 In case of an intense
regional conflict, Japan’s national security is vitally dependent on US assistance. Ni said that some Japanese scholars believe that the TPP is the golden chance for Japan to consolidate its relationship with the US.70 By participating in the TPP and the US’ “return to Asia” strategy,
Japan has established a link between its political and economic interests with the US’ concern about China’s growing military ambition within the region.71 Meanwhile, the
Senkaku/Diaoyu Island dispute between China and Japan also created the opportunity for America to return to Asia. The former US Secretary of Defense Leon Panetta proposed the rebalance strategy in Asia in the Shangri-La Dialogue in 2012, announcing that the US Navy would deploy 60% of the American fleet to the Pacific before 2020.72 Japanese media also
67Beeson, M. Regionalism and Globalization in East Asia: Politics, Security and Economic Development. (Japan: Palgrave Macmillan. 2014): 85
68 Solis and Katada, “Unlikely Pivotal States”: 165 69 Liu, “The content, characteristics of TPP”: 19 70 Ni, “CJK FTA or TPP? “: 88
71 Jiang, “Joining TPP”: 39
72 “The US Rebalance Towards the Asia-Pacific: Leon Panetta”, IISS, accessed June 2nd,
2012http://www.iiss.org/en/events/shangri%20la
paid attention to the security implications of the strategy. Nihon Keizai Shimbun wrote that the re-balancing policy means that:
“America has noticed China’s rise, transferring its foreign policy pillar from the Middle East to Asia. America has reflected on its ignorance of China. As a consequence, the US is reducing the martial power in Europe and Africa while maintaining its military power in Asia. To contain China’s rise of military, US also strengthened the cooperation with its Asia-Pacific alliance partners like Japan, Korea and Australia.”
Chinese scholars Xu and Dai do not think that the intensive military cooperation between the US and Japan, and the increasingly frequent exchange between the high-level of the two countries, is disconnected from Japan’s TPP strategy.73 In terms of time, they found that since
Japan launched its TPP process, the US-Japan communication has become more and more frequent. After the comparison of the time of Japan’s TPP process and the recent Japan-US communication, the military cooperation is implied as a consequence. In September 2012, Obama approved the US-Japan Security Treaty on the Senkaku/Diaoyu Islands when he visited Japan; in June 2013, the Japan Defense Force and the US navy were training for the island battle in California; in October 2013, American and Japanese governments revised the US-Japan Security Treaty to protect Diaoyu Island; in April 2014, the US Secretary of Defense Hagel visited Japan.74 The Chinese believed that due to Japan’s participation in the
TPP, it had the firm backup of the US on the Senkaku/Diaoyu Island dispute. Therefore, the consolidation of the Japan-US alliance further strengthened Japan’s security defenses whilst at the same time posing a security threat directly to China.
Moreover, Japan’s attitude to the US could create a chain reaction in other Asian countries that also want to depend on the US military to counterbalance China. Other countries also believe that the US-Japan alliance is a stabilizing force in the region. If the US develops more alliances in East Asia, China would be faced with a more challenging external security environment.
3.2 a new security Japan-US led regional institution: the regional
leadership issue
73 Xu and Dai,“The Influence of Japan's Joining in TPP”, 93.
74 “US backs militarization to Japan in response to China”, Business Insider, accessed April
5th, 2014.
http://www.businessinsider.com/r-hagel-backs-japan-plan-to-bolster-self-defense-2014-04? IR=T
3.2.1 the struggle of regional leadership between China and Japan
Besides the security issue, another vital factor for the Sino-Japan relations is the issue of regional leadership, which in turn concerns Japan’s TPP strategy. Undeniably, China, Japan and the US are great powers in the Asia-Pacific region that wield the most influence. In Asia, Japan and its alliance have dominated for a long time. In the late 20th century, the “flying
geese” mode75 proposed by Japan contributed much to the economic development of Asia.
Japan predominantly served as the pre-eminent economic power. During the 1990s, Japan’s “lost generation” limited its economic capacity of what it could do while China began to rise. Not just economically, China takes an increasing amount of initiative in terms of international relations. As the world entered the 21st century, the Japanese economy was still stuck in a
period of slow growth, and the US had been obstructed by the war on terror since 9/11. China took advantage of the best development opportunity during that time. According to Ravenhill, “it was an era when China was keen to join all manner of regional and global institutions, to reclaim what its leaders saw as its rightful place in global politics, and within regional institutions to balance the influence of Japan.”76 Singapore’s Minister Mentor Lee Kuan Yew
opined, “It has become normal in Southeast Asia for China to take the lead and Japan to tag alone. Since Japan is unable to recover its economy, it has no choice but to allow China to take the initiative”.77 Domestically in China, scholarly opinions, like those of Cuiling Wu
defend the view that the growing economic influence and advanced development of China has meant that it is becoming the leading power in Asia. Fanyin Zhou mentions that with the economic influence of China in East Asia increasing, the attitude of Japan towards
regionalism is more likely to contain China’s rise. He believes that the one of the most important goals set by Japan is to prevent close regionalism centered in China. Japan is attempting to introduce other great powers to decrease the regional influence of China; to impede the leadership of China in East Asia.78 Undoubtedly, the TPP is the chance that can
introduce other great powers and contain China at the same time. When Noda was in office, he proposed the new diplomatic policy in “The Pacific Charter” to construct the terms of economic cooperation and solve conflicts in Asia, attempting to take on a leading role along 75 The flying geese paradigm (FGP) is a view of Japanese scholars upon the technological development in Southeast Asia viewing Japan as a leading power. Its author Kaname Akamatsu published it in 1960s. (Akamatsu K, A historical pattern of economic growth in developing countries“ Journal of Developing economies 1(1): 3-25)
76 John Ravenhill “East Asian regionalism: much ado about nothing?”, International Studies, No.35 (2009): 220
77 Terada, “Forming an East Asian Community”: 12 78 Zhou, “China’s rise”, 10
with the US79; “Japan’s participation in the TPP can make Japan more important in the future
Asia-Pacific region.” In the 2011 Hawaii APEC Summit, Noda announced, “Japan would like to dominate the TPP process.”80
3.2.2 the TPP: a chance for Japan to be the rule-maker
According to Zhou, East Asia has formed the security-economy dualistic structure. The economic center is China, whilst the most important security alliance is the US.81 Thus, the
TPP would reduce the regional influence of China by reducing its economic influence. The TPP’s high quality and high standards represent a brand new era of future FTA construction. Since it is promoted and supported by the US and Japan, it is the most possible trade rule that could lead future Asia-Pacific FTA rules. The TPP also provides a chance for Japan to return to the leading position in the region by virtue of US influence. Under a stronger Japan-US alliance, the TPP will place Japan at the center of the US’ Asia policy in the coming decades. Tokyo may find itself more closely linked to key Asian players.82 Many Chinese scholars
regard the TPP as a “pride problem”. Xu and Dai have all argued that it is because Japan used to dominate Asia and lead the regionalism in the region that Japan is now reluctant to see China lead.83 The Japanese scholar Akiyama also mentioned that the whole TPP negotiation
and the participation of Japan aside, in Chinese opinion, all the obstacles to the economic integration are created by China.84
Another factor that many Chinese scholars voice their concerns on are the advantages brought about by the early participation of Japan. It is believed that Japan’s participation brings about advantages in establishing future Asia-Pacific rules and leading the region while China’s absence leads it to a disadvantageous position. Abe also mentioned that the earlier Japan participates, the more Japan can gain from the TPP. In the first place, being one of the initial members means that Japan can be one of the new rule makers in the Asia-Pacific region and have a stronger voice in the negotiations. Since one of the TPP’s entry requirements is the unanimous approval of all existing members, Japan would also have the advantages in selecting its partners. Considering China’s current domestic situation, it is 79 Ni, “CJK FTA or TPP? “: 89
80 Ni, “CJK FTA or TPP? “: 89 81 Zhou, “China’s rise”:14 8283 Auslin, “Getting it right”: 30
83 Xu and Dai,“The Influence of Japan's Joining in TPP”, 93. 84 Akiyama, “TPP and Northeast Asia”,26
almost impossible for China to participate in the TPP immediately. Early participation of Japan would also influence China in making new trade rules. As Japan participated in the TPP, the TPP now has growing influence in the world. With the cooperation of the two biggest economies on both sides of the Pacific, it would not be difficult to rebuild the Asia-Pacific trade institutions, which would also give Japan the leading position. Ma argues that whilst Japan and the US lead, China’s position can be marginalized both economically and politically, impairing its regional influence and leadership.85 From Japan’s perspective,
the TPP without China in the initial negotiation would be one that could be used later as leverage against its main rival.
In fact, the CJK FTA, which is driven by China’s worries over Japan’s participation in the TPP, has progressed slowly. Ni argued that China wants to utilize the strong economic connection between the three Northeast Asian countries to prevent the TPP from being the pivotal force of the Asia-Pacific region, though the Japanese government has not shown much interest.86 As mentioned in the last section, Japan tends to focus more on the TPP even if the
CJK FTA would create more profits. Therefore, it is regarded as a signal that Japan seeks more out of its participation in the Asia-Pacific rather than East Asia.
3.3 the TPP as a FTA: can the TPP really contain a great power?
Unlike the discourse in China, there are some other voices that argue about the actual influence of the TPP on the State. They do not believe that the TPP can form a real political predicament for China. Auslin disagreed with many in China on the claim that the TPP is a form of US containment, especially when viewed in the context of the larger Asian “pivot”, arguing that the TPP is to balance, rather than to constrain China. Although they will not let China dominate, it is difficult to avoid China.87 Scott and Jeffery opposed the containment
thesis as well. In the first place, a trade agreement cannot “contain” a large economy. Secondly, the US still needs China’s cooperation in tackling economic problems and regional security issues such as North Korea’s nuclear program. Besides, considering the fact that China is still the second largest economy in the world, States are reluctant to contain China. Moreover, some other observers mentioned that the TPP would include China in the long
85 Ma, “America’s ‘return to Asia’”, 38 86 Wu, “The studies of Japanese TPP strategy”: 167
term if the goal of the TPP were to expand to the FTAPP.88
However, most of the optimistic standpoints are not from China. Chinese scholars still insist on the serious consequences incurred by Japan’s TPP strategy. Japan’s general public also holds the view that the Japanese government’s decision to participate in the TPP aims to prevent China from being the regional leading power and to balance China with the help of the US, by forming an encirclement.89
3.4 Conclusion
Currently, there is a trend in the discussion about the political predicament of Japan’s TPP, and Chinese scholars are much more pessimistic than the various other opinions presented. Although most scholars affirm the political meaning of the TPP, Chinese scholars emphasise the “pertinence” of the TPP, while other scholars do not believe that the TPP would greatly contain China. This paper holds the view that Japan’s TPP strategy has created a political predicament for China, but not as serious as they mentioned.
In conclusion, in the Chinese domestic discussion, the Obama administration has seized the opportunity to re-engage with the region and to contain China’s influence, through the use of the TPP in its broader strategy. Indeed there are some claims that the US is trying to keep China out of the TPP and trying to “contain China” in order to restrain and exhaust its economic and political influence in the region. For the Japanese government, it is the chance to strengthen the Japan-US relations and to be a part of the US’ returning to Asia strategy, which was especially important with regard to the ongoing Senkaku/Diaoyu Island collision. Accordingly, Japan’s response to the TPP extends its influence and makes it more attractive to other countries. Consequently, the first predicament that China faces is the security threat. The US-Japan Security Treaty is regarded as a strong security buttress for Japan’s goal to contain China’s rising military power. Another predicament is the regional leadership issue. The TPP has the chance to be the future of regional trade rules with the promotion of the US and Japan. As one of the initial countries in the TPP, Japan has seized the chance of being one of the rule-makers in the Asia-Pacific with the US. Even if China participates in the TPP later, 88 Schott and Muir, “Understanding The Trans-Pacific Partnership”, 58
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