Panel Discusses Roles of U.S., Japan
In Asia-Pacific Economic Integration
Experts gathered at the Chicago Club in Chicago on June 15 to discuss the economic integration in the Asia-Pacific region and the roles the U.S., Japan and others are expected to play in the region.
Presented by the Japan External Trade Organization (“JETRO”), “A Symposium on Asia-Pacific Economic Integration and the Role of the United States & Japan” featured as the keynote speakers former U.S. Senator Adlai E. Stevenson III; Hiroyuki Ishige, Chairman and CEO of the JETRO; and Keith Williams, President and CEO and Trustee of Underwriters Laboratories, LLC. The panelists included Vo Tri Thanh, Vice President and Senior Advisor of the Central Institute for Economic Management of Vietnam; Ke Long, Senior Fellow at the Economic Research Center, Fujitsu Research Institute; Akio Takahara, Professor at the University of Tokyo’s Faculty of Law; and Travis George, Executive Vice President, Treasurer and CFO of Molex, Inc. Former President of the Japan America Society of Chicago Edward Grant moderated the discussion.
In his welcome remarks, Consul-General of Japan in Chicago Naoki Ito praised the 1,400 Japanese businesses operating in the Midwest for creating 140,000 jobs, 44,000 of which are in Illinois. “The close and dynamic economic partnership between Japan and the Midwest is a win-win situation for us all,” Ito said.
Ito, who arrived from Japan earlier this year, has met with the governors from eight states in the region. He said the governors told him that they are eager to welcome more Japanese-style investment, and in the wake of the U.S. withdrawal from the Trans-Pacific Partnership (“TPP”) negotiation, they plan to launch their own economic framework that will benefit their states.
Speakers’ Talking Points
Adlai E. Stevenson III
The economic prospects are unclear for Europe and the U.S. as indicated by the U.K.’s “Brexit” decision, threatened stability of the EU, and crisis of the trans-Atlantic alliance, Stevenson said. Meanwhile, the economic integration advances in the Asia-Pacific region, but it’s not trouble-free.
While China and the U.S. opted out of the TPP, Japan has made significant sacrifice to join it. China has grown to be the world largest economy, spreading its influence over the world through its purchasing power and investment. The U.S., on the other hand, threatens to revert to protectionism and militarism under the new Trump administration. Japan remains the bedrock of East Asia for its economic and political stability, but it’s facing challenges such as an aging population.
The Trump administration’s transactional tendency makes it impossible to predict its actions, which poses a threat to the world stability. While it’s possible that Trump is ousted from office, the U.S. may again pick up the global leadership in the Paris Accord.
In the meantime, Stevenson believes, discussions like this will help us explore opportunities for the world, Asia Pacific, the U.S., and the Midwest.
Japan promotes economic integration in the Asia-Pacific region and champions free trade. As such, it pushes the TPP under high standards and rules for open and fair market creation.
Ishige believes every TPP participant can share the benefits the partnership will create, once fair trade rules are established in the Asian market. The Asian market, today’s leading power of economic growth, is innately more favorable to the American products – 87% of the 500 American companies that are currently doing business with the Association of Southeast Asian Nations (“ASEAN”) said they planned to boost their investment in the region over the next five years, according to a survey.
One of the reasons Japan pushes for an early ratification of the TPP is that it wants the U.S. to return to the partnership, Ishige said. China, in the meantime, continues to promote its own version of economic integration, the “One Band, One Road” (“OBOR”) initiative, as its premier stated at the World Economic Forum in Davos: “We will steadily and unwaveringly move forward toward economic globalization.” Through this initiative, China is eager to fill the vacuum created by the U.S. withdrawal from the Asian market.
How will the U.S. respond to this? Bilateral negotiations with each country in the region will consume time and energy and opportunities may be lost. Ishige thinks a key to sustainable economic integration would be inclusiveness. It’s the party that didn’t receive any benefit who get angry in the process of globalization. One of Japan’s missions is “to ensure that no one is left behind,” Ishige said.
The ASEAN is the third largest export market in Asia
for the U.S. – its GDP is twice as much as that of India while its combined
population is half of that of India. The U.S. investment in the ASEAN
market amounts to $274 billion, triple the amount of its investment in
Japan and quadruple in China. Increasing investment from overseas will
create a significant need for infrastructure in the ASEAN countries, at
the level of $1.5 trillion in 15 years - for power plants, roads, airports
and railroads, as well as construction machinery that will be required
for building them. Markets for food, drugs, and various types of services
will also quickly grow.
According to Williams, the U.S. may step into another golden age for bilateral trade agreements. However, in the internet age of the 21st century, where people are connected globally, it’s next to impossible to revert to the old time.
Currently, the U.S. has 20 bilateral agreements. During the recent years, an observation has become increasingly common that the past agreements had ben biased against the American interests. Trade imbalance was one of the focal points during the 2016 presidential campaign.
The U.S. trade history presents the following for the future:
1. U.S. trade partners must exercise great leadership in carrying forward important matters in multi-level agreements such as the TPP. For example, the TPP participants could show the rest of the world how to follow trade rules.
2. America’s decades-old orientation to trade may be near its end. The American businesses are now facing the result of the short-term approach in overseas markets, focusing on trade deficits. Future trade agreements will be more like win-win deals.
3. The U.S. will continue to commit to Asia, with its fundamental trade benefits unchanged. It may be time to make new bilateral or multi-level agreements rather than revising the existing ones. As such, proper trade rules will become even more critical.
Long argued that establishing fair, open and transparent trade rules is more critical than discussing regional deals such as the TPP and China’s OBOR. The OBOR initiative is China’s domestic issue, and the Chinese government must maintain domestic economic development in order to launch the initiative.
Although the Chinese economy became global, its growth started to slow down five-six years ago, in part due to weak technological innovation and increase in trade cost. Long said the trade cost increase is an indication of China’s transition from low-level industry to that of high-level, without which the Chinese economy can’t be maintained.
China is presented with an opportunity to promote the global economic development in coordination with the U.S. and Japan. Also, the TPP, a mid- and long-term agreement, and the OBOR, an initiative, are not mutually exclusive, Long said.
Takahara thinks that regional integration in any form is inevitable in today’s world, where a network of corporations, experts, academics and citizens can develop quickly to become a part of globalization. Such a network serves as a channel through which people, money, information, and even viruses flow, and a framework will be established by regional authorities to control that flow. That’s the beginning of a regional integration.
One of the obstacles for integration in Asia-Pacific may be North Korea. If the unification in the Korean Peninsula is realized, that will become a buffer zone for China, but this idea is not moving forward for now.
If the U.S. wants to secure its interests in Asia, it should enforce its presence in the region and strengthen its ties, while keeping the “wait-and-see” attitude about the OBOR initiative. Finally, Takahara added that the best choice for the U.S. was to get back to the TPP.
The symposium was co-organized and supported by the
Illinois Chamber of Commerce, Japan America Society of Chicago, Consulate-General
of Japan in Chicago, Japanese Chamber of Commerce and Industry of Chicago,
Chicago Council on Global Affairs, Illinois Department of Commerce, Illinois
State Government and INTERSECT Illinois.
From left: Vo Tri Thanh, Edward Grant, Ke Long, Akio Takahara, Travis George
The “One Band, One Road” initiative