Strange Bedfellows: Trump Trade Fight brings Japan and China together

By guest author Peter Landers from Wall Street Journal

Prime Minister Abe is promoting a rapprochement with Beijing that reflects Tokyo’s need for allies in upholding the postwar free-trading system

President Donald Trump’s tough line on trade with China has finally given Japanese Prime Minister Shinzo Abe something to agree with Beijing about.

Chinese Premier Li Keqiang, left, shakes hands with Japanese Prime Minister Shinzo Abe during a meeting the two had at a Toyota Motor facility on Japan’s northern island of Hokkaido on May 11, 2018

After years of skirmishing with China over territory and security, Mr. Abe is promoting a rapprochement that reflects Tokyo’s need for allies in upholding the postwar free-trading system. It’s an example of how Mr. Trump’s “America first” policy of curbing imports he says threaten the U.S. are reshaping relations around the globe.

“I want to lift up the Japan-China relationship to a new stage,” Mr. Abe said at a news conference this month, describing a May visit to Japan by Chinese Premier Li Keqiang as “an important first step toward a dramatic improvement.”

Both sides in recent months have refrained from familiar denunciations in which Japan accuses China of trying to disrupt regional stability through force and China accuses Japan of ignoring the lessons of history through Mr. Abe’s military build-up.

During his visit, Mr. Li highlighted how Japan complements China as an export powerhouse, saying this results in “strong competitiveness in third-country markets” such as the U.S. He barely mentioned the historical issues that divide the two countries—Japan occupied much of China after invasions in the 1930s—and he repeated Tokyo’s favored formulation that the countries should “look to the future.”

Japan exported some USD 137 billion of goods to China in the most recent fiscal year, much of it semiconductors and other high-tech electronics used by Chinese factories to make products such as iPhones destined for the U.S. That’s why Mr. Trump’s initial USD 50 billion in tariffs on Chinese products, focusing on high-tech items, could end up hitting Japan as well.

The tariffs, and China’s vow to retaliate dollar for dollar, led the Nikkei Stock Average to fall 0.75 % Monday.

Mr. Abe’s concern about trade hasn’t led to a broader reassessment of Japan’s military ties with the U.S., Japanese officials say. Beijing and Tokyo remain at odds over a set of Japanese-controlled islets in the East China Sea and China’s moves to assert its military presence in the region.

Without American aircraft carriers, nuclear submarines and bombers, Japan would have little ability to protect itself against nuclear-armed China. That is why Mr. Abe has been careful not to describe his campaign for better relations with Beijing as a slap at the U.S. Unlike other American allies, Japan has yet to announce retaliation over Mr. Trump’s 25 % tariffs on imported steel.

Asked at the news conference whether Japan saw China as a better champion of free trade than the U.S., Mr. Abe said it was a mistake to “simplistically compare” the relationships. “Japan and the U.S. are allies, tied together by strong bonds,” he said.

Still, China and Japan share many of the same frustrations at U.S. trade policy. Japanese officials say they agree with Mr. Trump that some of China’s practices need changing—such as its use of subsidies to promote national champions in high-tech fields—but they say any measures against Beijing must comply with World Trade Organization rules.

For its part, China’s leadership sees benefits in reciprocating Tokyo’s outreach. The unease brought on by Washington’s moves gives Chinese President Xi Jinping a chance to project an image of Beijing as a steady, reliable power that, like Japan, wants free trade.

At a widely noted speech last November, Mr. Xi said, “We should uphold multilateralism” and “forge closer partnerships.”

Beyond that, as China’s own economy slows, Beijing is looking more toward Japan for investment and expertise in advanced manufacturing. Messrs. Xi and Abe spoke by phone for the first time in May and agreed it was an opportune time to improve relations. During the call, Mr. Xi said that “for a period of time, Japan has released positive signals and taken positive actions on bilateral relations,” according to official media.

This month, Mr. Abe’s office published in its official magazine an article by Australian National University scholar Shiro Armstrong arguing China needs to be part of Tokyo’s effort to patch together a global free-trading system in the U.S.’s absence.

“The Asian region and the global economy have relied on American leadership, but now it is necessary for Asia to step up,” wrote Mr. Armstrong. “China, though it may seem unlikely, will be a critical partner.”

In an interview, Mr. Armstrong said Tokyo needed a “hedge against Trump.”

The visit to Japan in May by Mr. Li, the Chinese premier, was the first by a Chinese leader in that position in eight years. Mr. Abe made the most of it, inviting Mr. Li to dinner in Tokyo and accompanying him to the northern island of Hokkaido, where they visited a flower shop together and viewed what is billed as the world’s largest tomato plant.

It was clearly intended as a preview of the hospitality Mr. Xi would receive if he visits Japan next year for the first time as president, as Mr. Abe wants.

Japan wants to lead the kind of trade agreements the U.S. forged in earlier decades. In March, 11 Pacific Rim nations including Japan signed the Trans-Pacific Partnership agreement reducing tariffs, reconstituting the trade deal after Mr. Trump withdrew. Japan and the European Union have reached a free-trade deal set to start next year.

The next step is bringing in nations in East Asia that are not part of TPP. Japan has recently taken a more active role in promoting the Regional Comprehensive Economic Partnership, a proposed trade deal that would link China, Japan, India and Southeast Asia. Ministers from those areas will meet in Tokyo on July 1, the first time Japan is playing host to such a meeting.

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Chinese Premier Li Keqiang, left, shakes hands with Japanese Prime Minister Shinzo Abe during a meeting the two had at a Toyota Motor facility on Japan’s northern island of Hokkaido on May 11, 2018