European Union is Strengthening its Ties with Japan

01.08.2018 Author: Vladimir Terehov

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Earlier we bore witness to a remarkable number of noteworthy events in world politics that occurred in the first half of July in Europe. During this period leaders of all the world powers (China was presented by its Premier Li Keqiang), with the exception of India and Japan, paid a visit to the EU for various reasons.

And as recently as 17 July, another significant event took place in Tokyo in the form of the 25th EU-Japan Summit, during which the participants signed documents on bilateral cooperation in the economic and political spheres. The preparations of the document on economic cooperation began in 2013, and on 6 July of last year the sides agreed on its preliminary provisions, which were finalized in December of the same year.

To complete the picture we cannot do without some figures.

By the end of 2017 Japan accounted for 3.5 % of the EU’s external trade volume, occupying 6th place. The USA took first place with a share of 17%, China with 15.3 %, and Russia in 4th place with 6.2 %. Another important part of the equation is who benefitted and who did not from this bilateral trade, and what the trade surpluses and deficits were.

The US leader has not expressed his joy at America’s leading position among EU’s trading partners.  A closer inspection of the official figures on trade between the US and the EU in 2017 (the US trade deficit with the EU was 120 billion Euros or approximately $140 billion) reveals why the American leader becomes openly enraged at these numbers and equates the allies to the robbing nations (with the Chinese receiving a similar treatment).

Europeans, in turn, whose nature forces them to remain polite and refrain from using similar language, most likely feel similar emotions towards the Chinese as the US leader. In 2017, the EU, as the USA, had a trade imbalance with China amounting to -$210 billion, which, along with the accusation that China is buying up European high tech companies, has resulted in strained relations between the block and PRC. For now the situation is at an impasse, despite the almost uninterrupted mutual visits of high level government officials from the EU and China.

From this point of view, everything is in order in trade relations between Europeans and Japan. In spite of the fairly low (in comparison with China and the USA) trade volumes of a little over $150 billion, the EU’s trade deficit with Japan was only $10 billion in 2017, which was, in fact, compensated by its trade surplus in the service sector.

In addition, Japan is involved in the economy of its partner, as it has thus far invested approximately $250 billion in the EU over time vs. the EU’s $95 billion investment in Japan.

These fairly uncomplicated bilateral economic ties must have played a crucial role in the successful end to the negotiations that had taken place on this agreement.

However, almost all the journalists have mentioned the political motives that underlie not only this document but also the Strategic Partnership Agreement. The US accounts for one such motives as previously mentioned in the NEO in the story about the signing of the preliminary agreement almost a year ago.

Even then there was a possibility of trade wars, which have now almost turned into reality. These wars have fairly objective justifications, and are not the product of Trump’s eccentricities. Along with China, key trade partners and allies of the US in Europe and Asia are becoming the main targets of the US attacks in the economic sphere.

However, in this environment of heightened tensions between the US and the EU, and less so with Japan, any steps taken towards increased cooperation between the European Union and Japan can be viewed as important political symbols.

In China, for instance, these actions have been interpreted as signs of US isolation, which for now is an exaggeration, as, despite the increased tensions in ties with the world power, the EU, Japan, as well as China are still in dialogue with their American partners. Still, neither Europe nor Japan has denied the importance of the American factor behind the signed agreements in Tokyo.

Its influence is also unmistakable when it comes to Japan’s successful efforts to resurrect the Trans-Pacific Partnership (TPP), which seemed on the verge of collapse once the US abandoned the initiative. On July 19, official representatives of the 11 TPP nation-participants gathered in Tokyo and expressed their satisfaction with the currently ongoing process of ratifying statutory documents by parliaments, and their confidence that these documents will take effect as early as the beginning of 2019.

The increasing turbulence in the political arena has had an effect on the territories of the leading world players. For instance, Europe could be viewed as a single political entity only with substantial reservations. Nowadays, these rifts are especially prominent, as the UK, one of the key European nations, is finalizing its divorce from the EU.

Yet another statement, made by the UK Secretary of State for International Trade, Liam Fox (a proponent of a hard Brexit), on 18 July is noteworthy, and concerns the possibility of initiating public discussions about the option of Britain joining the TPP once it leaves the EU in March 2019. He mentioned this possibility for the first time as far back as 3 January of this year.

It is worth reminding the readers that the issue of the UK’s position not only outside of the EU but also in relation to Japan, which is in the process of strengthening its ties with the EU, became the reason for Theresa May’s visit to Tokyo in the summer of last year. It seems that joining the TPP can be a potential solution to the problems facing London in relation to one of its leading Asian partners.

Japan’s Chief Cabinet Secretary, Yoshihide Suga, expressed his satisfaction with the statements made by his UK counterpart. At the previously mentioned meeting of the official representatives of the TPP nation-participants, the view that once statutory documents come into force, other nations can join the alliance was voiced. Along with Colombia, Thailand and several other countries, the UK was mentioned as a potential entrant.

Finally, it is worth focusing on figures yet again. It is reasonable to ask about the scope of these projects and initiatives as well as their core message to the world.

Journalists’ comments such as “the agreement between the EU and Japan would have an effect on one third of the world economy” certainly do not ring true. The first topic studied in a Math class in primary school provides one with capabilities of working such miracles, but the result of such manipulations with the economies of the EU and Japan has very little to do with the meaningful part of the agreements.

After all the issue is the effect of this document on 3.5% of the remainder (approximately one fifth) of the total economic activity of the EU accounted for by relations with its external partners. The agreement also has limited influence on Japan’s economy,

and the same can be said for the UK’s potential entry into the TPP. Its export volumes to all the countries of the future alliance are estimated at $8 billion, while the UK sells $11 billion worth of goods and services to Germany alone. The UK has no choice but to pay for its right to refuse to accept immigrants.

The symbolic nature of the agreements signed by the EU and Japan, the initiation of Brexit and the way it is taking place, as well as the UK’s subsequent (assumed) entry into the TPP, as well as other similar events in recent months, are all part of a broader trend towards a faster rearrangement of the world’s political landscape in the Post Cold War period.

The current world order is seemingly unravelling right before our eyes, but it is too early to talk about the new one.

Vladimir Terekhov, expert on the issues of the Asia-Pacific region, exclusively for the online magazine “New Eastern Outlook