CHINA JAPAN

China started trade in 1978 Japan started trade in 1950

- Eventually became a trade surplus - Japan used to export textiles in the
country and the volume of surplus 1950’s followed by other industrial
increased rapidly from 2006 (more product, machinery and transport
export than import / opposite of trade equipment so much that the export of
deficit) machinery and transport equipment
- From import substitution to export led. amounted to 75% total making it the
Industrial reforms led to the rest of Eaststrategic sector of the economy
Asia transferring their labor sector in
- Japan initiated an export-led growth
China since it was cheaper oriented to external market with
corresponding policies to advance it.
COMPARE AND EVALUATE THE STRATEGY AND TRADE POLICY OF JAPAN AND CHINA IN DEALING
WITH THE UNITED STATES UNDER PRESIDENT TRUMP

CHINESE TRADE STRATEGY JAPAN

- MANDATORY TECHNOLOGY - During the first year of the Trump

TRANSFERS IN JOINT VENTURES
WITH CHINA / INTELLECTUAL
PROPERTY THEFT
https://money.cnn.com/2018/03/23/
technology/china-us-trump-tariffs-ip-
theft/index.html
https://www.nytimes.com/2017/08/1
5/opinion/china-us-intellectual-
property-trump.html
The United States continues to fight its trade
war against China on two fronts. The first
front involves tackling its massive trade deficit
in goods, which has been a source of friction
not only with Beijing, but also with other
major trading partners that also have deficits
with the United States, including Japan. But
when it comes to Washington confronting
China with its systemic unfair trade practices,
the Trump administration has actually
succeeded in garnering support from its
traditional allies, most notably Japan and the
EU. Specifically, the three have worked
together since late 2017 through the World
Trade Organization to draft new rules
regarding forced technology transfers,
intellectual property rights, digital trade, and
broader WTO reform to bolster transparency.
presidency, the Abe government’s strategy
had been not only to focus on promoting
Japan as the leader of the CPTPP*1 in the
absence of the United States, but also to
bring the United States back to the
framework either under the current
administration or under a new leadership.
Keeping the door open for U.S. re-entry had
been a hallmark of Abe effectively acting as a
custodian of the free market principles. Yet
even as the CPTPP drew ever closer to
coming into effect by the end of 2018, U.S.
interest in negotiating a bilateral trade deal
over which it would have the upper hand,
became clear by September. The
compromise has been to embark on trade
negotiations that focus just on goods, and
not services.
- Japan was deliberately lowering the value of
the yen in order to make its exports more
competitive, thereby giving Japanese
manufacturers an unfair advantage in the
United States.6 Currency manipulation had
been a source of tension between the two
sides for well over three decades, yet in the
TPP negotiations, the divisive issue had been
avoided.
Together with promoting the Indo-Pacific
strategy, the trilateral effort to pressure China
to change its system is a clear example of the
Trump administration seeking out multilateral
efforts to challenge Beijing’s strategic
ambitions
https://www.forbes.com/sites/kensilverstein/
2019/12/05/as-the-us-becomes-isolationist-
china-is-becoming-globalist-the-implications-
for-energy-and-trade/#cdbf33d19f4e
JAPAN’S PROACTIVE APPROACH TO
RELATIONS WITH TRUMP ADMINISTRATION
- Abe’s nimbleness in reaching out and
courting Trump soon after his election was
perceived as key to establishing good
working conditions with the new admin. / US
commitment to the bilateral security alliance
has not been impacted by trade tensions. In
fact, personal relations between the two
leaders may have even gotten stronger, or at
least Abe seemingly remains committed to
flattering the president as a means to ensure
that relations remain strong. One anecdotal
- piece of evidence would be the fact that
Trump said the Japanese prime minister had
actually nominated him for a Nobel Peace
Prize to acknowledge the president’s
contributions to take the first steps in
ensuring peace by engaging with North
Korea. /Japan is the third largest foreign
investor in the US at $477 billion after UK
- Japan is now regarded as a nation
committed to free trade and to multilateral
agreements, especially in light of the U.S.
retreat. But just how much it would have to
concede to the United States in a bilateral
framework has yet to be seen. nd Canada.
- Japan’s economic strategy has been to hedge
against the zero-sum approach to trade that
the Trump administration has been taking
over the past two years. It has done so in
two effective ways. First, through continuing
to pursue multilateral trade deals, it has
pushed forward with the TPP without the
United States, and is shepherding the CPTPP
successfully.
- It has also succeeded in pursuing trade deals
with other countries, most notably by
pushing ahead with the EU-Japan Economic
Partnership Agreement, which entered into
force in February of 2019. Second, Tokyo has
broken through its diplomatic impasse with
China and is looking to increase partnerships
in infrastructure development in Southeast
Asia in particular. China and Japan signed
$2.6 billion in business deals following the
summit meeting in Beijing, with Abe
 accompanied by nearly 1,000 corporate
executives for the visit. With promises of
developing nearly 50 joint infrastructure
projects across Southeast Asia, the prospects
for new business deals are certainly
tantalizing. In addition, the two sides agreed
to cooperate in financial markets as well,
most notably by renewing and expanding
their currency swap agreement that had
expired in 2013. Moreover, Japan and China
agreed in principle to establish new
frameworks to look into opportunities for
technological cooperation as well as
intellectual property protection.18

A UNITED FRONT AGAINST UNFAIR TRADE

PRACTICES

As the leading voice keeping the CPTPP

together, Japan is fully aware that expanding
membership beyond the current 11 countries is
critical for its continued success. That includes not
only keeping the door open for the United States to
return to the multilateral fold down the line, but also
encouraging China to join the framework as well. As
such, Japan’s strategy would be to continue
strengthening economic relations with both Beijing
and Washington and encouraging both to join the
free trade agreement eventually.20

- (http://www.keia.org/sites/default/files/publ
ications/kei_jointus-korea_2019_3.3.pdf)
-
-

STRATEGIES TO LOOK INTO:

1. MANIPULATING EXCHANGE RATES

2. BELT AND ROAD INITIATIVE BY CHINA
-an ambitious program to connect Asia with Africa and Europe via land and
maritime networks along six corridors with the aim of improving regional
integration, increasing trade and stimulating economic growth.
-ANNOUNCED BY THE CHINESE IN 2013 AS A GLOBAL TRADE STRATEGY BASED ON THE
ANCIENT SILK ROAD TRADING ROUTE
-PROMOTES ECONOMIC COOPERATION ACROSS ASIA, AFRICA AND EUROPE
COMBINES NEW AND OLDER PROJECTS AND INCLUDES IMPROVED SOFT AND HARD
INFRASTRUCTURE.
*1 CPTPP

- The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), also
known as TPP11 or TPP-11,[2][3][4][5] is a trade
agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New
Zealand, Peru, Singapore, and Vietnam.

- The chapter on state-owned enterprises (SOEs) is unchanged, requiring signatories to share

information about SOEs with each other, with the intent of engaging with the issue of state
intervention in markets. It includes the most detailed standards for intellectual property of any trade
agreement, as well as protections against intellectual property theft against corporations operating
abroad.[14]

China accounted for almost 50 percent of global growth and continues to constitute some 30 percent of
global prospects today. In positive scenarios, such economic spillovers support global growth. In
negative scenarios, such spillovers would penalize those growth prospects and the collateral damage
would likely be the worst in emerging and developing economies.

Over the past year, the U.S. has imposed tariffs on $250 billion worth of Chinese imports and China has
retaliated, raising tariffs on U.S. exports. At the G-20 leaders’ summit in November 2018, Presidents
Trump and Xi agreed to resolve the trade dispute within 90 days—by March 1, 2019, though this
deadline has been recently extended. (https://www.brookings.edu/wp-
content/uploads/2019/02/us_china_economic_relationship.pdf) The tariffs imposed by both countries
are not WTO consistent

Bilateral Economic Relationship

- Bilateral trade is the exchange of goods between two nations promoting trade and investment.
The two countries will reduce or eliminate tariffs, import quotas, export restraints, and other
trade barriers to encourage trade and investment.
- Nevertheless, the economic costs of the bilateral economic relationship are very real. China’s
economic practices now risk harming the U.S. service and knowledge economy. As identified in
the United States Trade Representative (USTR) Section 301 report, intellectual property (IP)
theft and forced technology transfer and other Chinese unfair trade practices threaten high
wage jobs and high-value-added manufacturing in the U.S. The role of the state in effectuating
these policies with larger aims of supplanting U.S. leadership in high-tech industries makes these
Chinese policies all the more concerning.

CHINA’S ECONOMIC MODEL

A. The move towards self- sufficiency in emerging technologies is inconsistent with a trading
system based on comparative advantage.
B. Second, use of SOEs, their access to subsidies, and limited rule of law in China support state
companies within China and globally.
C. Third, China’s use of industrial policy to pick winners is expected to lead to excess production
and dumping overseas.

This has already occurred, for instance, in steel and solar photovoltaic (PV) with negative 3 The US-
China economic relationship: A comprehensive approach impacts for U.S. and global industries,2,3
 and is expected to occur in more advanced industries identified in China’s recent industrial policies,
such as robotics, high-speed rail production, new energy vehicles, and batteries.

CHINA-US Trade War

China’s unfair trade policies

However, it was slow to enforce intellectual property rights and add transparency to its industrial
rules and regulations, which made it difficult for U.S. businesses to access its market.[23] By 2019 the
estimated costs to the U.S. economy from Chinese IP theft was between $225 billion and $600
billion annually.[25] (wikipedia)
The Obama administration confronted other issues in 2010, when it opened an investigation into
whether the Chinese government was subsidizing its alternative energy companies, such as solar
and wind turbine, in violation of WTO guidelines that it agreed to. It was one of the first challenges of
China's alleged efforts to control major growing industries.[26] As explained by Obama's Trade
Representative, Ron Kirk, "Green technology will be an engine for the jobs of the future, and this
administration is committed to ensuring a level playing field for American workers."[26]
United Steelworkers President Leo Gerard said that those subsidies were in "direct violation" of
WTO rules.[27] Along with disallowed subsidies, Gerard pointed out that U.S. firms establishing joint
ventures with Chinese companies must surrender technologies and designs as a condition of doing
business:
As they steal the technology and force the companies to China, they are locking down research and
development. If we are not going to do solar panels and fluorescent bulbs and wind turbines here,
the next generation of R and D will not be here.[27]
Among the unfair trade practices asserted by the Trump administration is the theft of U.S. intellectual
property (IP).[25] James Andrew Lewis, senior vice president at the Center for Strategic and
International Studies, claims that IP has been taken through espionage, theft and forced technology
transfers due to mandatory joint ventures.[44] Estimated cost to the U.S. from IP theft is between $225
billion and $600 billion annually.[25]
Technology is considered the most important part of the U.S. economy.[45] According to U.S. Trade
Representative Robert E. Lighthizer, China maintains a policy of "forced technology transfer," along
with practicing "state capitalism," including buying U.S. technology companies and using cybertheft
to gain technology.[45] As a result, officials in the Trump administration were, by early 2018, taking
steps to prevent Chinese state-controlled companies from buying American technology companies
and were trying to stop American companies from handing over their key technologies to China as a
cost of entering their market.[45] According to political analyst Josh Rogin: "There was a belief that
China would develop a private economy that would prove compatible with the WTO system. Chinese
leadership has made a political decision to do the opposite. So now we have to respond."[45]