Japan Institute for National Fundamentals

　　　　　The United States and China have escalated their trade dispute, filing complaints against each other with the World Trade Organization and increasing the risk of world economy destabilization by shaking stock markets. At a time when the Trump administration’s “America First” foreign policy is adding fuel to protectionism and inward-looking policies in other countries, the WTO must be revitalized to reverse the trend and spread free and fair trade rules. Japan should take leadership in this respect.
　
Don’t leave China to violate intellectual property rights
　　　　　Tariffs imposed by the U.S. administration on a wide range of imported products would not only increase U.S. raw material costs to weaken U.S. companies’ international competitiveness but also boost commodity price to the disadvantage of private consumption. It would also invite other countries’ retaliatory actions, leading international trade to shrink. As a result, the U.S. economy will also risk contraction. Nevertheless, the U.S. administration has vowed not to retreat even an inch.
　　　　　At the same time, however, the U.S. administration has emphasized that the United States and China are now in talks, the first phase after filing complaints with the WTO. Obviously, the U.S. administration intends to exploit import tariffs as a bargaining chip to win Chinese concessions and domestic support toward November’s midterm elections. If the brinkmanship diplomacy fails, however, the repercussions will be immeasurably great.
　　　　　Japan should take a merit-based approach against the Trump administration that makes light of the WTO and gives priority to domestic law rather than international consultations. In response to U.S. restrictions on imports from Japan, Tokyo should file a complaint with the WTO.
　　　　　In response to Washington’s complaint filed with the WTO over China’s intellectual property right violation, Japan and the European Union indicated their intent to participate in the dispute settlement process as third parties. Given that developed countries are commonly required to address China’s industrial policy of forcing foreign companies to transfer technologies to Chinese firms, however, Japan as well should consider filing its own complaint with the WTO against China’s intellectual property right violation.

Japan responsible for correcting U.S. actions
　　　　　The present WTO system clearly contains numerous problems. U.S. Trade Representative Robert Lighthizer has criticized China for claiming itself as a developing country to benefit from exceptions to WTO rules. Even under WTO rules, unfair trade practices by China and others are not easy to improve.
　　　　　Although it is natural for the United States to insist on the need for reforming the WTO, the country should not be allowed to oppose appointing new members to the Appellate Committee in the WTO dispute settlement process to effectively make the process dysfunctional. With 164 countries and regions as members and the dispute settlement mechanism, the WTO has a great raison d’etre. WTO members should recognize this fact and strengthen the WTO regime.
　　　　　In its joint statement with the WTO on May 22, 2017, Japan vowed to be a champion of free trade. At Japan-U.S. summit talks later this month, Japanese Prime Minister Shinzo Abe should tenaciously persuade U.S. President Donald Trump not to turn his back to the WTO. Japan can muster support from many other countries and boost its influence by making a consistent assertion based on free and fair international rules in regard to not only economic problems but also North Korea’s denuclearization and its abduction of Japanese citizens. As a U.S. ally, Japan is required to correct U.S. actions.

Yujiro Oiwa is a JINF Planning Committee Member and Professor at Tokyo International University.