Beyond Bilateralism: Japanese and US Cooperation Conflict in Multilateral Asia

T.J. Pempel

The first characteristic of the post-war US-Japan relationship was that it was highly bilateral in the areas of security and economics. The American and Japanese governments were able to settle most issues through bilateral negotiations. It was a hub and spoke relationship: there were links between Washington and Asian capitals, but little intra-Asian connection, until recently.

The second characteristic was the relationship's essential asymmetry. It was not a relationship of equals, but the two countries were complementary. The US has had greater power in security and economics; and the US has had a global agenda. Japan's agenda was regional.

The theme of our presentation is the following: Despite frictions, the two governments have been able to resolve their issues-both in security and in economics. Some expected the bilateral security treaty to become superfluous, but Japan and the US have kept reaffirming the strength of the relationship through the Nye Initiative, the Armitage Report, etc.

Recently, however, we have seen changes in the relationship. The US and Japan have established a number of individual and collective ties in Asia. Japan is exploring free trade areas (with Singapore, Mexico, and others for example), while the US is forming a bilateral relationship with China (the friendly elephant in the Asian living room).

One of the global trends that we feel is notable is the significant volume of capital flows (about $2 trillion moves each day). In 1983, the world's five largest national banks had three times more in their reserves than the amount that was traded daily. In 1986, the level in the banks' reserves was about the same as the traded amount. But now, the amount that is traded is four times as large as the reserves in the five largest national banks. This makes monetary policy very difficult.

There are other trends too. Because regional organizations have been proliferating, countries now have the option of forum shopping. In other words, countries can select from various multilateral, regional, and bilateral organizations, depending on the nature or scope of the issue at hand.

In terms of Japanese government regional initiatives, private and public sector interests are not meeting. The Japanese government would like to provide linkages with Asian countries. But Japanese companies are not as enthusiastic as the government is about investment in Asia.

Japan's victories against the US at the WTO have given Japan leverage to move away from the bilateral relationship. Japan now has the power to shape policy, not necessarily in cooperation with the US. That Japan is forming relationships with Europe and other regions means that it will have better bargaining power. Japanese government agencies, however, are not in agreement.

Finally, there is a risk of a backlash against free trade by the US Congress if the US keeps loosing in international forums. I could imagine Senator Jesse Helms leading such a backlash.

John Ikenberry, in his idea of an American grand strategy, emphasizes the importance of US hegemony, bilateral security ties, and soft multilateralism. The US-Japan relationship has provided regional stability, keeping frictions down between Japan and China. Challenges to US policy include a weak Japanese economy, US-Japan asymmetry, sparse cooperation among US allies in Asia, US military stickiness to new conditions, and the concern that the US will revert to unilateralism.

Mike Mochizuki says that while Mr. Bush saw China as a competitor (which was the reverse of Clinton), it has been difficult for the US to see both Japan and China positively, simultaneously. It is analogous to a cowboy movie: one of the two-China or Japan-wears a white hat, while another wears a black hat. Mochizuki suggests pulling China into multilateral organizations to reduce conflict.

Ellis Krauss

Our conclusions, though tentative, were very positive on US-Japan relations. We noted some paradoxes:The first paradox is this: The world has turned out to be different from the expectations in the 1980s. The establishment of APEC was seen as a way to keep the US in Asia. American hesitancy toward multilateralism has been overstated. Bob Zoellick and Bob Fauver were central players in US institution-building in Asia. The US had high hopes.

But it turns out that Japan has taken a leadership role, which APEC made possible. APEC and the Early Voluntary Sectoral Liberalisation initiative (EVSL) showed that multilateral negotiations are as difficult as bilateral talks. The very norms of EVSL were too vague, which also exacerbated conflict. There have been frustrations on both sides of the US-Japan relationship, and multilateralism has not been the panacea people thought it would be.

For the long-term, however, multilateralism has positive effects. By having multilateral forums, there will be less bilateral friction because sometimes you win, sometimes you loose. It seems fairer. In bilateral relations, both countries always feel they are the loser.

The second paradox is in the security realm. People predicted the end of US-Japan security relations, but we have seen the opposite. Japan has sent destroyers to the Indian Ocean to help US antiterrorism operations. The demise of the Socialists in Japan and the adaptation of Ampo, the US-Japan Security Treaty, have accommodated an expansion of the alliance. The alliance also serves other functions: the Asian tigers were able to grow, in part, because of the stability the alliance provided for the region.

There are problems down the road. The first is Japan's economic weakness. Japanese political leverage has increased in Asia and Japanese power has grown, while Japan's economy has shrunk. This cannot continue.

The second potential problem will be China. How will China fit into the security and economic triangle? A conflict over Taiwan would force Japan to make tough decisions. The China issue is very salient in Japan. Japanese farmers are finding the beauty of the WTO.

Q: Japan's multilateral approach with the US is only one of the approaches we are trying. Messrs. Koizumi and Bush are creating a sub-ministerial partnership. The relationship is broad, so we need richer paths for communication and conflict management. Conflicts bring adjustments.

As for antidumping, yes, the US did agree to negotiate on increased discipline. But antidumping is not a US-Japan issue only. It is a systemic issue. Before, Japan was catching up, so there was conflict. Now, Japan is mature; we won't see eight or nine percent growth rates. Japan is no longer the chaser; rather Japan is being chased-by China. We should, therefore, see less trade conflict between the US and Japan.

T.J. Pempel: Policymakers are often fighting the last war. You are right: we must be more nuanced. Both in Japan and in the US, different government agencies have different agendas. I am not saying it is a bilateral issue, but Japan has been the victim of US antidumping measures. How might China use antidumping?

Q: Yes, China has begun using antidumping and Japan may too in the future. The biggest victims of antidumping duties have been Chinese and American companies.

Q: We should remember that Asia is dynamic. When China retaliated against Japan's measures to protect its tatami and shiitake industries, there was division within the Chinese government-between the young bureaucrats who were reluctant to retaliate and the elders who like to retaliate. So there is another "two Chinas:" the working-class, internationalized youth and the old China that says, "I push you because you pushed me first."

Seeing China as a threat is a hot topic these days. But I am afraid we will loose sight of the real Chinese economy. China is good not because of its cheap labor, but because it has been opening its economy for two decades and now we are seeing the effects.

METI officials are interested in this China-ASEAN FTA, which came as a surprise. China is thinking strategically now. They want an early harvest to their negotiations. This episode has been a real eye-opener for Japan and Japan can learn a lesson.

Ellis Krauss: Indeed, there has been a change in ASEAN. The group is now willing to accept China without Japan or Korea as balancers.

Q: Why did Japan support an Asian Monetary Fund (AMF)? First, in this era of globalization, even the US cannot be the last resort for liquidity. Second, one country alone cannot tackle the movement of capital. Third, the IMF's quotas for Asia are not in line with Asian economic power.

The US should use Japan to convey the idea of an international society. The New Miyazawa Initiative, by the way, was meant to support Japan's supplementary budget, not to increase Japanese business influence.

T.J. Pempel: The New Miyazawa Initiative suggested a government role that recognized mutual interests. But while the Japanese government saw this as its mission, Japanese companies did not. Maybe if the Japanese economy picked up, the trend would reverse. The American and Chinese reactions to an AMF were knee-jerk. The US is not hostile to ASEAN plus three, but it should do debt swaps that are compatible with the IMF, so there is not a perception of a whole new Asian financial system.

Ellis Krauss: Regarding the AMF proposal, there was not enough nemawashi (consensus-building)-not inside the Japanese government, nor between Japan and China.

Q: Is APEC still relevant?

Ellis Krauss: C. Fred Bergsten says the world may be moving toward three blocs. I don't agree. The US has not lost interest in APEC-yet. There were overblown expectations. APEC's three pillars were a way to satisfy three almost incompatible constituencies. The US president won't come to APEC to do "trade facilitation," but he may come to talk about "trade liberalization." Initially, MOFA was dragged into APEC, but now that ministry is the group's biggest supporter. The same goes for the US State Department.

Q: What are the criteria for US forum shopping?

T.J. Pempel: Within Washington, DC, there is a continual flux of issues on people's desks. Domestic political calculations will push a country to shop for a particular forum.

Ellis Krauss: Officials have efficiency in mind. Multilateral forums can be far more efficient. The payoffs are also a consideration.