Promote Multifaceted Japan-EU Cooperation on Supply Chain Resilience

Consulting Fellow, RIETI

On July 4, 2023, the Delegation of the European Union (EU) to Japan, RIETI, and the EU-Japan Centre for Industrial Cooperation (EUJC) jointly hosted a seminar entitled "Resilient Supply Chains in Times of Geopolitical Tensions" at the EU Delegation.
Resilient supply chains in times of geopolitical tensions | EU-Japan

This seminar was organized on the occasion of the visit to Japan of EU commissioner Thierry Breton, in charge of the Internal Market, Industry, SMEs, Digital Defense and Space.
Commissioner Breton has broad authority, and was in Japan for the first Japan-EU Digital Partnership Ministerial Council meeting. This seminar was a follow-up to the seminar held last September on “EU-Japan Industrial Cooperation for Economic Security and Open Strategic Autonomy,“with the aim of further deepening shared understanding and strengthening partnership with the Japanese side.
RIETI - Promote Japan-EU cooperation on economic security (in Japanese)

The program was as follows:
Keynote speech on the EU side:
- Thierry Breton, Commissioner, European Commission
Japanese view:
- URATA Shujiro, Chairman, RIETI
Panel Discussion:
- Thibaut KLIENER, Director for Policy, Strategy and Outreach, DG Connect, European Commission
- TAKAHARA Ichiro, Chairman and CEO, Japan Organization for Metals and Energy Security (JOGMEC)
- Nikolaus BOLTZE, Country Representative, thyssenkrupp Japan K.K.
- WATANABE Shoichiro, Executive Vice President/Chief Technology Officer (CTO), Panasonic Energy Co., Ltd.
Moderator: IIDA Kaori, Head of Digital News Department, Japan Broadcasting Corporation (NHK)
I was in charge of planning this seminar and provided the closing remarks.

Below is a summary of the main presentations and discussions of the seminar.

Presentation by Commissioner Breton:

  • During this visit to Japan, I discussed the EU-Japan Digital Partnership with Minister of Digital Affairs of Japan, Taro Kono and Minister for Internal Affairs and Communications, Takeaki Matsumoto, and signed a memorandum of cooperation (MOC) on submarine communication cables with Minister Matsumoto and on semiconductors with METI Minister Yasutoshi Nishimura. Discussions with Minister Nishimura focused on strengthening supply chain resilience in the fields such as critical minerals and batteries, as well as advancing cooperation in the space and defense industries.
    METI and the European Commission (EC) Sign MOC on Semiconductors in the Presence of Minister Nishimura and Mr. Breton, Commissioner for Internal Market, the EC
  • In light of the recent geopolitical situation, economic security has become an issue. There is a risk of being overly dependent on a particular country for critical items, and the supply chain needs to be diversified.
  • The European Commission's Economic Security Strategy, published on June 20, 2023, calls for (1) promoting the EU’s economic base and competitiveness, (2) including in the digital space, protecting citizens against risks, and (3) partnering with like-minded partners.
    An EU approach to enhance economic security (
  • Along these lines, we have already addressed the Chips Act, Single Market Emergency Instrument, Green Deal Industrial Plan, Critical Raw Material Act, Net-Zero Industry Act and Act in Support of Ammunition Production.
  • The EU cannot realize this ambition alone, but must work together with like-minded partners, and Japan is very important in this regard. We have already concluded both an EPA (Japan-EU Economic Partnership Agreement: 2019) and an (Japan-EU Strategic Partnership Agreement: 2019) with Japan.
  • Though the regulation of AI has become a policy issue, I remember being invited as a computer engineer to a MITI conference in 1985 and having a discussion about the 5th generation computer, what is now called AI, with Professor Kazuhiro Fuchi. In the EU, the legislative process for the AI Act is in its final stages. Just as airbags and other devices were introduced for the safe use of automobiles, AI needs to be regulated to promote innovation. We will also cooperate with Japan in this regard.
  • I want to create an integrated single market between the EU and Japan, including in the digital space.

Presentation by Chairman Urata:

  • Japan has a long history of supply chain shocks (e.g., Mt. Fuji eruption, Great Kanto Earthquake, Great Hanshin-Awaji Earthquake, Great East Japan Earthquake). Furthermore, the risk of supply chain disruptions is increasing due to the recent U.S. sanctions against China caused by the U.S.-China conflict, the COVID-19 pandemic, and the rare earths embargo imposed by China.
  • Japan's import dependence on China is 26%, which is higher than that of the U.S. and Germany, and the impact of a disruption in imports from China, the so-called China Shock, would be enormous. According to a RIETI study, if 80% of components and other goods import from China to Japan are disrupted for two months, about 10% of GDP production will be lost. To avoid this risk, if 80 major products including home appliances and automobiles were to stop imports from China and switch to domestic production or imports from other regions, it is estimated that costs would increase by approximately 14 trillion yen, and the prices of personal computers and smartphones would rise by approximately 50% and 20%, respectively.
  • As discussed at the recent Japan-EU High-Level Economic Dialogue, it is important to focus on (1) Economic security, (2) A rules-based free-and-fair trade framework, and (3) Japan-EU economic cooperation in the digital sector and other areas.
  • In the area of economic security, like-minded countries should collaborate on critical goods such as semiconductors, diversify procurement through the Critical Raw Material Club concept, and strengthen communication between consuming and resource-rich countries. Japanese and European companies should create Business Continuity Plans (BCPs), build up inventories, and confirm chokepoints in supply chains.
  • Regarding a rules-based free-and-fair trade framework, we should continue to communicate on efforts for the World Trade Organization (WTO) process and utilization of Japan-EU EPA.
  • Japan-EU economic cooperation in the digital sector should promote cooperation on cyber security between the EU and Japan, conclude data flow negotiations, and introduce updated digital trade rules.
  • Japan prides itself on being a "leader" in supply chain resilience. Japan’s resilience is the result of corporate BCPs and a culture of mutual aid. Japan also has the technology to deal with climate change issues. We hope that digital technology will bring Japan and the EU closer together and further deepen Japan-EU cooperation.

Key comments from the panel discussion:
The panel discussion was held in response to questions from moderator Iida, and the main comments from each panelist were as follows:

Director Kleiner: In 1992, Francis Fukuyama advocated "the end of history" and an era of happy globalization began, but today there is a revolutionary change and the global supply chain can no longer be trusted.

  • In March 2023, EU Chairman von der Leyen gave a speech on the need for de-risking just before her visit to China. De-risking means maintaining the relationship and controlling the dependency situation, rather than severing the relationship as in a de-couple. The MOC signed today with METI regarding semiconductors is a good example of this.
  • As for critical raw materials and mineral resources, Sweden used to produce 50% of the copper consumed in Europe, and the region has its own resources, so we will respond by promoting production of these resources, promoting partnerships with Japan, Africa and Latin America, and promoting reuse and recycling within the region.

Chairman Takahara: JOGMEC has always taken a supporting role with companies in the development of mineral resources, but now JOGMEC itself will come to the forefront. Industry has also changed its perception of critical minerals. We are ready to cooperate with European companies in Africa and other third countries. There is no institution like JOGMEC in Europe, but we are ready to cooperate with European institutions and lend our expertise to their efforts.

  • For de-risking, it is effective to advance various pathways toward carbon neutrality, as agreed at this year‘s G7 meeting.
  • As seen in the battery sector, companies in the U.S., Europe, Japan, and China are facing difficulties due to different systems, but this is because it is still early days since the declaration of carbon neutrality, and it is hoped that the systems will soon be aligned among the countries and regions. Therefore, Japan needs to cooperate with Europe, U.S., and China.

Representative Bortze: Thyssenkrupp is a leading European company in many fields, including steel, heavy machineries, and energy, and we would like to cooperate with Japan in the fields of green hydrogen and green chemicals, fuel cells and batteries, and Carbon2Chem.

  • Russia's invasion of Ukraine has increased the need for supply chain diversification especially in terms of alternatives to the situation of dependence on China. Japan and Europe have potential for third-country cooperation. We would like to connect the current awareness of common supply chain resilience issues to the realization of specific cooperation projects in the future.

Vice President Watanabe: Factors affecting the battery business these days include: 1) the trend toward blocking the electric vehicle (EV) market (different policies in the US, Europe, and China), 2) the U.S. Inflation Reduction Act (IRA), 3) the trend toward higher raw material prices, and 4) the need to reduce carbon footprint.

  • Until now, there has been a strong demand for lower-priced EVs and batteries, and China and Korea have responded to this demand. However, the recent trend toward regional blocking has increased, and investment in each region is necessary. Raw materials can be produced even without being in China, but what is troubling is whether users and consumers are willing to pay the cost.
  • The global market is becoming blocked and local production for local consumption is becoming more important, but resources are dispersed and can be handled. You need to steer yourself and stay ahead even if the rule changes in response to technological innovation.

After listening to the above discussion, my takeaways are as follows:

First, risk awareness of supply chain resilience is common in Japan, the U.S. and Europe, but it is rapidly gaining strength, especially in the EU. This is likely due to heightened risk awareness in the energy crisis (especially natural gas) resulting from Russia's invasion of Ukraine last February and the recent intensification of the U.S.-China conflict.
As Commissioner Breton noted in his speech, by the time the Economic Security Strategy was published in June, the Chips Act, the Single Market Emergency Instrument, the Green Deal Industrial Plan, the Critical Raw Material Act, and the Net-Zero Industry Act had been proposed and were being rapidly debated within the EU system. In particular, the Green Deal Industrial Plan and the Net-Zero Industry Act reflect a sense of crisis that European companies need to pursue strategic autonomy, as the production capacity and technology of European companies could be absorbed by the U.S. due to the U.S. IRA.
An extension of this is a partnership orientation with Japan. Commissioner Breton’s speech was also full of strong enthusiasm for strengthening the partnership with Japan.

Second, Japan shares the same risk awareness as the EU, and as noted by Chairman Urata, Japan has abundant experience in supply chain shocks and has the know-how to deal with them. It would be effective to cooperate in the form of lending such expertise to the EU side.
Coincidentally, on July 6, the agreement was signed between the European Commission (DG GROW) and JOGMEC to enhance cooperation for the stable supply of critical raw materials.
Enhancing cooperation with Japan on critical raw materials supply chains through a new Administrative Arrangement (
Information sharing will be promoted in areas such as risk management and recycling related to the supply chain.
As Deputy Director-General Rute commented at the seminar last September, the EU does not have an organization like JOGMEC and is willing to learn about its operations, to which the Japanese side responded. This kind of experience sharing is the kind of cooperation that only like-minded partners can offer.

Third, the Japan-EU partnership for addressing supply chain risks in critical commodities needs to be comprehensive and multifaceted, as noted by Chairman Urata. The partnerships cover: (1) bilateral and multilateral economic security, (2) a rules-based free-and-fair trade framework, and (3) Japan-EU economic cooperation in digital and other fields.
Economic security includes MOC on semiconductors in the bilateral scope, and joint steps as seen in the “G7 Leaders' Statement on Economic Resilience and Economic Security” in the multilateral.
G7 Leaders’ Statement on Economic Resilience and Economic Securit (

It is important for the Japan-EU partnership to take the lead in creating international frameworks and rules, especially in the areas of trade and digitalization, in a manner that is inclusive of the countries of the Global South. In doing so, as Vice President Watanabe points out, there are various necessary considerations such as maximum possible convergence of rules and regulations, fair sharing of costs, to make it easier for businesses (especially global companies) to respond.
In particular, from Japan's perspective, as Chairman Takahara points out, it will be necessary to constantly emphasize the need to take into account the situation in Asia, which will be the center of future economic growth and carbon emissions, as well as a supply chain hotspot.

Following last September’s seminar, this year’s seminar was again extremely fruitful, with meaningful discussions on economic security and supply chain resilience among EU and Japanese officials from the public and private sectors, and concrete directions for strengthening the Japan-EU partnership were set forth.

Subsequently, in the Joint Statement following the EU-Japan Summit on July 13, the leaders stated: "We underline our determination to strengthen our cooperation in the promotion of economic security. We will strengthen the resilience of our economies in the areas of critical infrastructure and supply chain resilience, as well as cyber security and exports. (snip) We will strengthen the Japan-EU dialogue on economic resilience to address or mitigate the risk of over-reliance, address risks to critical global supply chains in areas such as semiconductors and raw materials, and share best practices to ensure the security of critical infrastructure.” The Japan-EU partnership in this area is making steady progress.

The video of the seminar is available on the EUJC website above, and we recommend that readers view it.

(The comments of each speaker in the text are based on my understanding.)

July 14, 2023
>> Original text in Japanese

August 17, 2023