Information
- Time and Date: 09:00 a.m. - 12:30 p.m. (PST), November 22, 2024
- Hosts: Center for International Studies (CIS), University of Southern California (USC), Research Institute of Economy, Trade and Industry (RIETI)
Summary
Opening remarks
Shigetoshi IKEYAMA (Vice Chairman, RIETI)
Kenko SONE (Consul General of Japan in Los Angeles)
Saori KATADA (Professor of International Relations/ Director of the Center for International Studies, USC)
Moderator Saori Katada, Professor of International Relations and Director of the Center for International Studies, USC, opened the seminar on “Economic Security, US-Japan Cooperation and the Future of Globalized Production” and welcomed all seminar participants.
The Consul General of Japan in Los Angeles, Mr. Kenko Sone, shared personal experiences from India highlighting how economic issues intersect with national security, using infrastructure projects as an example. He noted Japan’s focus on maintaining a rules-based free and fair economic order through participation in international frameworks, including the WTO, CPTPP, RCEP, and IPEF, while strengthening coordination with allies on issues such as supply chain resilience and emerging technologies.
Vice Chairman of RIETI Mr. Shigetoshi Ikeyama highlighted how technological innovation and expanding supply chains have made the global economy more interdependent, while also creating new vulnerabilities stemming from geopolitical tensions and natural disasters. He emphasized the seminar’s focus on economic security and global supply chains, featuring experts from both Japan and the U.S.
Panel discussion: “Business Interests and Economic Security”
Yasuyuki TODO (Faculty Fellow, RIETI / Professor, Faculty of Political Science and Economics, Waseda University)
Ulrike SCHAEDE (Professor of Japanese Business, University of California, San Diego)
Robert DEKLE (Professor of Economics, USC)
Moderator
Saori KATADA (Professor of International Relations/ Director of the Center for International Studies, USC)
Presentation 1: “How can we construct secured, resilient, and innovative global supply chains?”
Professor Yasuyuki Todo of the Faculty of Political Science and Economics of Waseda University, who is also a Faculty Fellow at RIETI, provided an overview of secure, resilient, and innovative global supply chains from Japan’s perspective using his analysis of large data regarding inter-firm linkages. The presentation demonstrated the significant impact of supply chain disruptions, showing through a simulation study conducted jointly with Professor Hiroyasu Inoue that an 80% reduction in Chinese imports for just two months could result in a 40% loss in Japan’s value-added production. In particular, disruptions in upstream products such as metals, plastics, chemicals, and rare earths have amplified effects as they ripple through domestic supply chains.
In assessing the current state of affairs, despite U.S.-China decoupling and the drastic reduction of the United States’ reliance on China since the beginning of the two countries’ tariff war in 2018, many Asian countries, including Japan, are maintaining their high dependence on Chinese imports. The U.S. has successfully diversified its supply chains while maintaining profits, but Japan’s reliance on China remains high, particularly in ICT and automotive sectors. This has left Japan performing poorly in terms of supply chain resilience, economic profits, and addressing its national security needs.
Three main policy recommendations were raised to address these challenges.
First, friendshoring was addressed. Friendshoring would achieve the diversification of supply chains across like-minded countries while reducing dependence on China, but government support is necessary to overcome informational barriers, which could be provided by harnessing public institutions like JETRO and Japanese embassies and consulates. Second, the importance of integrating with the Global South—particularly ASEAN and India—was emphasized, suggesting that Japan could serve as a bridge between Western countries and developing nations. Furthermore, Western countries need to provide more economic benefits to effectively compete with the influence that China has built up through its Belt and Road initiative in these regions. In this context, the private sector’s low recognition of the risks related to national security that come with supply chain disruptions was also addressed. The third recommendation focused on the aspect of “knowledge friendshoring” by promoting international research collaboration among like-minded countries. In discussing industrial policy, Japan’s recent initiatives were evaluated by contrasting the successful TSMC plant establishment in Kyushu, which benefited from an existing industrial cluster, with concerns about the Rapidus project in Hokkaido, which lacks a similar industrial ecosystem. This analysis highlighted the importance of considering regional industrial environments when implementing such policies.
Presentation 2: “Japan’s Business Transformation and Economic Security”
University of California San Diego’s Professor of Japanese Business Ulrike Schaede presented a comprehensive overview of her insights gained through her research focusing on individual Japanese companies rather than aggregate economic data. She introduced her upcoming book “Japan Re-emerges,” which challenges the narrative of Japan’s economic stagnation, arguing that Japan’s economy simply follows the 80-20 principle, where a small portion of companies is responsible for driving the bulk of economic activity. Despite being only the 12th largest country in terms of population, Japan has long maintained its position as a leading economy and has ranked first in export product complexity for the past 30 years.
Particular attention was focused on how Japanese companies, especially large companies labeled as “front runners,” have transformed their business strategies since 2005 in response to globalization challenges. Rather than competing in traditional manufacturing, for example of consumer products, where profit margins were shrinking, these companies moved upstream in the supply chain to focus on highly advanced products, parts, and materials. Professor Schaede termed this as the “Japan Inside” phenomenon, where Japanese components and materials become crucial to global products, even though consumers may not realize it. For instance, she noted that 34% of the iPhone’s value added came from Japanese components in 2010 and other smartphone manufacturers were reliant on Japan as well. This transformation was described as the “Mainoumi Strategy,” named after sumo wrestler Mainoumi who succeeded against stronger opponents through superior technique and strategy rather than size. Using data from METI and NEDO, evidence of how Japanese companies have achieved dominant market shares in numerous small but critical market segments was shown, particularly in intermediate products and fine chemicals. This strategy has been adopted by large companies who have the necessary funds and talent to develop highly specialized businesses, including AGC, JSR, Hitachi, Fujifilm and Nippon Steel.
Regarding economic security, Japan, being the only country capable of producing certain critical components (except for rare earth materials), has created a balanced trade relationship in Northeast Asia where South Korea and Taiwan depend on Japanese materials, while China depends on South Korean and Taiwanese components. Looking ahead, Professor Schaede discussed Japan’s semiconductor vision for 2040 referring to a book recently published in Japanese by Mitsunobu Koshiba and suggesting that while the world is entering a technology war that is likely to last 20 years, no single country will be able to achieve technological independence, making interconnectedness a necessity rather than a choice going forward.
Presentation 3: “Japanese Defense Burden Sharing and the Economy”
Professor of Economics Robert Dekle of USC shared insights from an international relations perspective and discussed the evolution of defense burden sharing between Japan and the United States from the Cold War era to the present. Beginning by revisiting his 1989 paper written for the American Enterprise Institute (AEI), which analyzed the theory of international public goods and burden sharing during the Cold War period, when Japan’s GDP was approximately 80% of the U.S. economy but its defense spending was only 1% of GDP compared to America’s 6-7%, he explained that according to the theoretical model of that time, a nation’s defense spending should be proportional to its potential output, as larger economies benefit more from global security. By this logic, Japan’s defense spending in the late 1980s should have been between West Germany’s 4% and America’s 7%. However, he noted that Japan’s actual defense spending, when calculated according to NATO definitions (including military aid and pensions), was closer to 2% rather than the commonly cited 1%.
He then proceeded to contrast this Cold War scenario with today’s geopolitical landscape, arguing that the original model used up until 1989 was no longer applicable. Using recent research on geoeconomic fragmentation, he described how today’s world is divided into three blocs—the U.S., China, and non-aligned nations—rather than the binary division during the Cold War period. Unlike the dramatic decline in trade between the Soviet and Western blocs during the Cold War (from 25% of GDP in 1935 to 10% in 1955), current economic decoupling is primarily limited to U.S.-China trade, with minimal impact on other relationships.
In conclusion, Japan’s current defense spending of approximately 1.5% of its GDP was evaluated as being appropriate in today’s context, given that U.S. and Japanese interests are less aligned than during the Cold War, particularly regarding China. Japan’s defense spending should not necessarily need to match the percentage of Germany, for example, as the simple public goods model of burden sharing no longer applies in today’s more complex, interconnected world where trade relationships and security interests do not align as clearly as they did during the Cold War.
Discussion
Rafiq DOSSANI:
Professor Schaede discussed that Japanese companies are moving towards the so-called smile curve, focusing on design at the high end and sales at the low-end. Doesn’t the reduced exposure to manufacturing that results expose them to higher supply chain risk?
Ulrike SCHAEDE:
While the manufacturing share in Japan’s economy continues, it’s moving to higher value-added input materials. Companies like AGC moved from commodity glass to specialty materials such as more complex autoglass. Rather than hollowing out, these companies are leveling up their capabilities. They’re moving into difficult-to-copy products while inventing new ones. Japan may depend on China for basic consumer goods like rice cookers and hairdryers, but they’re focusing on high-end products instead.
Etel SOLINGEN:
The dependencies are mutual, and there is value added throughout the smile chart. But if China retains production capabilities and makes others dependent, China will maintain power. These dependencies can accrue significant value.
Ulrike SCHAEDE:
China depends on difficult-to-make inputs, while everyone needs China’s market size, so there is still a dependency. Germany made some unwise decisions regarding market dependency. Japan needs China for certain products—it’s an equilibrium that nobody wants to disrupt, though this could be detrimental to the U.S.
Saori KATADA:
Could you please share your thoughts on Japan’s Economic Security Promotion Act which has designated 12 sectors for protection, including LNG and semiconductors, but is focusing on defensive rather than offensive aspects of supply chains?
Ulrike SCHAEDE:
The repositioning on supply chains wasn’t policy-driven but a business response to markets. In these uncertain times, it’s difficult for METI to predict which industries to support. We don’t know how digital transformation will affect production technologies, for example. Companies can figure this out through market signals. Meanwhile, the government can help with tax incentives and funding, but can’t identify future leading industries in a similar fashion like it could 40 years ago when MITI was able to design growth plans for chemicals and steel. The situation is very different today. Leaving it to the market to figure the situation out is one of the key points here.
Saori KATADA:
To diversify supply chains, METI has been providing subsidies to reshore companies that have expanded into China back to Japan. But Japan’s dependency on China has actually significantly increased. Does this mean that METI’s policy has not been effective?
Yasuyuki TODO:
For Japan, onshoring policies may not be the ideal solution as the country is known to be prone to natural disasters such as earthquakes, which also poses a risk to supply chains. METI implemented another policy for diversification to relocate plants from China to other countries, but I’m not sure about the success so far.
Ulrike SCHAEDE:
In addition, Japan is facing a labor shortage, so repatriating some of these high labor manufacturing operations would not be a smart decision, so they are moving to Southeast Asia where there is labor. In fact, the majority of the overseas movement is in finance-related sectors like finance and insurance, which are very active in Southeast Asia at the moment to gain access to new markets as the domestic economy is decreasing due to factors such as demographic change and aging society. These policies were early on branded as China Plus One and companies were heading towards Vietnam or Thailand, for instance, as potential markets.
Etel SOLINGEN:
Returning to the topic of friendshoring—this term permeates the current discussions directly and indirectly. Of course, there is a lot of truth in statements asking to “let the market lead.” But that is exactly how Germany wound up in the situation it is now in. Friendshoring was not a concept over the last 15 years. The only model they had was getting cheap imports from China into Germany, not only industrial exports to China. There is risk in letting firms make the decisions.
On another note, I believe Germany has not fulfilled the 2% of GDP for defense spending yet.
Ulrike SCHAEDE:
I think Germany’s love affair with China included the politicians and the bureaucrats. It wasn’t just that the companies did something foolish and ignored the government’s advice. The government fell in love with China, too. For example, BMW designers were fired and laid off and replaced by Chinese designers so that they could design cars for the Chinese market. I think the government was just as smitten by this whole idea.
Shujiro URATA:
One quick comment on Japan’s dependence on China. It is true that in terms of trade, particularly imports, the dependency on China is still quite high. But in terms of foreign direct investment, China’s share is declining quite fast. Rising wages in China and increasing uncertainty in the country contributed to that. In addition, METI has given some assistance to Japanese companies which are interested in reducing dependence on China or diversifying their FDI in other countries, including back to Japan. On another topic: How do you see the future prospects of Japanese automotive companies? Many large car makers seem to be struggling. Now that Trump is going to be in office, how are Japanese car makers going to perform? Do they remain competitive? And what about the rise of electric vehicles?
Ulrike SCHAEDE:
Nissan’s issues stem from mismanagement under Carlos Ghosn. Toyota initially preferred hydrogen over EVs, but shareholder pressure pushed them into EV investment. The next decade’s big automotive demand will come from India and Indonesia, where combustion engines will dominate due to a lack of EV infrastructure. There is also a vision and plan for subscription-based transportation services at Toyota. In general, Japanese automotive companies have solid plans, unlike their counterparts in Germany or the U.S.
Round table: "Economic Resilience and US-Japan Cooperation"
Discussants
Rafiq DOSSANI (Director, RAND Center for Asia Pacific Policy, RAND)
Etel SOLINGEN (Distinguished Professor, University of California, Irvine)
Kenko SONE (Consul General of Japan in Los Angeles)
Shujiro URATA (Chairman Emeritus/Distinguished Senior Fellow, RIETI)
Moderator
Saori KATADA (Professor of International Relations/ Director of the Center for International Studies, USC)
Participant A presented a comprehensive analysis of global value chains (GVCs) and economic resilience, drawing from participant A’s extensive research including a Cambridge University Press book on geopolitics and supply chains in East Asia, as well as participant A’s contribution to the GVC Development Report sponsored by major international economic institutions including the WTO, OECD, and various Asian economic organizations. In participant A’s presentation, participant A traced the evolution of GVCs through several major disruptions over the past decade. Beginning with their robust rebound after the 2008 financial crisis, she detailed how the landscape shifted with the U.S.-China trade tensions, sparked by China’s 2025 plan and Xi Jinping’s push for self-sufficiency. This was followed by Trump’s retaliatory measures against China’s intellectual property violations and WTO commitment breaches, leading to increased protectionism and nationalism on both sides. The COVID-19 pandemic, particularly China’s lack of transparency regarding its origins, further exacerbated these tensions.
Despite these multiple disruptions, it was pointed out that by 2021, there was surprisingly little evidence of fundamental GVC restructuring. Surveys showed declining intentions among firms in the U.S., Europe, and Japan to move out of China, with only marginal declines in China’s role as “the factory of the world.” However, Russia’s invasion of Ukraine marked a crucial turning point, that she described as an “autocracy shock.” This event dramatically shifted business perceptions, with European firms’ interest in leaving China doubling from 11% to 23% after the invasion. Jörg Wuttke, the former president of the European Chamber of Commerce in China, described this period as “the darkest ever” in Europe-China relations.
China’s embrace of Putin, another autocratic shock, further complicated matters, compounding existing concerns about China’s coercive strategies toward Taiwan, Japan, Australia, and other nations. This led to increased interest in various shoring strategies (onshoring, reshoring, friendshoring) and a dramatic decline in China’s inbound FDI to its lowest level in decades.
In participant A’s conclusion, participant A emphasized several key points about the future of GVCs. While complete decoupling appears unrealistic and prohibitively expensive, businesses are actively recalculating risks and seeking alternatives to China. Economic impact studies suggest that while the U.S. would be less affected by decoupling than other countries (with China, India and Russia facing a potential decline of over 7% of GDP), the consequences could still be severe under certain scenarios during the upcoming Trump administration, including significant loss of jobs in the U.S. in the first year of aggressive decoupling policies with California and Texas bearing the brunt of the economic impact.
Participant B focused on two critical themes in the presentation: climate change impacts on global supply chains, in particular in countries of the Global South, and insights from a study on middle powers’ perspectives on China and geopolitical tensions.
On climate change, participant B began by highlighting the urgency of the situation, noting that global temperatures have already reached 1.35°C above pre-industrial levels by the end of 2023, and will likely exceed the Paris Agreement’s 1.5°C target before 2030. Climate impacts are distributed unequally across regions, with developing nations bearing the greatest burden while the developed countries face less significant impacts or even positive developments for the time being. Due to ocean current patterns flowing southward, South Asia, Southeast Asia and East Africa face particularly severe risks from rising sea levels and extreme temperatures. This geographic vulnerability creates significant challenges for supply chain resilience strategies that aim to shift production to these regions in the so-called Global South reshoring.
Two primary approaches to address climate change were highlighted: mitigation and adaptation. Mitigation efforts focus on reducing greenhouse gas emissions through strategies such as electrification, green hydrogen adoption, and reforestation. Adaptation, meanwhile, addresses existing and anticipated impacts by building resilience in human habitation, adjusting cropping patterns, and managing rising sea levels. A crucial distinction between these approaches was pointed out: while mitigation efforts can attract private investment due to their commercial viability—such as electric vehicle production or solar panels—leading to new business opportunities, adaptation requires significant government funding as it represents a local public good and there is no clear incentive for global companies to invest in these areas. This shortage poses a serious risk to developing countries’ ability to maintain supply chain resilience. Focusing solely on industrial supply chain resilience would be insufficient if broader adaptation needs, such as population displacement due to rising sea levels or failing crop patterns, are not addressed.
In the second part of the presentation, participant B discussed findings from his recently completed report on “Middle-Power Equities in a Cross-Strait Conflict,” which examined the perspectives of four key middle powers: Australia, the United Kingdom, Canada, and Japan. Through interviews with high-level policymakers and analysts, the study revealed a significant divergence between U.S. views and those of these middle powers regarding China. A striking finding was the remarkable unanimity among these middle powers in their assessment of China, viewing the country as primarily focused on maintaining Communist Party control above all other objectives, whether related to global trade or regional hegemony, including issues with regard to Taiwan. This perspective suggests a more nuanced understanding of China’s motivations than often presented in U.S. policy discussions. The opinion is also prevalent that China views Japan primarily as a source of technology and as a U.S. satellite.
On India, participant B challenged its categorization as a non-aligned country, arguing that India sees itself as a major power that believes in multipolarity and aspires to great power status. India’s strategic shift from Russia toward the U.S., particularly in defense technology purchases, was summarized, with Russian share dropping from 80% to 30% over a decade. Tensions in U.S.-India relations due to America’s reluctance to share technology while wanting to sell products were noted. Furthermore, regarding India’s potential role in global supply chains, the country’s skill gap at the intermediate level was identified as a major constraint, despite strong capabilities in management and technology, suggesting it would take several decades before India could play a major role in global supply chains.
According to participant C, Japan’s government has identified several major global challenges. In the realm of security, there are significant concerns about maintaining the free and open international order based on the Rule of Law, particularly in light of the ongoing situation in Ukraine. In East Asia and Southeast Asia, there are mounting worries about attempts to change the status quo by force or coercion, especially regarding developments in the East and South China Seas. Additionally, North Korea continues to pose a substantial threat, while Chinese military activities in the region have been steadily intensifying. The landscape of global governance has become increasingly complex, largely due to the shifting balance of power brought about by the rise of the Global South.
This transformation has revealed certain limitations in the United Nations’ capability to effectively address global issues. Furthermore, the international community faces serious economic security challenges, including notable vulnerabilities in global supply chains affecting essential resources such as food, energy, semiconductors, and critical minerals. There is growing concern about economic coercion by countries with large markets who leverage economic dependencies, alongside persistent issues with the theft of intellectual property and sensitive technology, as well as development finances that often disregard the sustainability needs of recipient countries.
The international community is grappling with numerous interconnected complex challenges. These include climate change, international health crises, and persistent poverty, all of which have been further complicated by the ongoing conflicts in Ukraine and the Middle East. At the same time, the rapid advancement of technology presents both opportunities and challenges. While digitalization and IT innovations have significantly improved human lives and communication capabilities, they have also made global issues more visible and complex, and it is becoming more difficult to identify dual-use technologies. Artificial Intelligence, while offering tremendous potential, brings with it considerable security risks, particularly in terms of cyber-attacks and the spread of disinformation.
Japan has taken significant steps to address these challenges through enhanced cooperation with like-minded countries. A notable milestone was reached when Japan hosted the G7 summit in Hiroshima, where leaders issued their first-ever joint statement on economic resilience and security. The Japan-U.S. relationship has been particularly crucial in this context, with several important initiatives being established: The Competitiveness and Resilience Partnership (CoRe) was launched in 2021, followed by the formation of the Economic Policy Consultative Committee (Economic 2+2) in 2022, which expanded traditional security collaborations to include economic security matters.
Meanwhile, in Southern California, Japanese companies have emerged as the largest investors in the region, with a particular focus on hydrogen technology development. More than 30 Japanese companies are currently collaborating on projects to implement hydrogen fuel cell technologies in port equipment at the Ports of Los Angeles and Long Beach. Meanwhile, in Arizona, Japan is actively encouraging companies to invest in the semiconductor industry.
Participant C emphasized that regardless of potential administrative changes in either country, the foundation of Japan-U.S. cooperation remains strong and essential for maintaining stability and promoting technological advancement in the Indo-Pacific region.
Participant D:
I think it’s very hard for the U.S. to come to grips with China surpassing the U.S. in GDP. They’ve become the largest country in the world. This is about containment, right? Holding technology and trade to slow down China and the Chinese government, but it’s too late. So that puts Japan in a difficult position. How does RAND think things are going to unfold in the next 10 years?
Participant B:
RAND doesn’t have an official position. We pride ourselves on being objective, nonpartisan, and evidence based. There’s a fair amount of interest at RAND in studying how technology and economic sanctions and regulation can be used to compete with China. We recognize four and a half percent growth by China will lead it to stay in second place for several years. China is doing quite well in technology development, though it’s suffering from not having access to the academic and corporate access they had earlier from the U.S. The demand for their products is growing in Southeast Asia and the Global South generally. These regions are also growing relative to the developed world. Over the next 10 to 20 years, these markets are likely to overtake the market size of the OECD countries.
Participant A:
I wasn’t clear when you said political survival of the Communist Party was the utmost objective. I don’t see how not attacking Taiwan stems from that objective. And regarding GDP growth, all this campaign for self-reliance and Made in China 2025 makes me think ‘be careful what you wish for.’ China still has 600 to 800 million people to integrate into the middle class. It seems to me that they may have been moving too soon.
Participant B:
The Chinese don’t see Taiwan as a renegade province at all. They see it as part of China, but it’s something they can wait for, as long as no red lines are crossed. Regarding the “Made in China 2025” initiative, it is similar to the Indian government’s “Make in India 2025” initiative and many others. It is quite normal for developing countries to use slogans to energize their people. I don’t think it was ever meant to be a definitive deadline for becoming a sophisticated country.
Participant E:
Another aspect to note is that the Japan-U.S. trade issues of the past were never labeled as a “trade war,” but as “trade frictions.” On the other hand, the U.S.-China conflict is called a “war” in all languages. During the Cold War, the Western nations greatly overestimated the USSR. When everything fell apart, the term “paper tiger” was used. I’m wondering whether it is similar with China. The last time we saw the Chinese military in action was 1979. And now there are no jobs for young, educated Chinese people. How do we think about this?
Participant C:
My impression is that China is interested in controlling information. The Communist Party makes an effort to not let those living in poverty blame the party for their situation. Instead, if people have complaints, they are directed at something else—for example at foreign countries. That’s what happened with Japan—China has always used the history issues with Japan to bring people’s attention to Japan, despite the fact that current situation in Japan is quite different from the past. But maybe at some point the Chinese people will start to feel frustrated with the current domestic situation.
Participant F:
All countries are giving subsidies to TSMC, but we’re also seeing Japan invest in companies like Rapidus. How do you approach building a legitimate domestic foundry while also supporting existing companies which have such massive advantages?
Participant E:
The interesting aspect regarding the TSMC money is that TSMC buys 80% of its production machinery from Japan. In that way, the Kumamoto investment makes sense, Arizona less so. We’re already in this technology war, doubling down with billions of dollars. Those investments will have to be used for 20 years to amortize. We’re creating a technology war as collateral damage.
Participant G:
From the perspective of economics, industrial policy or subsidies to particular firms or industry can be justified in the presence of an increasing returns scale. TSMC in Kumamoto is successful in a way because of technology spillovers in the region. I am not sure about Rapidus, on the other hand. Instead of focusing only on one specific company, some kind of competition for Rapidus is needed.
Participant D:
Why did Japan allow its semiconductor dominance to decrease after the 1980s?
Participant C:
Investments were high, but the returns were just getting smaller. Even high technologies soon become a mere commodity, so it is difficult to keep investing and that is what happened in most Japanese companies.
Participant E:
Also, due to the bubble bursting in the 1990s, the investment that was needed to maintain the advantage disappeared rapidly, ending their dominance by 2000 or so.
Participant H:
Studies show that in a U.S.-China tariff war with 60% tariffs, Japan would benefit from trade diversion. Also, regarding the potential impact of Trump’s tariffs on the U.S. income distribution, it is ironic that Trump’s policies will likely hurt many of his supporters who are the poorest. I wonder if there are studies on the first Trump administration’s impact that could be used to fight against these policies. Also, what about India’s protectionist policies?
Participant B:
India’s protectionism varies greatly. Mobile phones and telecom equipment do not attract tariffs, which is why Chinese companies have 99% of the market. But India is highly protectionist in textiles, agriculture, and other areas. This is further complicated by federalism—states support their own industries, thus distorting prices. It is a very particular mix that India has developed—traditional businesses want protection - subsidies and tariff walls, mostly, while new businesses want fewer restrictions. State governments are controlled by local businesses, which in most of the populous states with the most votes in Parliament, means traditional businesses. So the national government is limited in what actions it can take to reduce the protections granted to the industrial sector. We will have to wait for a change the political structure of the country for India to remove protections for businesses.
Participant A:
Regarding the upcoming Trump administration and its impact on U.S.-Japan cooperation: Three weeks ago, friendshoring was displacing decoupling as a strategy, connecting democracies through NATO and existing GVC networks. But with the Trump administration, this very concept is being abandoned. In that worldview, there are no friends. The BRICS countries, which are often brought up in this regard, are aligned with China and Russia, so they are also not a friendshoring alternative.
Participant E:
One of my concerns is that the American people actually have lost the ability to distinguish between Japan and China. For Japan, this is a problematic situation. How can Japan clearly communicate that they are not China in the business area?
Participant I:
To me, it seems like there are three layers. Locally, the distinction between China and Japan is recognized due to the presence of Japanese companies. At the top level of the government, China and Japan are very much distinguished in the sense of enemy versus the friend. But in the middle is where it’s not quite clearly distinguished. That’s where public diplomacy should come in. We are now coming to an end, and I would like to thank everyone for your participation in today’s seminar.