{"id":45218,"date":"2019-02-04T13:01:53","date_gmt":"2019-02-04T02:01:53","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=45218"},"modified":"2019-02-04T13:01:53","modified_gmt":"2019-02-04T02:01:53","slug":"time-for-global-leadership-japan-style","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/time-for-global-leadership-japan-style\/","title":{"rendered":"Time for global leadership, Japan-style"},"content":{"rendered":"
<\/figure>\n

Japan has taken up the G20 presidency at a key time in global economic affairs and has the opportunity to shepherd the global economy through a period of greater uncertainty than there has been in decades. But the task is tough. Not only are the issues on which progress must be made substantial, but Japan\u2019s G20 presidency will effectively be one of the shortest ever, with leaders meeting in the middle of 2019.<\/p>\n

The World Trade Organization, at the core of the multilateral trading system, is in crisis. With only three out of its seven possible appellate court judges, the WTO\u2019s\u00a0dispute settlement body is down to the\u00a0minimum number<\/a>\u00a0of judges\u00a0needed to function. If one of the three judges has to recuse himself or herself from a case or becomes unable to serve, the enforcement mechanism of the multilateral trading system will cease to function. This is the system that holds countries accountable to the world trade rules and, without it, a core function of the WTO will collapse.<\/p>\n

It\u2019s the United States that is vetoing the appointment of new judges because it says it wants changes to the system.<\/p>\n

The importance of the multilateral trading system and dispute settlement mechanism is more hardwired into Japanese strategic thinking than perhaps that of any other country. Japan\u2019s post-war reconstruction and rapid rise were made possible by reliance on open international markets underpinned by the WTO\u2019s predecessor, the General Agreement on Tariffs and Trade. The WTO entrenched the dispute settlement process that has avoided much conflict over trade issues. Recently, for example, the dispute over the cutback in Chinese exports of rare-earth metals to Japan and other countries was resolved in a WTO dispute settlement case. China accepted the ruling against it. Japan didn\u2019t retaliate and the matter was settled peacefully. For Japan and other countries, the WTO dispute settlement system works.<\/p>\n

The WTO, of course, is far from perfect and is in need of some reform. The failure to conclude the Doha Development Round\u2014the most recent negotiations on multilateral liberalisation, which started in 2001\u2014has meant that some rules are out of date or do not exist for new areas of commerce relevant for the 21st century. Gaps in the rules have become issues of contention between the major trading powers.<\/p>\n

The leaders of the G20 recognise the importance of reform and, for the first time, in the communiqu\u00e9 from last November\u2019s meeting in Argentina, they committed \u2018to work together to improve a rules-based international order that is capable of effectively responding to a rapidly changing world\u2019.<\/p>\n

There is now an opening for G20 leaders to set the strategic direction of reform for the WTO. As the president of the G20, Japan has a responsibility to develop a framework to help prioritise reforms and catalyse action on those that are most urgent. A clear direction needs to be set during Osaka\u2019s G20 summit, or else momentum will be lost.<\/p>\n

Of all the areas in which the WTO needs to change, priority must be given to those that help to settle the trade tensions between China and the United States. The\u00a0trade war<\/a>\u00a0has already affected global trade and shaken confidence in global markets, disrupting investment and reorganising some supply chains. Confidence in the multilateral trading system is at stake. Trade wars can easily spread as countries incurring direct or collateral damage seek to \u2018protect\u2019 themselves or retaliate by putting trade barriers up.<\/p>\n

A G2 deal between the US and China that eases trade tensions may seem a positive outcome but will do little to calm the now bipartisan push in the US to\u00a0contain<\/a>\u00a0the rise of China. There is also a real chance that a bilateral deal would undermine the multilateral trading system. The proposed packages of massive Chinese purchases of US energy and agricultural goods may temporarily ease bilateral tensions but will likely be outside of the established rules and potentially divert trade from others.<\/p>\n

The global economy will be better served by a US\u2013China deal that is done within a multilateral framework, extending market opening in China to other countries on a most-favoured-nation basis. That would serve Chinese interests as well, even though the instinct will be to do a narrow, bilateral deal to appease the Trump administration. This is where countries like Japan are crucial for marshalling support from other countries to encourage China in particular to avoid a narrow, bilateral settlement and frame a multilateral settlement.<\/p>\n

Japan has the ability to mobilise and work with like-minded countries in Asia and around the world to preserve the open, liberal rules-based order and to set a direction on strengthening it. Such an approach will make it easier to avoid a bilateral game of divide and conquer played out of Washington or Beijing.<\/p>\n

There will be plenty of distractions for Japan as it negotiates its own bilateral deal with the US, manages a successful G20 summit and continues to\u00a0improve its relations with China<\/a>\u00a0while managing all the attendant risks. But these challenges will be made easier if Japan works with a coalition of middle powers that share the same core interest in an open, rules-based multilateral order.<\/p>\n

The success or failure of Japan\u2019s G20 presidency ultimately depends on whether that is the defining strategic outcome of the Osaka summit next June.<\/p>\n","protected":false},"excerpt":{"rendered":"

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