Economic policy

Future Forward with the U.S.-Japan Economic Policy Advisory Committee

United States-Japan Economic Policy Advisory Committee (EPCC) held its first-ever meeting in July, with US Secretary of Commerce Gina Raimondo and US Secretary of State Antony Blinken hosting their Japanese counterparts, then Minister of Economy, Trade and Industry (METI ) Koichi Hagiuda and Foreign Minister Yoshimasa Hayashi in Washington.

Their Joint Statement highlighted commonalities in general U.S.-Japan relations, such as support for economic growth, democratic values, and human rights in the Indo-Pacific. The statement also mentions the importance of promoting these ideas in other forums for the Joe Biden and Fumio Kishida governments, including the Group of Seven (G7), the Asia-Pacific Economic Cooperation (APEC) and the Indo-Pacific Economic Framework. for Prosperity recently launched. (IPEF).

IPEF is criticized for being “watered down” and is unlikely to generate concrete measures that would lead to new policies in the short term. A properly executed EPCC, however, could provide a closer forum in which Washington and Tokyo can work bilaterally to develop coordinated policies and resolve important economic and technology-related security issues outside of other frames.

Global Concentration Lines

The EPCC joint statement identifies two strands of Japan’s economic security promotion law – coordination of research and development (R&D) and export controls – as key means by which the United States and Japan can work together and build resilience in the promotion and protection of emerging technologies.

While then Minister Hagiuda said meetings with his American counterparts not be confined US-Japan bilateral relations, Washington and Tokyo must prioritize deepening bilateral coordination on export controls and R&D work if they plan to develop concrete and enforceable measures to deal with threats from China.

Combined efforts on economic, technological, and security issues have played a major role in U.S.-Japan relations since the 1960s, and this approach is necessary given the seriousness of shaping the future of science and technology policy development for the two countries.

Japan’s METI Minister Koichi Hagiuda, Foreign Minister Yoshimasa Hayashi, US Secretary of State Antony Blinken and Commerce Secretary Gina Raimondo, the US-Japan Economic Policy Advisory Committee (EPCC) in Washington on 29 July 2022. (Tom Brenner/Pool Photo via PA)

Export control measures

Enhanced export controls should be at the top of the list when it comes to coordinated innovation and technology policy emanating from Tokyo and Washington. Deliberate and planned export controls between the world’s largest and third largest economies can ensure that hard-earned technological innovation does not fall into the hands of opposing powers, such as China.

Japan has taken positive steps in this direction with the recent adoption of the Economic Security Promotion Bill. And this issue has the support of the highest levels in both capitals. May 2022 Readings Biden-Kishida Summit in Tokyo specifically include the use of export controls for deeper US-Japan cooperation on the protection and promotion of critical technologies.

Advantages of the working group

For this policy to be successfully implemented, both partners and allies should follow the suggestion of former US Ambassador to Japan Bill Hagerty and consider establishing Export Control Working Groups similar to those of the current Trade and Technology Council (TTC) between the United States and the European Union. This group could focus specifically on dual-use surveillance, and potentially national security-specific technologies, and the impacts of exporting them to China.

In remarks to the Office of Industry and Security of the Ministry of Commerce (BIS), in late June, Secretary Raimondo identified a key role played by the US-EU TTC in coordinating export controls against Russia. There is reason to believe that the United States and Japan could find political support to act in the same way to identify sensible export controls targeting China’s high-tech sectors and state-owned enterprises. .

This group would build on the stated goals of the EPCC and would specialize in technology issues of critical importance to U.S.-Japan relations, and expand beyond semiconductors to include rare earth minerals. , supply chain coordination, cyber and other issues.

Shared approaches across problem sets will be important in combating China’s vision for its “2035 Standardsin the information and communication technology services (ICTS) sector as well.

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Joint research and development

The joint statement from the EPCC also focused on an important element of U.S.-Japan science and technology cooperation: research and development (R&D), a key part of stabilizing the long-term supply chains of semiconductors and microchips. The US and Japanese private sectors will also play a vital role in coordinating R&D if Washington and Tokyo are to succeed on this front.

The June 2022 announcement of joint R&D cooperation between Japan and the United States on a 2-nanometer semiconductor factory based in Japan shows how the strengths of both countries can help stabilize and diversify advanced microelectronics supply chains. If reports are correct, the project could potentially go live between fiscal year 2025 and fiscal year 2027. It offers the possibility of using US chip design expertise and Japanese chip manufacturing equipment expertise chips to speed up the process.

The development of joint semiconductor projects between the United States and Japan would also increase production capacities in Japan. Recently announced plans by Taiwan Semiconductor Manufacturing Corp. (TSMC) in Kumamoto are larger chips that are less advanced than the recently announced 2nm project. In the longer term, the successful development of joint U.S.-Japan projects increases new capabilities coming online in both countries and offers the possibility of reducing long-term reliance on single-source semiconductors in the Supply Chain.

The recent passage ofCHIPS and scientific lawin the United States includes $500 million in credits for the International Fund for Technological Security and Innovation it could also support joint ventures with countries like Japan in the future.

Cyber ​​cooperation

The EPCC also calls for further coordination between the United States and Japan on cybersecurity issues that will be addressed as part of the Japan-United States Cyber ​​Dialogue. The last intersessional meeting at director level met in May 2021. Future meetings and developments on this front should focus on strengthening Japan’s cybersecurity and cyber capabilities, which have been referred to by some as “unreliable.”

Additional cooperation

Further cooperation on economic and technological issues should also include ways to build on the 2019 benchmark US-Japan Digital Agreement as a model for better coordination between the United States and Japan, drawing on the experience and expertise of private sector leaders. As the new Kishida Cabinet chooses which international issues to prioritize, cross-border data flows and data governance could be opportunities for policymaking.

The United States and Japan are also cooperating to develop and deploy secure and open 5G networks by 2030. The establishment of the U.S.-Japan Partnership for Global Digital Connectivity provides an opportunity for deeper coordination for the deployment of Open Radio Access Networks (Open RAN) as an alternative to Huawei and other network providers.

Visitors walk past an exhibit showing microchips and circuit boards during the 21st Beijing International Hi-Tech Expo in China, May 18, 2018. (AP Photo/Mark Schiefelbein)

Identity of investors and owners of the company

Future U.S.-Japan executives are also expected to coordinate investment screening efforts more closely. This should include improving channels for sharing information on Chinese foreign investment trends in the two countries ー sharing derogatory information about potential foreign investors and establishing joint screening mechanisms, while protecting the proprietary business information and intellectual property.

Such an effort could lay the groundwork for greater regional coordination to identify targeted and malicious investment schemes. It should consider mirroring the US “Uyghur Forced Labor Protection Act” and its approaches to import controls.

Conclusion

If properly implemented, the EPCC could serve as a forum to coordinate U.S. and Japanese supply chain coordination, shape the economic benefits of coordinating emerging technologies, and strengthen existing bilateral trade agreements. It could also establish the framework for coordinated investment opportunities, investment selection and serve as a forum to intensely focus on emerging technologies as a key pillar to focus on countering Chinese economic and technological influence in the Indo-Pacific.

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Author: Erik M. Jacobs