ASEAN Economic Relations The Republic of Korea and ASEAN

A VIEW ON REGIONALISM THROUGH JAPAN–ASEAN ECONOMIC RELATIONS

Emese Schwarcz

As time passes in the so-called Asian Century and governments are trying to balance national policies in the changing power structure in the East and Southeast Asian region, many questions are raised regarding where to now. The Trump administration brought about considerable uncertainties to the East Asian strategic alignments, without making actual adjustments to them. It goes without saying, however, that the lack of maintenance or enhancement of these security alliances projects a worrying picture of ambiguities, and ambiguities are not what make a secure alliance in a region where nuclear programs are still active and are used frequently. The worries about President Trump’s United States are integral parts of the concept that seems to expand continuously: the idea of economic regionalism in the Eastern part of the globe. Being its integral part means that there are several aspects to consider while examining the reasons for Japan to team up with the Association of Southeast Asian Nations (ASEAN). In this paper, I will try to identify motivations, rationales, and opportunities on the Japanese part.

A BRIEF HISTORY

ASEAN was formed in 1967, and Japan endorsed it quite early on.1 Their relations were solidified by 1977 under Prime Minister Fukuda Takeo, known for his expertise in finance and economics. He was also known for advocating the Fukuda Doctrine which congealed the Japanese intent for nurturing an active, equal, and cooperative relationship with ASEAN.2 Fukuda was trained by the infamous Kishi Nobusuke, an indicted-but-released wartime economic minister, later to become a post-war prime minister who also happens to be the grandfather of the current prime minister, Abe Shinzō.3 All three of them are known for their distinct economic policies in which Abe definitely follows the Fukuda line in interacting closely with Southeast Asian countries. The prospect of new trading partners and new markets became especially important at the end of the Shōwa Era (1926–1989) and basically during the whole Heisei Era (1989–2019). When the oil shocks of the 1970s pressured the Japanese “economic miracle” into a halt, major concerns took over the country. The 1990s introduced a long period of economic recession whereby the population started to dwindle, unemployment was on the rise, and the country’s national debt began to grow significantly. While fewer and fewer people were willing to bear children in an insecure economic environment, baby boomers were living longer and longer, which put additional pressure on the country’s finances. In parallel, China, which had been perceived as a cheap alternative for factories and plants due to cheap labour and low costs for a long time, started to develop rapidly, not needing Japan’s long-time provided Official Development Assistance anymore. In the post-war period, after reestablishing relations, China grew to be Japan’s biggest export partner, taking in as much as 20% of the country’s export products with a value of USD 136 billion per year.4 In 2010, however, China rose through the ranks and took over Japan’s place in the global economic ranking, becoming the second-biggest economy in the world. What that entail for Japan are higher costs and more expensive labour. Living standards and market preferences are changing, and, with the chronic economic malaise that Japan has, it is of utmost importance to find new markets and potential bases for assembly factories and facilities.

ASEAN Plus Three countries

CHINA SOUTH KOREA

LAOS

CAMBODIA

SINGAPORE MYANMAR (BURMA)

THAILAND

VIETNAM PHILIPPINES

MALAYSIA

BRUNEI

INDONESIA JAPAN

ASEAN

Plus Three countries

And here is where Southeast Asian countries are becoming relevant. Currently, Southeast Asia is viewed as the engine of economic development, with growing markets and opportunities. During World War II, the Empire of Japan also engaged in expansionary efforts in the Southern region and realised that these countries are rich in resources which Japan desperately needed to carry on with its military ambitions. In the postwar world, however, being rich in resources also means an expanding middle class with growing purchasing power.5 No wonder that Japan has been supporting the so-called ASEAN Way from day one but there is also underlying thinking in bolstering Asian regionalism. Japan’s post-war standing in the international community resembles a kind of duality: around the time Japan established relations with ASEAN, the major Western powers had already accepted back the island country as a leading economic power, and the image of a country that had lost the war faded considerably. However, the other side of the coin is how immediate neighbours and East Asian regional powers viewed Japan, and that is quite different from a repented country. Part of the post-war development and reconstruction is the American sponsorship of it all: the American occupation demanded that US military bases were to be built on the soil of Japan, and the country becoming the most prominent military headquarters in the region stimulated a sense of isolation from the other neighbouring countries. Not only that but also the lack of closure regarding wartime responsibility in the case of the emperor left those countries which suffered the blow of the Japanese war hammer the most with an uncomfortable feeling. Japan’s leaders realised this sense of isolation around the 1970s, and soon reestablishment of diplomatic relations ensued. The emergence of ASEAN was, therefore, timely. Let us take a look at the ways Japan strengthened its regional influence.

THE NATURE OF COOPERATION

Japan is considered to be the biggest investor in the Southeast Asian region. According to ASEAN data, foreign direct investment shares coming from Japan are hovering between 14% and 20%, putting the island country in the first place among countries to invest in ASEAN.6 The commitment of the current Japanese leadership manifested in two symbolic actions. First, when Abe Shinzō became prime minister in 2012 for the second time, he chose the ten ASEAN countries as his first destinations for state visits when he began his tenure, and he simultaneously became the first Japanese prime minister to visit all ASEAN countries in his first year in office. This action was meant to show his resolve in keeping close relations with the association. In the same way, when the current minister of foreign affairs, Motegi Toshimitsu—who previously served as minister of economy, trade, and industry—entered office in 2019, he went on a tour to visit Vietnam, Thailand, the Philippines, and Indonesia right away.7

There are two main multilateral platforms through which Japan and ASEAN cooperate: the ASEAN Plus Three Dialogue and the Regional Comprehensive Economic Partnership (RCEP). The ASEAN Plus Three (APT) is a format established in 1997, in which China, Japan, and the Republic of Korea (ROK) join the ten ASEAN countries. The trade shares between ASEAN and the three countries are impressive in itself: in 2017, 31.6% of ASEAN’s total trade was conducted with these countries. In line with the main ASEAN philosophy, that is, cooperation should not stop at an economic level, the APT aims to join forces in many other different areas, as well, let them be social issues, political means, or environmental efforts. There is a common understanding that the main goal is long-term community-building, something that was definitely lost in World War II. The APT scheme appears to be quite similar to the European Union in the diversity in fields of cooperation: security, transnational crime, trade and investment, finance, tourism, agriculture and forestry, energy, science, technology and innovation, environment, rural development and poverty alleviation, culture, disaster management, and connectivity are all included in the discussions.8 The security aspect, which deals with counterterrorism, border control, human trafficking, and cybercrime, is especially interesting if we consider that the APT originally came to be for the reason of working out methods to avoid economic troubles. Among many other fields in which this liaison works, this domain also shows the intent to put real efforts into regionalism.

The cooperation lists several malaises that Japan suffers from. Agriculture is especially interesting, since the country has always been known for strict protectionism when it comes to this sector. Farmers in Japan are heavily subsidised because, due to the scarceness of the lands, the food industry relies heavily upon them. The government’s stance on agriculture posed quite some problems with international partners, such as the US, notably in the case of the infamous Trans-Pacific Partnership.9 However, as society’s ageing is becoming more of a serious problem, this will probably change in the near future. Opening up the market for Southeast Asian countries is essential for the survival of the industry, but domestic politics play a major part in this discussion. The ruling Liberal Democratic Party depends heavily on the farmers’ votes, which creates a conflict of interest with the probable easing on the protectionist policies. Nevertheless, as trade relations with the US are becoming unpredictable and subsidising such a large industry is no longer affordable for the economically weakening country, the attention is increasing regarding the APT.

Energy is another interesting field from the Japanese point of view. The 2011 Tōhoku triple disaster changed the country’s energy consumption for good. Before the nuclear meltdown in Fukushima, Japan was heavily dependent on nuclear energy because the country is scarce in resources and has to import fossil fuel—at a high price. Confidence in nuclear power, therefore, had always been great during the Heisei Era despite the country’s

125.00

120.00 120.16

115.00

110.00

105.00 11.22

108.94

100.00

95.00

2014

101.94 1.08 100.86

2015 105.86

–9.31 112.86

–6.92

105.94

96.55 2016 2017

■ Export ■ Import ■ Balance 116.88

–2.11 114.77 116.08

–6.25

109.83

2018 2019

high tectonic activity, reoccurring accidents, and questions around waste disposal. At the time of the Fukushima disaster, nuclear power covered 29% of Japan’s energy consumption, but the disaster reorganised the shares considerably. While, in 2010, the nuclear energy consumption in million metric tonnes of oil equivalent was 66.2, in 2018, the amount was a stark 11.1.10 Because of this drastic reduction, the country has to find new sources of energy, which is not exactly that easy considering the changing geopolitical situation in the region. With China’s military ascendancy and heightened military presence in the East and the South China Sea, countries in the region are on their toes. This is especially true for Japan because the nation’s most active territorial dispute is with China over the Senkaku (or Diaoyu) Islands which happen to house massive oil reserves. It is no wonder, either, that China is increasingly active in the South China Sea, for that region is rich in oil, natural gas, and fish—which is why it is important for Beijing to procure additional exclusive economic zones. To make up for the missing energy, Japan will need ASEAN’s help.

Social issues like the ageing of society are also being discussed between the partners, which introduces an interesting question: what is more viable in this region, bilateralism or multilateralism? Comparing their situation with the EU’s, researchers have asked many times: is institutional integration necessary for effective regionalism?11 If we take a look at ASEAN’s structure, it is apparent that national sovereignty is important for Asian countries, and, while regional interdependence is discernible, the bilateral approach to cooperate is still popular in East Asia. A good example is Japan’s answer to the ageing-induced workforce scarcity; the country was to strike a deal with the Philippines and Indonesia in two bilateral economic partnership agreements. The agreements created a trainee programme for Filipino and Indonesian medical caregivers, which gave an opportunity for them to work in Japan for two to five years, thus somewhat alleviating the critical shortage in the Japanese medical sector.12 What Japan did do in cooperation with the association is establishing a best practice–exchanging forum for the member states, called Japan–ASEAN Health Initiative.13 In this instance, for example, we can see that, while regionalism and creating an East Asian identity are priorities for Japan, bilateral deals are still attractive for pragmatic problem-solving initiatives, even if the partner country is a member state of ASEAN.

The APT scheme is not the only platform for cooperation, though. I mentioned earlier the

Regional Comprehensive Economic Partnership (RCEP), which is a comprehensive, far-reaching free trade agreement proposal connecting fifteen countries: the ten ASEAN countries (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Laos, Myanmar, Cambodia, and Vietnam) and five ASEAN trade partners (Australia, China, Japan, Republic of Korea, and New Zealand). India was originally part of the negotiations, but, citing concerns about e-commerce, and—lo and behold—trade imbalances in agriculture, Prime Minister Modi opted out at the end of 2019.14 The RCEP— with or without India—is a major step towards maximising the scope of economic regionalism: by reducing trade barriers and creating common rules of origin for shipping procedures, 30% of the global population will (or would) enjoy the benefits of (the almost) free trade, not to mention the lower costs for already existing supply chains.15 Almost free because the agreement would reduce only 80% of all tariff lines, prompting criticism for being unambitious. Still, however grand and beneficial the agreement will be even with this amount of commitment, the RCEP is a perfect example for how daunting a multilateral approach can be for Asian countries: with negotiations starting in 2012, the final signatures are still nowhere to be found.

COMPETITION FOR REGIONAL ROLES

When discussing East Asian regionalism or economic cooperation, one cannot disregard China’s Belt and Road Initiative (BRI) and, in Japan’s case, the Free and Open Indo-Pacific (FOIP) strategy. This latter is, again, an interesting concept in the ASEAN-based milieu. The strategy itself (introduced in 2016) promises a grandiose infrastructural investment plan to enhance regional connectivity, mainly targeting Southeast Asian countries with high-quality infrastructure withstanding natural disasters, employment, and education under the flag of the rule of law, freedom of navigation, and free and open routes.16 At first glance, the strategy seems like an updated version of the BRI, but, in reality, it is an extension of the already existing investment culture in the Southeast Asian region. Companies in the Indo-Pacific already know and respect Japanese investors due to their long-term commitment to the target region or country. Therefore, the known and preferred Japanese FDI is transforming to get accustomed to the fresh trend of the 2010s and 2020s, that is, the trend of connectivity. Once again, from a holistic point of view, this plan seems to be leaning to bilateral deals, just like in the case of the BRI. In this sense, comparing the two initiatives, it is easy to see that a very pronounced competition for the graces of ASEAN countries

is underway. The past ten-or-so years transformed the Southeast Asian region into an integral part of East Asian strategic thinking. Multilateralism in the name of identity- and community-building is a long-term goal for Asian countries, but the fight for resources and business partners seems to be falling on bilateral grounds—mostly because they work out speedier. There is also an underlying competition against Chinese overinfluence in the region—not only in a geopolitical way, e.g., capacity-building, provisioning patrol boats for Vietnam, or the Japanese–Filipino joint military exercises but also trade-wise. As the China–US trade war is bound to affect the whole region’s supply chains, countries are searching for alternatives. Common challenges also remain outside the economic problem cluster: most Southeast Asian countries are starting to experience the signs of ageing societies, following in the footsteps of the “big three”: China, Japan, and the ROK. Along with the devastating COVID-19 pandemic that is rapidly pushing the global community into an economic crisis, this problem will certainly urge countries to consider the ASEAN Way and strengthen not only economic cooperation but the inclination for building a community, as well.

in the Indo-Pacific. The Diplomat. 7 January 2020. <https:// bit.ly/2VyDbHF >

8

Overview of ASEAN Plus Three Cooperation. ASEAN Secretariat Information Paper. 24 April 2020. <https://bit. ly/3aHYKtR >

9

Kent Troutman: Will Japan Bet the Farm on Agricultural Protectionism? Peterson Institute for International Economics. 21 October 2014. <https://bit.ly/3589FvD >

10

Primary energy consumption in Japan in 2010 to 2018, by fuel. Statista. 28 June 2019. <https://bit.ly/35agk8L >

11

Philomena Murray: Comparative regional integration in the EU and East Asia: Moving beyond integration snobbery. International Politics. 2010/3–4. 308–323.

12

Jeff Kingston: Contemporary Japan. History, Politics, and Social Change since the 1980s. Wiley-Blackwell, New Jersey, 2012.

13

Cooperation between Japan and ASEAN in the healthcare sector. Mission of Japan to ASEAN. January 2016. <https://bit.ly/2zxgTxr >

14

William Alan Reinsch–Jack Caporal: At Last, An RCEP Deal. Center for Strategic and International Studies. 3 December 2019. <https://bit.ly/359SpWG >

15

Shotaro Tani: India stays away from RCEP talks in Bali. Nikkei Asian Review. 4 February 2020. <https://s.nikkei. com/3aLoYLL >

16

Emese Schwarcz: An Unexpected Ally: Japan’s Upand-Coming Partnership With the EU. The Diplomat. 30 October 2020. <https://bit.ly/3cUadHY >

ENDNOTES

1

Bhubhindar Singh: Japan–ASEAN Relations: Challenges, Impact and Strategic Options. Panorama: Insights into Asian and European Affairs. 2017/1. 95–106.

2

Fukuda Takeo. Encyclopædia Britannica. <https://bit.ly/ 2VzG0s4 >

3

PM Abe’s father also served under Fukuda as Chief Cabinet Secretary.

4

Japan. The Observatory of Economic Complexity. <https://bit.ly/3eGlygG >

5

Péter Goreczky: Lejátszott mérkőzés? Kínai–japán gazdasági erőviszonyok Délkelet-Ázsiában (1.). KKIelemzések E-2020/20. <https://bit.ly/3eOtmgk >

6

Foreign direct investment net inflows in ASEAN from selected partner countries/regions. Association of Southeast Asian Nations. 26 October 2016. <https://bit.ly/2Y3keyG >

7

Prashanth Parameswaran: Foreign Minister’s First ASEAN Voyage Spotlights Japan–Southeast Asia Relations