Renegades!

Bygones Be Bygones: The EU and Japan

A new report from the European Policy Centre concentrates on the relationship and joint cooperation of Japan and its new big brother: Europe. While the EU sees Japan as a natural buyer in the larger first world markets that haven't appreciated their currency against the Euro, as the US Dollar has, Japan's new appreciation of Europe is something of a mystery. While a casual observer might pass over this detail as insignficant given the apparently close relationship between the US and Japan, there are obvious signs that Japan is looking for new trading partners and a renewed independence as a leader in Asia, while the EU seeks to further its own influence. To do this, Japan needs to break off some of the ties to the US and seek its own path to some extent, with the help of an old nemesis.

Long before the US showed up on Japan's shores to demand trade treaties with gunboat diplomacy, the Dutch had set up shop off the shore of Japan to trade. Japan feared the foreign barbarians, but enjoyed the brisk trade and huge trade surplus that European markets supplied. While Japan later broke off most trade with the outside world to go into what you might call 'seclusion' for 200 years, Japan maintained links with the Dutch traders in what might have been called Japan's most positive foreign relationship until the post World War II era. Even today, fruits of the EU-Japanese relationship are evident on the streets of Osaka: While American cars on unheard of, Volkswagon and Mercedes are commonly seen alongside Toyotas and Nissans.

Mining this relationship for ideas on the future, the report makes an interesting policy recommendation calling for a Japanese version of the International Monetary Fund to fund Asia's struggling smaller economies (a recommendation Renegades! has previously made). Currently, there is an aversion to US aid in some quarters as the IMF has enforced some very tough measures on struggling economies: Restricting deficit financing to 3%, etc. Japan has taken it upon itself to rectify this funding issue by quietly 'encouraging' its own private and semi-private banks to take on riskier loans to these economies to protect Japan's trading interest, but also the regional economy as a whole. With the largest banks on earth and highest savings rates in the free world, there is no shortage of capital, either in the Federal Reserves or in private banks to keep Asia liquid if the need came.

The report implies that the 1997 currency crisis and the IMF's poor handling and outdated recommendations worsened the problem. There is a sense that report implies that possibly a less dogmatic (Read: US free-market) approach to resolving the crisis would have been preferable. The unspoken reasoning is that a pragmatic Japanese resolution could have saved the turmoil that rocked Indonesia and Malaysia.

Cynics can look at Japan's history and wonder if Japanese leadership in Asia would be positive given the enormous baggage of WW II and the Interwar Period. While perceptions of Japan in Asia have not always been positive, there has and continues to be reverance reserved for Asia's natural leader. It's economy is still larger than China's, and has been a first world country for a long time with some of the highest living standards on earth. The respect of Asia has been regained, and with the US' brand in a public relations disaster, Japan sees an opportunity to put an Asian face on market capitalism in the Far East. With massive contributions to tsunami relief (over $500 mill, Japan again raised its regional profile.)

With weakness in North Korea, and the possibility of either a collapse of the regime or an opening in dialogue with the six party talks, Japan might see further opportunity to raise its regional profile. If it can take a leadership position in the talks, a UNSC seat might be in the cards. Further complicating the issue, China is hinting they might trade a disarmed North Korea for US and Japanese leeway on the issue of Taiwan. If Japan position itself as a peacemaker and bring a resolution to the North Korea (with some US cooperation) they can consolidate their recent foreign policy gains.

In the Asian theatre, the EU is active on all kinds of fronts. While these talks concentrated on the EU-Japanese relationship, there were sections that read like a passage from Gulliver's Travels, as the Lilliputians attempted to tied down the 'monster', Gulliver (Read: The US). The EU sees Japan as a counterforce to be unleashed to diminish the relative unipolarity of world power. This line of thinking would never have gained much in previous post WW 2 years, but the younger generations of Japan no longer look towards the US as their guardian and cultural icon. The Japanese, while extremely pacifist in nature and constitution, want a real independence from the US and want to become a normal nation: Sovereign, free and independent. The EU sees this desire as an opportunity to push for a rising Japanese state as a counter to US dominance in the economies of the far east. With massive US-Japan trade, and a foreign reserve of well over $1 trillion of USD, Japan has a special hold over the US' power in the area. The EU's calculation is that if the EU can wield its influence over Japan, it might hold more sway with the US as well.

Of course, apart from Japan, the EU is focusing its might on building up China as well. The proposed abolition of the ban on weapon sales to China could lead to a rising arms race across the Straits, and if war broke out (which the EU is thinking won't happen)the US could have dead soldiers on its hands...killed with EU weapons. The EU of course is thinking with its wallet, and the possibility of again countering the US' dominance in the area. Japan, for its part, would be wise to see that Europe is playing both sides of the aisle.

While it would be easy to assume that both the EU and Japan are eager to see the US fall from grace, both economies are extremely interlocked to the US'. It hasn't escaped either the EU or Japan that in this intergrated world economy that if one player falls, the repercussions for the rest would be disasterous. For now, the EU needs the US market, while Japan's defender and the main buyer of manufactured Japanese goods is still the US. Any currency shenanigans perpetrated by the Japanese (ie: dumping USD) would result in the collapse of the Japanese and EU markets. In terms of their relationships with the US, the EU and Japanese aren't running for the door, but there are sideways glances and slow moving feet.

posted by Shamrocks! @ 4:28 PM