Trade
Japan’s weapon-export industry takes its first steps
Author: Purnendra Jain, University of Adelaide
In its first breakthrough since easing restrictions on arms exports in 2014, Japan signed a deal to sell US$100 million worth of advanced air surveillance radars to the Philippines. These radars — fixed and mobile — are built by Japan’s Mitsubishi Electric Corporation (MELCO), one of Japan’s five leading defence production companies.
MELCO has signed a contract with the Philippine defence ministry for the radars, which will reportedly be used for detecting stealth fighter planes and missiles. China is the obvious focus. Tokyo has previously supplied defence-related equipment such as patrol boats to Southeast Asian countries like Vietnam and the Philippines. This was part of Japan’s official development assistance (ODA) under its ‘capacity-building’ program, advancing a Japanese narrative driven by ‘proactive contribution to peace’.
Although donated to the coast guards of the recipient nations, the boats are defence-related products — as one analyst noted, ‘the provision of patrol vessels to the Philippines and Vietnam has a military dimension, even if the official statements declare differently’. Tokyo has also provided TC-90 training planes to the Philippines military and trained Philippine naval pilots to fly the aircraft.
In 2014 Japan introduced a revised set of ‘three principles on transfer of defence equipment and technology’ and in 2015 a new Development Cooperation Charter that gives ODA a ‘strategic edge’. Even before these changes, Tokyo provided ODA loans to Indonesia to purchase patrol vessels for the prevention of ‘piracy, maritime terrorism and proliferation of weapons’. Strictly speaking these vessels do fall under the definition of ‘arms’, but the conditions of sale made them appear to be for purely civilian purposes.
Japan’s earlier attempts to sell military wares abroad either failed or remain under negotiation. Tokyo’s bid to sell its Soryu-class submarines to Australia reached the final stage, but in 2016 the Australian government awarded the multi-billion dollar contract to France. This was a huge disappointment to Japan, as the deal would have been a game changer for its defence industry.
For the last few years, Japan has been in negotiation with India to sell its US-2 amphibian search-and-rescue aircraft made by Shin Maywa and used by Japan’s Maritime Self-Defense Force. The deal progressed almost to completion two years ago, and in a 2018 joint statement the two prime ministers stated that ‘the two sides will continue to make efforts with regard to cooperation on US-2 amphibian aircraft’.
But the proposal has since stalled, reportedly due to reasons of cost and disagreement over technology transfer. The deal seems to be off the table for now, as top leaders of the two nations have not discussed it in recent meetings.
Tokyo was also in discussion with Britain to sell P-1 submarine hunting aircraft made by Japan’s Kawasaki Heavy Industries, the first such proposal outside of the Indo-Pacific region. But this also ended in failure.
Japan’s failures in Australia, India, the United Kingdom and other countries can be ascribed to many factors, from the inexperience of Japanese defence-related companies in the international arms market to the lack of comparative advantage and capacity. Japanese arms are not combat-tested, as most Japanese producers sell their military wares to Japan’s Self-Defense Forces which is not a combat force. Some Japanese companies are also reluctant to aggressively pursue arms sales in the international market because it is not their core business and they don’t want to be labelled as ‘merchants of death’ in the eyes of the Japanese public.
Regional maritime security and safety is one of the major goals of Japan’s free and open Indo-Pacific vision. Southeast Asian nations, many of which face China’s increasing military assertiveness in the South China Sea, are recipients of Japan’s assistance for building surveillance capacity.
Securing its first arms deal in Southeast Asia with the Philippines is a landmark development. The deal shows Japan’s diplomatic acumen in dealing with Philippine President Roderigo Duterte, who is wary of the United States and eager for a close relationship with China. In 2016, the Duterte administration ignored the rulings of the Permanent Court of Arbitration in The Hague that recognised virtually all of the Philippines’ claims in the South China Sea.
The same administration has now been persuaded by Tokyo — a US ally…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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