We Are Tomodachi Spring / Summer 2018

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20Contributed Article: Dr. Shiro Armstrong Japan has found itself assuming new and unusual leadership responsibilities in the Asia Pacific as it deals with the rise of protectionism in the United States and parts of Europe. Japan has led the way in holding the line on the global economic rules-based order, through pressing conclusion of the Asia Pacific’s first mega-regional trade agreement in the Trans-Pacific Partnership (TPP) and initiating the EU-Japan Economic Partnership Agreement.The leadership vacuum in the global economic systemThe current U.S. administration’s America First agenda is a dramatic departure from the U.S. leadership of a multilateral order that has been the norm for over 70 years. That order defines the rules of trade and economic exchange between countries that have signed on to it through the World Trade Organization (WTO) and other international institutions and underpinned the growth in Asian economic relations and prosperity. Economic relations between Japan and China have prospered hugely despite the ups and downs of their political relations because of both countries’ adherence to the rules of the WTO. Economic relations would unravel all over Asia if confidence in the WTO-led, rules-based order was undermined. Trade disputes, like that between Japan and China over rare earth metals in 2012, are settled peacefully in the WTO without resort to retaliation, escalation or force.Protectionist measures may not have large, immediate economic effects but they pose a bigger and long-term threat to the entire global rules based system. Managed trade that includes measures such as voluntary export restraints will have negative effects on other countries, putting pressure on other markets to close up or ‘protect’ themselves. Asia cannot afford to see beggar-thy-neighbor policies and contagious protectionism. That is one challenge the free trade system faces. Another that is equally important is to expand the coverage of the agreed upon rules of economic exchange that are more relevant to business in the 21st century and to strengthen cooperation at the multilateral level. Global Economic Uncertainty and Japan’s Leadership in the Asia Pacific Dr. Shiro Armstrong Armstrong is a Director of the Australia-Japan Research Centre and the Asian Bureau of Economic Research at the Crawford School of Public Policy at The Australian National University, and an Editor of the East Asia Forum. He is also a Research Associate at the Center on Japanese Economy and Business at Columbia University.The Asian region and the global economy have relied on American leadership but now it is necessary for Asia to step up and assume a larger leadership role on the global stage, commensurate with its economic weight and interests. Japan has positioned to take a more active leadership role but no one country in Asia can do this alone. Collective leadership will be required from those that have a large stake in the global trade regime. Asian leadership will require coordination and strategic action that doubles down on the rules-based global system. Japan is key, and other open economies such as Australia and Canada will be important. China, though it may seem unlikely, will be a critical partner. Japanese leadership in a time of uncertainty Prime Minister Abe effectively built a productive