After eight long and tumultuous years of “Japan bashing” and “Japan passing,” interspersed with a brief period of constructive engagement (the Pentagon’s “Nye Initiative” in the mid-’90s), a new era of friendly and positive U.S.-Japan relations has commenced. Guided by a team of Japan experts with unprecedented experience in managing the U.S.-Japan alliance in the Reagan and Bush Sr. years, the administration of President George W. Bush promises to undo the damage of the Clinton era and create the grounds for a Nichi-bei renaissance.
Revitalizing the U.S.-Japan alliance and repositioning it to better suit the needs of the 21st century will involve paying as much attention to “securities as much as security” and “balance sheets as to the balance of power” in the planning and conduct of our diplomatic relations. It is a task the Bush administration appears up to but which many in Japan may yet feel daunting. Nonetheless, the benefits of transformation and reform almost certainly outweigh the supposed costs of tinkering with the status quo.
Specifically the Japan policy challenges the U.S. will need to face in the coming four years can be grouped into three areas:
- Encouraging and cooperating with Japan so that it can play a larger, more positive, and more visible role in regional and international security affairs--in effect raising the status of our political-military cooperation with Japan to a level equivalent to the “Great Britain in the Far East.”
- Encouraging and cooperating with Japan to help it enact sweeping financial, fiscal, and regulatory reforms in order to restore the grounds for growth and deepen market integration between the U.S. and Japan--in effect making Japan as close an economic ally as Great Britain is to America in the contemporary.
- Updating and revising the U.S.-Japan treaty agreements to support and reflect the advancement of these goals.
This paper will review these bilateral security and economic policy challenges and consider how a new alliance architecture could be used as part of successful policy approach to them.[1] Although it touches on what some administration officials have suggested both recently and in the past regarding the desired course for the U.S.-Japan relationship, the paper is principally based upon the author’s own experience and subjective viewpoints. Thus, none of this should be confused with official policy. The views expressed herein merely reflect one man’s opinion.
Japan the “England of the Far East”--Challenges for the Security Alliance
In a report published by the National Defense University in October 2000, a high level commission, chaired by Deputy Secretary of State Richard Armitage, established the goal of strengthening the U.S.-Japan security alliance in order to make Japan the “Great Britain of the Far East.”[2] For the Bush Administration it appears that this priority will tower over all others in its Japan policy.
Making the U.S.-Japan security relationship as deep and robust as the U.S. relationship with Britain, however, will be far from easy. It will require a full sea-change in the way that the Japanese government approaches security policy cooperation with the U.S. and an equal change in the manner in which the U.S. government approaches cooperation with Japan. It is a sea-change that began with the Pentagon’s “Nye Initiative” (1994-96)[3] and the enactment of new bilateral defense guidelines in 1997, but which is still far from complete. This evolution undoubtedly will take years, but it is a process that must be pursued steadily and sincerely from here forward.
Although there are a large number of issues the U.S. and Japan need to address in order to put the security alliance on a footing comparable to that with the UK, in the author’s opinion, the following five stand out most prominently.
- Japan Should No Longer Hide Behind Its “Peace Constitution” and Should Recognize Its Right of Collective Self-Defense
The Japanese government has long held the view that Japan has the right of collective self-defense, authorized by Article 51 of the U.N. Charter and acknowledged in Article 5 of the 1951 San Francisco Peace Treaty and the preamble of the 1960 revision of the security treaty, but that the exercise of that right is prohibited by the ninth article of the Japanese constitution. Article 9 has an important symbolic meaning to the Japanese people in that it clearly renounces the “right of belligerency.” However, from a literal standpoint it is a mass of contradictions. Most obviously, if it were strictly interpreted the Self Defense Force itself could not even exist! Even its American promulgators--who originally intended the article as a means of permanently emasculating any latent expansionist aspirations Japan might yet have after WWII--quickly came to regret its limitations in the wake of the Occupation.[4]
Today, it is up to the Japanese people and their Parliament to decide whether or not to revise Article 9 and once and for all eliminate its ambiguity. Perhaps there are good reasons for maintaining its language and simply changing its “official interpretation.” However, the Japanese government should no longer try to use Article 9 as a shield to avoid international and bilateral cooperative military activities needed to safeguard Japan’s security interests.
Self-defense is a sovereign right that all nations intrinsically maintain, whether explicitly acknowledged in a constitution or not. As Yale University international security specialist Jim Van De Velde correctly notes, from the standpoint of international law “if Japan interprets a situation as a threat to its security, it can easily act in accordance with other nations in its self-defense, thus making the prohibition on collective security largely, if not entirely, irrelevant.”[5]
Recognizing that Japan has the right of collective self-defense would significantly strengthen the U.S.-Japan alliance and enhance Japan’s status in the international community. The Armitage report clearly states: “Japan’s prohibition against collective self-defense is a constraint on alliance cooperation. Lifting this prohibition would allow for closer and more efficient security cooperation.” Moreover, the report correctly calls for the “full participation in peacekeeping and humanitarian missions and the removal of self-imposed restraints that would otherwise burden other peacekeeper nations.” The fact that Japan--the self-described “Peace Nation” (heiwa koku)--severely limits peacekeeping is a testament to the inadequacy and contradictions of its current stance toward world affairs. If the Japanese government continues to try to hide behind its interpretation of Article 9, Americans may be justified in criticizing Japan as a “free rider” on the U.S. “peace train.”
Nonetheless, an American desire for Japan to play a bigger role in security is not a call for Japan to become “militarist.” It is simply a call for Japan to use the considerable current capabilities of its self-defense forces alongside those of its ally--the United States--as well as the United Nations to help support the cause of peace. Japanese troops may not have to be on the front-line as part of a revised arrangement, but they should no longer stay on the sidelines when our mutual security interests are threatened.
2. Japan Should Accept that the Alliance Has a Global as Well as Regional Dimension: Article 6 of the U.S.-Japan Mutual Security Treaty Should Be Prioritized
As a nation that imports over 85% of its oil from the Middle East and whose export and investment interests span the globe, Japan’s national security interests go far beyond its territorial waters. Nonetheless, the Japanese government has tried to limit discussion of expanded defense cooperation under the revised Defense Guidelines of 1997 to the narrow range of activities mandated under Article 5 of the 1960 Security Treaty (which addresses the territorial defense of Japan). Proactively expanding the terms of bilateral cooperation to support Article 6 of the Treaty (which addresses the role of U.S. forces in Japan in ensuring “the maintenance of international peace and security in the Far East”) was bypassed. This is unfortunate.
The original aim of the Defense Guidelines review process was to stretch the narrow envelope of bilateral security cooperation. In fact, in the early days of the Nye Initiative, in September 1994, Japanese and American officials agreed to pursue the objective of “bilateral internationalism,” beginning with the U.S. providing international air and sea-lift capabilities for Japanese peace-keepers (an idea that sadly “never got off the ground” as a result of a dispute between the Pentagon Japan Desk and the U.S. Air Force over transporting Japanese troops into Goma, Zaire). Moreover, it was hoped that the interpretation of Japan’s commitments to Article 6 could be expanded to facilitate the introduction of new roles and missions such as U.S.-Japan SLOC (Sea line of communication) patrol operations into the South China Sea and down through the Straits of Malacca. Unfortunately, largely as a result of the Okinawa Rape Incident and the onset of the time consuming SACO process, the task of alliance internationalization was put to the wayside.
Nonetheless, it is time that bilateral internationalism finally be brought to the forefront of alliance planning discussions. Japan shares vital strategic interests with the U.S. globally as well as regionally and should play at least a supporting role in trying to protect those interests. These shared interests are particularly evident in the Middle East. Thus, if another Gulf war occurs and Japan stays on the sidelines or only dispatches minesweepers after the danger has passed as it did in 1991, it could severely reduce public and political support for the U.S.-Japan alliance. To avert this possibility, long-needed discussions of the international role of the alliance should no longer be shirked. As Torkel Patterson, now the Senior Director for Asian Affairs at the National Security Council, wrote in 1996 regarding Japan’s mutual security interests in the Persian Gulf:
Japan’s political and bureaucratic leaders…should consider pursuing policies which include the ability to operate in areas where Japan has a legitimate national security interest, in particular the Middle East….What happens in and around the Persian Gulf is of vital interest to Japan. Japan’s inability to come to terms with this issue posed one of the most severe strains on the U.S.-Japan alliance during the Gulf War. Japan’s force structure must be designed to operate in and around the Persian Gulf. Anything less is to invite oil blackmail. Japan’s navy is currently capable of this if it can utilize the U.S. logistics pipeline, as are its other services to lesser degrees. In a very real sense, this issue is one of political will and leadership rather than increased defense spending.[6]
3. The U.S. and Japan Should Attempt to Gradually Integrate Roles, Missions, and Eventually Even Forces
Setting the stage for a more international alliance, however, should not be taken to imply that Japan needs to dramatically increase its independent power projection capabilities. Japan does not need--and the alliance would not benefit from--aircraft carriers, nuclear submarines, Land Attack Cruise Missiles, etc. Instead, the long-range objective should be to harmoniously blend current Japanese and American capabilities and roles and missions. In the near run this means that Japanese and American forces should share training facilities and actively train together, not just in Japan but on American soil as well (the fact that Japanese Maritime Special Forces were not allowed access to the U.S. Naval SEAL training facility in Coronado, California in 2000 and, instead, had to go to England for training is exactly the sort of thing that should not happen). Moreover, efforts to improve interoperability must be expanded considerably and intelligence sharing and intelligence cooperation must be upgraded.
In the longer term the idea of partial force integration and joint command and control needs to be considered. Someday one or two Japanese destroyers and minesweepers could be assigned to a U.S.-Japan joint SLOC patrol flotilla; Japanese F15s could operate with U.S. refueling support to help enforce a no-fly zone over a country like Iraq; and Japanese and American Marines might be assigned jointly to a rapid response team based on Okinawa. Moreover, in the not-too-distant future it is not unreasonable to consider sharing the peacetime command authority of U.S. Forces Japan with the Japanese military. A Combined Forces Command (CFC) structure has worked in South Korea and in Europe. The fact that the U.S. and Japan still lack a combined planning and intelligence staff is testament to the backwardness of the alliance as an effective tool for addressing our mutual security challenges.
4. Japan Should Join a Network of Pacific Allies
An upgraded U.S.-Japan security partnership should be the hub of an expanded network of alliances between American allies in Asia. In the last five years a vibrant strategic trilateral dialog (the so-called T-Cog) between the militaries of the U.S., the Republic of Korea, and Japan has developed. In the coming years the objective should be to operationalize military cooperation between these three nations, especially for maritime and air patrol operations and peacekeeping. Moreover, to expand the alliance network southward, cooperative training exercises between north Pacific and South Pacific allies should be pursued. As a number of retired Japanese and American naval officers have suggested this could involve taking a joint flotilla of U.S., ROK and Japanese naval vessels down through the Straits of Malacca to the waters of Australia and New Zealand.[7] Creating what amounts to a Pacific Nato, or at least a Pacific “Partnership for Peace,” may be the best way to constrain China as its military power and territorial ambitions grow.[8]
5. The Alliance Must Be Supported by a Commitment to Technological Cooperation and Systems Interoperability
A final key element in transforming the alliance is technological. The U.S. and Great Britain share very intimate defense technology ties, with England in on the ground floor as a full developmental partner on projects such as the Joint Strike Fighter (JSF) and the Amraam missile. The Anglo-American approach to defense technology cooperation has been driven by military performance and technical requirements, rather than industrial technological goals. Technology in the U.S.-UK context has been a means to an end. However, the U.S.-UK approach contrasts sharply with that of Japan and the U.S.. All too often in the U.S.-Japan weapons development context technology has been treated as a “means to itself.” The result has not been impressive.
Although Japan relies on a great deal of military equipment from the United States, it continues to cling to an outdated core policy of autonomous indigenous development, wherever possible. This so-called kokusanka approach is not only extremely costly, it also has led repeatedly to domestically developed systems that are of inferior quality to their American or European counterparts.[9] Consider, for example, the once heralded F2 (formerly FSX) fighter or the ALOS reconnaissance satellite currently under development. Both of these systems are costing far more but provide far less capability than the off-the-shelf alternatives Japan could have purchased from the U.S. (such as the F16 C/D or the Ikonos satellite).
Today, Japan appears to be continuing to follow the outdated kokusanka pattern in its policy toward joint Missile Defense development with the U.S. Although the Japanese Defense Agency has made a positive commitment to research cooperation with the U.S. in a few areas, it is missing out on many of the larger opportunities for full joint R&D and co-production of systems like the Block IV upgrade to the Navy’s Standard Missile and the Army’s THAAD missile. Moreover, given the number of Japanese proposals for autonomous TMD development circulating currently one wonders if Japan eventually will actually attempt to go it alone with TMD, perhaps only licensing select components, much as it did with the FSX. In light of the huge budget constraint Japan faces this would seem a fatally flawed approach.
Despite these considerable challenges, the U.S.-Japan security alliance can and must evolve to the exigencies of the 21st century. Its evolution, however, cannot be a one-way endeavor with the U.S. calling all the shots. The Armitage report calls for “excellence without arrogance” from the United States in its efforts to expand the partnership with Japan. In this regard, as Michael Green, Japan director at the National Security Council suggests, the Armitage report indicates “there will be a far more open door in Washington for Japanese ideas and initiatives, while at the same time encouraging Tokyo to expand its security and diplomatic responsibilities in Asia.”[10] Hopefully, through this “open door” the U.S. will be able to engage in a frank and positive dialog on the alliance in the first year of the administration that leads to a truly new era in the security partnership.
Can Japan Become as Deeply Integrated an Economic Partner as Great Britain?
Strengthening the U.S.-Japan security alliance in order to make Japan the “England of the Far East” is an ambitious objective. However, promoting economic integration with Japan on the same level of depth as with England is in some ways even more challenging.
The United Kingdom is America’s second largest non-NAFTA trade partner and largest recipient of FDI from the U.S. For most of the last two decades bilateral trade and investment flows have been roughly in balance and trade tension practically non-existent (although as a member of the EU the UK has been party to a number of high profile disputes with the U.S.). In year 2000 U.S. exports to the UK were $41.6 billion versus imports of $43.46 billion resulting in a small trade imbalance of $1.86 billion. In 2001 it is projected that the U.S. will have a positive trade surplus with the UK.
Continuously deepening investment ties have played a important role in deepening trade ties and minimizing possible trade friction. In the year to March 2000 U.S. FDI in the UK jumped 23%, bringing the estimated stock of American direct investment in the UK to $213 billion (more than half of the $400 billion of the total inward FDI stock). According to the U.K. government’s “Invest.UK” bureau the foreigners, with Americans far in the lead, now control over 40% of all assets in the manufacturing industry, provide 17% of the country’s manufacturing jobs, 26% of its net output, and 33% of its net capital expenditure.
The contrast between the UK and Japan could hardly be starker. Japan remains the largest non-NAFTA trade partner of the United States. In year 2000 U.S. exports to Japan amounted to $65.24 billion versus imports of $146.58 billion, thus producing a huge deficit of $81.34 billion. Moreover, although there are signs that the Japanese investment environment is improving and overall the trend is upward, for fiscal 1999 (through March 2000) the flow of U.S. direct investment in Japan actually dropped, bringing the stock of American direct investment in Japan to a relatively meager $36.43 billion (roughly the same as in Brazil or Switzerland). Meanwhile Japanese direct investment in the United States surged in FY99 bringing the accumulated amount of Japan FDI in America to $292.47 billion (an eight to one difference!). Total inward direct investment in Japan still falls below 1% of GDP versus over 30% of GDP in the UK. Jesper Koll of Merrill Lynch in Tokyo has calculated that FDI would have to rise by nearly $500 billion to reach the average level in the advanced industrialized world!
The gap in direct investment is manifested in the perceptions that foreigners have about the relative openness of the Japanese market. One survey done by Japan’s Ministry of International Trade and Industry (MITI) estimated that foreign companies in 1995 accounted for only 1.2% of all sales and 1% of all assets in the Japanese economy—absurdly low figures even if the MITI data somewhat understate the real position of foreign enterprises in Japan, as one scholar contends.[11] By contrast, a 1993 U.S. Commerce Department report showed that foreign companies accounted for 16.4% of sales in the United States, 14% in Germany, 24.1% in Great Britain, and 28.4% in France.[12] Given this statistical backdrop it is no wonder that trade friction with Japan is so much higher than with the other G7 nations.
A large part of the blame for the chronically imbalanced nature of the U.S.-Japan trade relationship rests with trade officials and economic policymakers on both sides of the Pacific. Far too often those in the White House and Kasumigaseki have discounted the possibility of a radical alteration of the bilateral status quo (dare I say normalization of the trade relationship?) as “naïve and unrealistic.” This attitude was particularly evident during the Clinton Administration when those (such as the author) advocating a more positive integrationist approach to bilateral relations were severely criticized by the “revisionist” policymakers who believed Japan’s economy was unchanging and in many aspects invulnerable to the normal forces of economics.[13]
Following the revisionist line of thinking, the U.S. Trade Representatives Office wrongfully insisted that the only hope was to “ignore the market and instead manage trade relations.” As one U.S. negotiator said to the author at the time, “We can’t trust the ‘invisible hand’ to triumph over the ‘visible hands’ of the Japanese bureaucracy.” Describing the White House strategy, Deputy Treasury Secretary Roger Altman went so far as to declare in a Foreign Affairs article that the U.S. would target definite results in trade talks with Tokyo, until “hell freezes over,” if necessary.[14] To achieve these results the U.S. sought to use its mighty “Super 301” hammer to force Japanese to go along with managed trade. However, section 301 quickly became a hammer that did as much damage to the U.S. economy as it did to the Japanese (as shown during the 1994-95 luxury auto and computer parts import imbroglios when American consumers and producers lobbied against the White House). Ultimately, despite the big promises, the only “significant and tangible” results of “Results Oriented” trade policies of the Clinton era were recrimination and a tremendous rise in bilateral tension.[15] By the administration’s own metric for evaluating success or failure (a comparatively substantial increase in market penetration), the talks were a colossal failure--during the 1990s the pace of export growth and investment flows into Japan grew at a far slower rate than into Europe, Latin America, or Southeast Asia.
Making matters worse, a fundamentally wrong-headed view of the Japanese economy applied as much to leading Japanese policymakers like Vice Minister of Finance Sakakibara Eisuke (“Mr. Yen”) as to Mickey Kantor and Roger Altman. Sakakibara arrogantly insisted in a best-selling book that Japan had “surpassed capitalism” (shihonshugi o koeta nihon)[16]--a disconnected mentality that may help account for the policies that helped produce Japan’s terrible economic performance in the 1990s.
In sum, infatuated by their own version of revisionism, Japanese economic policymakers in most cases resisted, rather than embraced, the huge changes that were underway in their economy and preferred procrastination (saki-okuri) to prompt corrective action. The result was the development of a veritable public and private sector “financial Mount Fuji” of debt, a tremendous wipe in national wealth, and a continued contraction in nominal GDP even in the face of massive fiscal stimulus.[17]
Today, to restore the grounds for economic growth, Japan needs to abandon saki-okuri and promote radical deregulation, structural adjustment, and public and private sector financial reform. The only alternative is to accept an acceleration of Japan’s relative economic decline. This, clearly, is unacceptable. Thus, whether the traditional old guard likes it or not, Japan today needs to embrace the principal of free trade inside Japan, as well as between Japan and its major trading partners. This new reality presents a major opportunity for the U.S. and Japan to move in a much more positive bilateral economic policy direction. It is time to take our economic relationship permanently “beyond revisionism” and actively aim to make the U.S.-Japan economic relationship every bit as deep and robust as that between the United States and the United Kingdom.
A Comprehensive Security Alliance: Taking the U.S.-Japan Relationship into the 21st Century
Despite the great challenges ahead, the vision of Japan becoming a “Great Britain of the Far East” in security and economic terms needs to pursued for the stability, security, and prosperity of the United States and Japan and the Asia-Pacific in the 21st Century. As a first step the USG and the GOJ should jointly embark on a bottom-up review of the U.S.-Japan economic and security treaty architecture. In the coming months a bi-national U.S.-Japan alliance commission should be formed, made of government officials, politicians, businesspeople, and scholars. The members of the commission should be given a specific but bold mandate: to come up with guidelines for revising, enhancing, and even possibly replacing the 1960 Mutual Security Treaty and the 1953 Treaty of Commerce and Navigation. The commissioners would report their findings to both the President of the United States and the Prime Minister of Japan after one year of deliberations. Based on these guidelines the aim would be to promulgate updates for these aging treaties by the middle of the decade.
The purpose of the revised treaties also should be clear from the start of the Commission: to facilitate a much deeper security partnership and economic integration between our two countries. Let’s examine what they might contain and what their ultimate aims could be.
A Friendship, Commerce, and Navigation (FCN) Treaty for the 21st Century: Toward a U.S.-Japan Common Market
A revised Friendship, Commerce, and Navigation Treaty could pave the way for the eventual development of a U.S.-Japan Common Market. A key revision to the FCN treaty could be the inclusion of a preamble like the one contained in the 1957 Treaty of Rome, which created the European Community. Rome was not created in a day and neither was the EC (which has taken nearly 45 years of negotiations to bring together economically). Revising the FCN would only be a first step but it would be an important one. Following the lines of its European predecessor, the preamble could possibly read:
“Aiming to establish the foundations of a U.S.-Japan Common Market both countries will undertake all necessary legal, regulatory, and procedural steps to promote the orderly harmonization of their internal markets and effect a convergence in the pricing mechanism for labor, land, capital, energy, information, and services.”
Ideally, a revised FCN treaty could be consummated by April 2003--the fiftieth anniversary of the current FCN treaty and nearly the 150th anniversary of the original “Peace and Amity Treaty” (“Washin Joyaku”) between the United States and Japan signed on March 31, 1854. The symbolic importance, alone, would justify the diplomatic effort. The legacy of Perry’s black ships and of unequal treaties would finally and permanently be removed from the U.S.-Japan relationship.
A Common Market Agreement
After an FCN treaty ratification, both governments could launch negotiations for a Common Market Agreement (CMA). This agreement would mandate the orderly harmonization of rules, regulations, competition policies, and tariffs in the U.S. and Japan over the following ten years. As established in the new FCN Treaty the aims of achieving price convergence, highly “contested markets,” and “open skies” would be the guiding principals for negotiation. There should be no “taboo” sectors. GATT Article 24 compliance would be an upfront requirement. Nonetheless, the agreement could allow concessions for “buying-off” and induced retirement of capacity in a limited set of sectors (i.e. Japanese agriculture and U.S. steel). The Japanese samurai were paid to turn in the swords and so must inefficient Japanese farmers be paid to turn in their plowshares--the same principle should apply to America’s uncompetitive steelworks.
In contrast with the progressive nature of the EC harmonization talks, ratification of the U.S.-Japan CMA should be made on an all-or-nothing basis. The agreement should not be negotiated piecemeal. The United States and Japan should assemble comprehensive lists of proposed changes across all sectors and present them to each other, with subsequent negotiations limited by time and content.
Existing bilateral managed trade agreements would be abrogated as part of a CMA. Both sides should relinquish the right to unilateral retaliation and pledge to resolve disputes via either bilateral arbitration or the World Trade Organization (WTO). Nonetheless, there should be one binding numerical target for the agreement: within five years of the CMA’s enactment, Japanese purchasing power should be within 10% of that of the dollar.
Purchasing power parity (PPP), especially in “non-traded goods,” may not be an accurate indicator of currency movements but it is an excellent measure of the relative level of protectionism in an economy--protectionism that impedes expected flow-based currency adjustment in line with the so-called law of one price. A PPP target is an ideal means of assuring that Tokyo rapidly implements the changes that it promises, without tying its hands on every decision. If met, that target would benefit Japanese consumers and foreign investors by lowering both the cost of living and the cost of doing business, and by making the yen worth as much in Japan as it is abroad. Nonetheless, in order to reduce the deflationary drag induced by the PPP target it could be complemented and supported by a Reverse Plaza Accord for the Yen-Dollar aiming to stabilize at a 135 Yen to the Dollar baseline. This would be in between the average trading value of the Yen over the last five years and its purchasing power.
A U.S.-Japan Mutual Security Treaty (MST) for the 21st Century
A new U.S.-Japan Mutual Security Treaty (MST) should be negotiated simultaneously with the CMA in order to supersede the 1960 Treaty of Mutual Cooperation and Security, keeping many of the cold war treaty’s essential elements intact but restructuring its foundations to meet present and future needs. The security agreement could be founded on five principles:
1. Strategic credibility. The MST should have a twenty-year duration, thus eliminating the uncertainty of an open-ended agreement.
2. Strategic reciprocity. Although Japan should not be committed to playing an offensive role in a hypothetical strategic contingency, it should be obliged to come to the “defensive aid” of the United States in a supporting role if U.S. forces are attacked, making use of the considerable military assets it currently possesses. The American conventional and nuclear commitments to Japan’s defense should in turn be solidly reaffirmed. Thus, unlike the current treaty, the MST would be reciprocal in nature, but with clear and inherent limitations. The “free rider” problem could be solved without Japan having to amend its symbolically important constitutional peace clause.
3. Regional commitments. Under the MST Japan should be drawn into a formal network of allies in the Asia-Pacific region (including South Korea and Australia). In simultaneously updated agreements, these nations should be bound to consult with each other in the event that any one of them is threatened with attack. To facilitate a broader strategic role for the alliance and eliminate the current ambiguity, Japan should also formally acknowledge in the treaty its right to collective self-defense.
4. Global reach. The treaty should obligate Japan and the United States to cooperate--in conjunction with other allies and mutually interested nations in the region--in ensuring the free flow of oil from the Middle East and the freedom of navigation in Asian waters. Also, a division-level U.S.-Japan joint peacekeeping and rapid-reaction force should be established and based in Okinawa as the U.S. Marine presence diminishes. Furthermore, the neglected option of replacing Futenma Air Station with a mobile offshore base (MOB) should be revived, thus providing the bi-national joint reaction force a degree of mobility for staging regional operations.
5. Rationality. Unnecessary duplication of capabilities should be kept to a practical minimum. Japan should commit to maintaining requisite defensive roles and missions. It should also continue to provide host-nation support to American forces in Japan and agree to a binding wartime acquisition and cross-servicing agreement with the United States. Moreover, it should pledge to jointly develop and deploy theater missile defense systems with the U.S. in order to protect forces against the threat of conventional missiles and reduce the threat of unconventional strike on civilian populations. In turn, the United States should provide, and Japan largely rely on, American strategic airlift and sealift capabilities either based in Japan or readily available elsewhere. A combined forces command structure should be swiftly adopted between U.S. Forces, Japan, and the Japanese SDF. Pursuant to this objective a fully staffed joint intelligence headquarters also should be established, giving Japan much wider access to U.S. intelligence, including about nations in its immediate vicinity, as should a joint planning and command center. In addition, the United States and Japan should significantly expand the terms of their defense technological partnership, allowing Japanese firms reciprocal freedom to bid on U.S. defense contracts and to participate in international armaments projects with U.S. partners, provided the system involved is not overtly offensive (e.g., a missile or bomber).
Finally, both sides could supplement the new treaties with an International Cooperation Agreement (ICA) containing a detailed statement of common foreign policy priorities such as:
- The rapid economic development of North Korea upon the completion of an eventual armistice, disarmament, and reunification accords;
- Greater transparency in Chinese defense strategy and budgeting;
- Stability in the Middle East and the free transport of natural resources from the Persian Gulf to Japan and the United States;
- A peaceful resolution of island disputes in the Far East;
- Multilateral development and use of contested natural resources in the Far East;
- Multilateral economic growth initiatives for the Russian Far East, North Korea, China, and Indonesia;
- Cooperative denuclearization with Russia and China;
- Promotion of a new WTO round of negotiations on vexing but vital issues like agriculture, telecommunication services, aviation, and competition policy.
Conclusion
In conclusion, the upcoming 50th anniversary of the promulgation of the U.S.-Japan security and commerce treaties affords us a chance to look forward and back. The U.S. and Japan can look back on a security alliance that, overall, functioned extremely well, helping to win the cold war and keep the peace in East Asia in the 1990s. Nonetheless, the alliance today increasingly seems trapped in the past. It is hamstrung by outdated limitations on collective self-defense and international operations in Japan as well as by the latent unwillingness of some in the U.S. to give Japan a larger place in international affairs and to allow for a more balanced distribution of security roles and missions. Looking forward, the U.S. and Japan need to remove the limitations of the Cold War alliance system and push forward toward a bolder, broader, and better mutual security relationship. As argued herein, this process of positive security integration could be facilitated by an attempt to improve the diplomatic architecture supporting the alliance instead of relying on piecemeal reinterpretations and cosmetic revisions as has been the past practice.
Economically, it is easy to not want to look back and instead only look forward. The protectionist policies that Japanese officials once touted as a “global development model” and many Americans thought worthy of emulation in the 1990s only produced an economy in remarkable decline. The end of “Japan, Inc.” has been traumatic. Nonetheless, crisis also produces opportunities. The collapse of “old Japan” is paving the way for a more efficient and more globalized capitalist system in Japan. Japan’s new reality, however harsh for the old guard, opens doors throughout the economy for foreigners and new Japanese investors long shut out of the market. Looking ahead, Japan’s process of creative destruction will be made much easier should the U.S. and Japan work together to foster integration of our two economies, actively working to create a new commercial treaty system that bolsters investor confidence and actively brings down remaining barriers.
Fifty years after the U.S. and Japan first formed a post-WWII treaty relationship, it is time to roll up our sleeves and start building a security and economic alliance between the United States and Japan that is every bit as deep and durable as that between the U.S. and Great Britain. However difficult the task will be, the benefits will undoubtedly be much greater than the costs incurred. Political, economic, and security integration succeeded in Europe in the late 1950s, despite the legacy of the war and the cultural, economic structural, and emotional barriers. Naysayers need to recognize that it certainly could succeed in the U.S.-Japan context.
APPENDIX A
Is Japan Facing an “English Style” National Financial Crisis?
Japan today faces the possibility of becoming an “England of the Far East” of a different era--the mid 1970s when Great Britain’s public and private finances hit the wall, forcing authorities in 1976 to call in the International Monetary Fund for assistance.
Japan has the most rapidly aging population, the largest gross debt and deficit, and the most underfunded social security system among the world’s advanced industrialized countries. Moreover, Japan is plagued by a dim growth outlook, unceasing deflation, and continued high levels of private sector leverage that together have helped boost its rate of business failure to one of the highest levels in modern history.
Egged on by the Keynesians in the Clinton administration, the Japanese used massive fiscal stimulus packages to try to numb the pain of structural adjustment following the collapse of the financial bubble at the beginning of the 1990s. The result of this fiscal recklessness is that the level of Japanese government gross debt to GDP is now nearly 140% and at the current trajectory will surpass 200% in 2005. Measured on a cash flow basis Japan’s public financial situation is even more deleterious. Currently, nearly 65% of central government retained tax revenue goes to debt service, while long-term debt exceeds revenue by more than 15 times. Thus Japan in many ways is in a far worse situation than Great Britain in 1976, when gross government debt only was around 50% of GDP, debt service accounted for 11.1% of tax revenue, and long term debt was 1.6 times tax revenue.
Japan has entered a zone where all other countries that have experienced similar national balance sheet deterioration eventually have encountered a debt-funding crisis. Yet, if a Japanese debt crisis were to erupt the implications for global financial stability would be significant. Japan’s national debt is now nearly 18% of global GDP and Japan’s broad money supply (M3) represents a significant portion of global transactional liquidity. With a current account deficit of well over $450 billion, a large part financed in Yen, America would be particularly vulnerable to a surge in Japanese interest rates or a disruption of capital flows from Japan.
The pain the Japanese will have to endure to get out of their debt trap, indeed, will be remarkable. Merely to stabilize Japan’s national debt between now and 2005 requires that the GOJ boost revenue or cut expenditure by an amount equivalent to 10.5% of GDP—about ¥55 trillion. This is larger than the total amount of Japanese central government tax revenue and more than 2/3 of expenditure. This apparently would be the largest fiscal shift ever attempted by an advanced industrialized economy.
Effecting fiscal adjustment in Japan on such a large scale will be next to impossible without getting the Japanese economy growing again. Yet, creating the grounds for endogenous growth requires a radical downsizing in corporate balance sheets in order to boost capital productivity. In the past decade Japanese companies have invested on aggregate over 1/3 more than those in the U.S. to yield only 1/2 the corporate return on assets (ROA). Based on an analysis of the Ministry of Finance’s Survey of Incorporated Enterprises, merely bringing the average Japanese ROA back in line with the 1980s average requires non-financial companies to scrap unproductive assets and cut excess liabilities by a colossal 65% of GDP. Even then Japanese companies average ROA would still be less than 2/3 that of their American competitors.[18]
For Japan today bolstering trade and investment ties with the U.S., as well as adopting serious domestic fiscal and financial reform policies, will be a critical part of avoiding an “English style” national financial crisis. This formula worked in the U.S. in the 1980s and early 1990s when Japanese investors helped refinance “America Inc.” and it could work to save Japan from financial failure.
APPENDIX B
Why a Common Market Would Bring About Common Benefits
1. Benefits to the U.S.:
Investment potential would be dramatically improved (as transparency increased and costs came down) and the competitive playing field would be leveled.
American industries such as airlines, telecom, energy, financial and information services would be particularly empowered in Japan. M&A and FDI potential in old economy sectors also would be dramatically enhanced.
Japan’s economic structure would finally move from a producer to a consumer footing and be able to support global growth.
U.S. economy is already open. We would need give up little to gain a lot in terms of access.
If Japan rejected a CMA, then relations would continue as is. No binding penalty would be attached (other than a public stigma that the GOJ “talks up one line, but walks down another” when it comes to free trade).
2. Benefits to Japan:
Question of U.S. long-term commitment to trade openness would be answered unequivocally.
The threat of unilateralism would be removed.
Remaining U.S. tariff barriers would be removed.
Vitally needed foreign investment would be free to flow in and help revitalize the economy.
Economic restructuring and deregulation could proceed in Japan with the U.S. market providing an open safety valve for external demand.
Notes
1. The author has made the case for a comprehensive update of the alliance architecture previously. See David Asher, “A U.S.-Japan Alliance for the 21st Century,” Orbis, summer 1997, pp. 343-374 and “Hokuto Azia no Igirisu,” Ronso Toyo Keizai, March 2001. This paper provides a restatement and further elaboration of many of the arguments advanced in those articles.
2. Precisely the report states: “We see the special relationship between the United States and Great Britain as a model for the alliance.” See INSS Special Report, “The United States and Japan: Advancing Toward a Mature Partnership,” Institute for National Strategic Studies, Wahington: National Defense University, October 11, 2000. Hereafter referred to as the “Armitage report.”
3. For the author’s insider perspective on the Nye Initiative, see op. cit. Asher, “A U.S.-Japan Alliance for the 21st Century.”
4. See John Dower. Embracing Defeat: Japan in the Wake of World War II, New York: W.W. Norton & Company, 2000.
5. James Van De Velde, “Article Nine of the Postwar Constitution: Codified Ambiguity,” Journal of Northeast Asian Studies, Spring 1987, p. 40.
6. Torkel Patterson, “Future Roles and Missions of the Japan Self-Defense Forces,” Prepared for conference: Restructuring U.S. Japan Relations The Okazaki Institute/Pacific Forum CSIS Tokyo, January 11-13, 1996.
7. Sumihiko Kawamura. Rear Admiral (JMSDF, Ret.) “Trilateral Cooperation for Assistance Projection,” Prepared for 1998 Japan - Korea - U.S. Trilateral Naval Cooperation Workshop May 14-15, 1998 http://www.glocomnet.or.jp/okazaki-inst/kawamura-inst/khpe.html.
8. A similar argument is presented in Robert D. Blackwill and Paul Dibb, Editors, America’s Asian Alliances. Cambridge, Mass: MIT Press, 2000.
9. For a detailed analysis of kokusanka ideology in the context of defense industrial policy, see Michael J. Green, Arming Japan. New York: Columbia University Press, 1997.
10. See Michael Green, “Preparing for New Teams in Tokyo and Washington...and a Muddy Field in Both Capitals,” Comparative Connections, Honolulu: CSIS Pacific Forum, October-December 2000 http://www.csis.org/pacfor/cc/004Qus_japan.html.
11. See David Weinstein, Foreign Direct Investment and Keiretsu: Rethinking U.S. and Japanese Policy (Washington, D.C.: National Bureau of Economic Research, June 1996).
12. See Marcus Noland, “U.S.-Japan Trade Friction,” The World Economy, Mar. 1995, p. 238.
13. Such a more proactive approach, aiming to foster market integration via deregulation and structural harmonization, instead of managed trade, was advocated by a large group of leading Republicans in 1993 and directly proposed to the White House. Unfortunately, it was rebuffed as “unrealistic”--an ironic charge given that by the end of the Clinton administration’s second term, a very similar approach was beginning to be undertaken. See David Asher, Beyond Revisionism: Towards a New U.S.-Japan Policy for the Post-Cold War Era (Washington, D.C.: House Wednesday Group, U.S. Congress, Mar. 1993).
14. Roger C. Altman, “Why Pressure Tokyo?” Foreign Affairs, May 1994, p. 5.
15. For background on the development of the Clinton administration’s Japan policy, see Arthur Alexander, “Sources of America’s Asia Policy in the Clinton Administration,” Japan Economic Institute Report (Washington, D.C., Apr. 21, 1995).
16. See Sakakibara Eisuke. Shihonshugi o koeta Nihon. Tokyo: Nihon Keizai Shimbunsha, 1991.
17. See David Asher and Robert Dugger. Could Japan’s Financial Mt. Fuji Blow its Top? Cambridge: MIT Japan Program working paper, May 2000.
18. See David Asher, “The Bush Administration’s Japan Problem,” On the Issues, Washington: American Enterprise Institute, March 2001.
