Activating the U.S.-Japan Alliance in 2020 – Starting with Medicines and Trade

Ambassador Kurt Tong
May 14, 2020

The close alliance of the United States and Japan has made significant and positive contributions in tackling a variety of regional and global issues over the years.

Now, facing the special challenges of 2020 and the coronavirus epidemic, can this powerful partnership once again be put to work to the benefit of broader humankind?

Over the years, Japan and the United States have sustained strong joint military readiness and developed profound economic relations, while at the same time building a strong tradition of personal, cultural, and academic exchange. The resulting U.S.-Japan affinity has helped make the world a better place, contributing to global economic growth, scientific advancement, and international security.

The two governments have regularly thought to team up in concrete ways to try to solve regional and global problems beyond their borders. I know this from personal experience.  As a junior diplomat in 1993, I helped organize a grand new initiative called the Common Agenda for Cooperation in Global Perspective, which helped align U.S. and Japanese efforts on development assistance and environmental protection for almost a decade. In 2010 and 2011, as back-to-back hosts of APEC, Japan and the United States organized a “one-two punch” that give birth to an enlarged Trans-Pacific Partnership, which has reshaped Indo-Pacific trade and investment rules in very positive ways – even absent U.S. participation. There are many other examples of this kind of effective teamwork.

Today, in this difficult springtime of 2020, national leaders in both Japan and the United States are primarily looking inward, struggling to contain the immediate day-to-day impact of the global pandemic on their citizens and economies.

As we move into the summer, however, global attention will shift to vaccines and treatments, as well as the impact of COVID-19 on both the performance and the rules of the international economy. How can the U.S.-Japan partnership play a role?

While there may be other opportunities, the managers of the U.S.-Japan alliance could usefully focus on two critical areas: 1) development and deployment of medical treatments and vaccines; and 2) shaping international trade policy, even as nations experiment with new approaches reflecting their perceived national weaknesses exposed by the COVID-19 epidemic.

Providing the Medicines Our People Need

In the desperate environment of the COVID-19 epidemic, the entire world is focused on the development and deployment of diagnostic tests, treatments, and vaccines. The research institutes, universities, and pharmaceutical manufacturers of Japan and the United States are among the most capable in the world, and they will certainly play a central role in meeting this challenge – particularly when it comes to treatments and vaccines.

Right now, the two governments are seized with the potential utility of Avigan – produced in Japan – and Remdesivir – an American product. Many clinicians are rushing forward, with government permission, to try out these drugs and evaluate their effectiveness as treatments to help speed patient recovery. Neither treatment appears to be a “miracle” drug, but they could both be useful in saving lives. It is logical for Japan and the United States to coordinate closely in evaluating, producing and distributing these medicines to have the greatest impact.

No doubt the excellent pharmaceutical companies of the United States and Japan will also come up with other treatments as the year progresses, so it makes sense to establish a clear bilateral channel now to share research and production information, as well as to handle the related commercial complexities.

Even more important – and politically and strategically significant – than patient treatments will be the tough questions surrounding vaccines, including their safety, speed of development, speed of manufacture, and affordability.

The question of who pays for vaccines, and who benefits, is something that should be discussed by Japan and the United States now, not later. The United States and China are two of the main possible sources of vaccines. How these vaccine policy questions are handled could have a salient impact on the overall tenor of the U.S.-Japan alliance.

There are also specific and practical issues surrounding possible vaccine production bottlenecks that bilateral coordination could ameliorate. Such bottlenecks could even include the quite literal problem of making necks for bottles, as one reads about possible shortages of medical glass perhaps causing a slowdown in vaccine distribution.

Still, there are two caveats to remember as Japan and the United States work together on the medicinal response to COVID-19.

The first is to make sure that communication takes place in close coordination with, or even directly including, the relevant private sector scientists and business leaders working in our pharmaceutical companies. Pharmaceutical pricing and patent issues have long been a big problem in U.S.-Japan bilateral economic relations, due to the conflicting agendas of research-heavy U.S. firms seeking good prices for their innovative products, at the same time that the debt-heavy Japanese government tries to minimize costs for its publicly funded health system. The coronavirus crisis should be used as an opportunity to improve, not worsen, that perennial problem.

Second, while working closely together as a bilateral team, the United States and Japan should be careful not to convey an atmosphere of exclusivity toward the rest of the world. Ideally, we would see Japan and the United States coordinating in advance of important World Health Organization sessions and other relevant meetings, thereby presenting a united front. This would certainly be preferable to seeing the United States go it alone, as sometimes seems to be the default approach of the Trump Administration. For example, the U.S. did not join the May 4 vaccine pledging conference convened by the European Union. Prime Minister Abe Shinzo had it right when he told that conference, “Let us in the international community unite to overcome this crisis.”[1]

I believe it is entirely possible for the United States and Japan to be constructive actors in a concerted global response to COVID-19, even as we leverage the latent strengths of the U.S.-Japan alliance to effectively tackle the most important medicinal aspects of the crisis response.

Keeping Global Markets Intact and Robust

The other important area where I would like to see urgent U.S.-Japan alliance cooperation in 2020 is in trade policy.

While global actions on trade are evolving on a day-to-day basis, it is clear that many countries are ready to take unprecedented measures in 2020 to try to ensure security of supply for key commodities in the midst of the ongoing medical and economic crisis.

The Center for Strategic and International Studies has reported that as of April 16, some 75 countries – including the United States – have either limited or banned certain medical exports.[2] Typically, when one thinks about creeping protectionism, the main concern is national barriers to imports aimed at helping local producers; now, governments are concerned about making sure that their most precious items are not exported, amid global shortages.

Some countries – including Japan and other developed Trans-Pacific Partnership nations such as Canada, Singapore and New Zealand – have taken a stand against export limitations.  On May 1, the trade ministers of Singapore and Japan agreed to work together to maintain and promote trade in agricultural and medical products amid growing concern about export limitations.[3]

But at the same time, other important voices are focused even more narrowly, not just on ensuring security of supply, but on trying to exclude certain sources of supply – namely China. This movement is building amid rising political distrust and antipathy directed at Beijing. Writing in the Washington Post, Senator Mitt Romney suggests that, “The free nations must collectively agree that we will buy these products only from other free nations.” [4]

In fact, according to one report, the United States is now trying to assemble a pact among trusted partners to create something it might call the “Economic Prosperity Network.”[5]  While the concept remains unclear, the idea appears to be to emphasize trade among friendly companies and countries, agreeing on some common rules, while attempting to exclude non-friendly countries and sources of supply.

So, what is the right approach for the United States and Japan to take on such issues?  And can they do so as a team?

Certainly, extensive protectionist actions, occurring amid a generally tense political and geo-strategic environment, could dangerously undermine global confidence in the international trading system. In a worst-case scenario, such measures could lead to an accelerating bandwagon of 1930s-style retaliatory trade barriers among major trading nations. At the very least, widespread trade restrictions may constrain global economic growth, further deepening what is already looking to be the worst planet-wide economic recession in seven decades.

At the same time, security of supply is a legitimate concern, especially based on the newly reinforced realization that certain items are must-have commodities for societies, regardless of price or efficiency. Therefore, it makes sense for governments and companies to identify and foster reliable supply chains amid growing complications in international shipping, transportation, and communications. Redundancy and reliability of supply are worth paying for, to a certain extent.

Tata Group CEO Natarajan Chandrasekaran has suggested that companies and nations will increasingly look to create “just-in-case” supply chains, building on the previous paradigms of “just-in-time” and lowest-cost supply channels.[6]

Nations can balance these various competing priorities in their policy actions by adhering to two principles: 1) the goal for supply chains should be reliability rather than exclusivity; 2) national policy should focus on incentives rather than disincentives.

Following these principles would help avoid some of the worst zero-sum, “beggar thy neighbor” side effects of policies aimed at increasing security of supply.

With those principles in mind, Japan’s recent decision to make available the relatively modest sum of $2 billion to encourage Japanese companies to consider moving some production from China to Japan or Southeast Asia, for example, might pass muster. At the same time, coercive measures to force companies to stop producing in China might not.

These are complicated issues, and by working together as the world’s #1 and #3 economies, the United States and Japan could leverage the trust inherent in their alliance to design sector-specific policies that first build redundancy, before trying to diminish dependency.

A good first step would be a firm leader-level bilateral commitment to zero export barriers between the United States and Japan.  Then our two nations could look at what are some of the key manufacturing or information management “commodities” that we want to ensure are available within the U.S.-Japan orbit – and figure out the incentives to make that happen.

Broadening the Scope of U.S.-Japan Teamwork on “National Security”

Over the longer term, beyond 2020, it is clear that the United States and Japan will want to use our experiences this year to take careful philosophical steps to expand the concepts underpinning the U.S.-Japan alliance to include a broader definition of national security.

Such a reconceptualization will certainly include pandemic preparedness and response as a key element.

There are of course many voices calling this year for greater cross-boundary coordination on countering biological threats. Alluding to the concept of “mutually assured destruction” that forced U.S.-Soviet cooperation even during the Cold War, Robert Koepp asserts that “mutually assured epidemic destruction” means that the United States and China may inevitably find a way to cooperate on pandemics, even in the face of profoundly high levels of mutual distrust.[7]

Koepp’s idea points in the right direction, and I have also called publicly for U.S.-China and G-20 cooperation on the COVID-19 response. [8]

Even while focusing on China, however, there is much we can do in this area inside the context of the U.S.-Japan alliance to benefit our nations and the world. For example, we could assemble joint stockpiles of medical devices and personal protective equipment to prepare for the next pandemic, or the second wave of this one.[9]

Such concrete steps would be of real practical value, while also reinforcing the spirit and effectiveness of the U.S.-Japan alliance – especially as we approach the 70th anniversary of that essential trans-Pacific connection. [10]

 

Kurt Tong is a member of Sasakawa USA’s Advisory Committee on Projects and a Partner at The Asia Group LLC. A former U.S. diplomat, he served as Deputy Chief of Mission in Japan from 2011 to 2014.

 

 

[1] Robin Emmott, “World leaders pledge $8 billion to fight COVID-19 but U.S. steers clear,” Reuters, May 4, 2020.

[2] William Reinsch and Jack Caporal, “Free Trade or Medical Supplies: Do Countries Have to Choose?” Center for Strategic and International Studies, April 20, 2020.

[3] Takashi Nakano, “TPP countries defy protectionist trend to maintain supply chains,” Nikkei Asian Review, May 2, 2020.

[4] Mitt Romney, ““America is awakening to China,” April 23, 2020.

[5] Humeyra Pamuk and Andrea Shalal, “Trump administration pushing to rip global supply chains from China,” Reuters, May 4, 2020.

[6] Edward Luce, “Tata’s lessons for the post-Covid world,” Financial Times, May 1, 2020.

[7] Robert Koepp, “Geopolitical shifts from COVID-19,” geoeconomix.com.

[8] Kurt Tong, “U.S. and China should fight coronavirus, not each other, Nikkei Asian Review, March 26, 2020.

[9] Satohiro Akimoto, “Japan and U.S. must lead preparations for next pandemic,” Japan Times, April 14, 2020.

[10] The U.S.-Japan Security Treaty was signed on September 8, 1951 and went into effect in 1952; it was later revised in 1960 and remained in effect since that time.

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