The card of restricting exports made Japan stuck between a US-China confrontation

The “export restriction” card leaves Japan stuck between a US-China confrontation

The US and China take measures to retaliate against each other is in the forecasts of many observers, but Japan risks being caught between these two powers.

A cargo port in Tokyo, Japan. Photo: AFP / VNA

According to the commentary of economist Keiichi Kaya published on Japan Business Press, the passing of the Export Control Law is the Chinese government’s response to US trade sanctions against the country. .

Previously, the administration of President Donald Trump has imposed export ban on a number of Chinese businesses, including technology conglomerate Huawei. This mutual retaliation is in the forecasts of many people, but Japan risks being caught between these two powers.

A series of provisions in the Export Control Law may not necessarily be activated but will also depend on the negotiation process between the US and China. However, as a country trying to turn the economy around by boosting exports to both China and the US, Japan is sure to be the loser in the confrontation between the two countries with the first GDP and second world.

The new US administration may try to normalize this problem, but the negotiations will face many difficulties. The split of positions between China and the US is likely to be promoted, when Japan will face pressure to make an important choice on which side.

The Japanese economy faces a bleak future

On December 1, 2020, the Export Control Law was enforced by China for the purpose of controlling exports of goods that China considers to be related to national security.

The law is made up of two parts, one of which is a list of items that Chinese enterprises cannot freely export regardless of whether they are licensed. Second is the list of Chinese enterprises banned from export to foreign businesses identified as having a national security issue.

Previously, the Trump administration launched a trade war against China, which included export bans against the products of certain Chinese companies for security reasons and Huawei group is a typical example. Thus, this move by China is understood as a response to the US similar to the US export ban.

Japanese businesses import a lot of raw materials and components from China, so after this Law comes into force, it means that they are not free to buy Chinese products, but there will be some obvious problems. tie.

One product most mentioned by the media is rare earth, an indispensable raw material for the production of household electrical appliances, electronic equipment, automatic electric cars (EV). Japan depends on up to 60% of rare earth materials from China, so if this item becomes the subject of the China Export Control Law, Japanese enterprises will face many difficulties.

Japan’s total trade in 2019 is 155,000 billion yen, of which bilateral trade with China is 33,000 billion yen and bilateral trade with the US is 26,000 billion yen. Thus, both the US and China are major partners of Japan.

There are many different ways to create that impressive figure, for example Japanese enterprises import raw materials and components from China, process domestically, then export to the US. Or Japanese enterprises export components to China, then Chinese enterprises complete the final stage before exporting to the US market.

Either way, China and the US are both major partners of many Japanese manufacturers and the Japanese side will certainly suffer the most if the US-China trade conflict escalates. Still knowing that the US starts a trade war with China, China will surely have a counterattack that is easy to predict, but for Japan this is indeed the worst scenario.

The Law’s Objective For Re-export

What is of particular concern to the public is the re-export issue. Export bans imposed by the US include third country exports. That is, the US government prohibits US businesses from selling to Huawei, but if US businesses export components to Japan then Japanese firms sell final products to Huawei, it is also within the ban. Or generally speaking, if Japanese businesses sell products using US components and materials to Huawei, they cannot continue to do business with the US.

Meanwhile, China’s export control mechanism is working in the near future, almost similar to that of the US, which means that exports from China to a third country (here is Japan) are also in the scope. vi of the Law issued by China this time.

For example, a Japanese enterprise imports raw materials from a Chinese company and sells goods to an American company. In the case that China considers that US enterprise to be the object of a ban on export, the Chinese enterprises not only cannot export directly to the US enterprise but also cannot transact with a Japanese enterprise (currently exporting to a US enterprise). industry). Japanese enterprises cannot import raw materials, so there is practically no way to stop business or go bankrupt.

The re-export control mechanism is understood as not only a direct business between the US and China, but it is highly likely that it will be used to pressure countries that do indirect business with the US and China.

As an example, when the US conducts separate negotiations with Japan, Japan will inevitably propose to the US to remove agricultural products such as rice from its list of taxable objects. But if the US applies regulations on re-export and comes up with a package deal (comprehensive negotiation of the same items), Japan must compromise.

On the contrary, when Japan negotiates separately with China, and the Chinese side also takes the same measure, Japan is forced to make concessions. In theory, it is quite possible that a compromise option is that if Japan wants to continue doing business with Chinese enterprises, it will have to compromise the Senkaku Islands issue (China is called Diaoyu).

If you look from the way the Japanese Government has attitude so far, even if you have to accept damage to the way its businesses, Japan will hardly compromise with China on the territory.

In addition, in the event that both the US and China put pressure on Japan, Japan will be stuck in the middle and face the pressure to choose the side. Regulations on re-export are likely to put Japan in a difficult position.

Risk to the business world

Export control is one of the top negotiating cards for both the US and China, so it is unlikely that these two countries will immediately apply this card.

In other words, it is unlikely that the Chinese Government will suddenly put a wide range of commodities under export control. However, although it is not done immediately, it is clearly a powerful weapon with great diplomatic influence.

The Japanese social community tends to take China lightly and there are signs that a part of the public opinion of this country is not fully acknowledging the export control mechanism introduced by China this time.

If the Chinese Government does not put important items within the scope of the subject of the Export Control Law, perhaps Japanese public opinion will be merely comments such as “Without Japan, China Quoc can’t do anything “or” China can’t force Japan. ” However, once China wants to apply the law to negotiations, it is impossible to foresee what China will do with Japan.

Suppose the Chinese Government adds some products to the list of products banned from export for a certain period, but in reality they are not yet in a hurry to impose export restrictions on those products.

The Japanese government and Japanese businesses believe that they should be assured to continue doing business with China. However, after a while, suddenly Chinese businesses do not export a large amount of these products, then Japanese businesses will be in a dilemma.

The Japanese side is researching whether China has imposed an export restriction or not, asking the Chinese side will only receive answers as “the problem is only the circulation of goods, there will be no limit. institutions for a country ”.

But the big question raised by Japanese businesses is whether China will impose different measures on each enterprise even though they import the same product.

Many Japanese view the Trump administration as a “guardian god” that defends justice, while hoping that the United States can put pressure on China, but the reality is far from over. The fact is that in the international community, no country can survive by relying solely on foreign countries, even the US as its biggest ally cannot say anything.

Some have suggested that the US-China conflict will be eased by the political transition from the Trump administration to the Joe Biden administration, but perhaps not much should be expected.

There are not many signs that the US-China conflict will not continue and become more intense when the United States enters the Biden administration. Japan will then continue to face the possibility of being forced to choose sides, even this may come in the near future.

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