 I'm so happy to be here at a five o'clock block with global connections, and we're connected with Professor Yoichiro Sato with Ritsumeikin Asia Pacific University, and he is a specialist in international affairs, and geopolitics in Asia and elsewhere, and we have so much to talk with him today. Hi, Sato-san. You there? Hello, yes. Good afternoon. Yeah, Mr. Sato has been on ThinkTech many times, and we always enjoy seeing him. He's been here. He's been there, and we like catching up with him. We want to do that. So this all came through my attention by PacNet32. PacNet32 is a code of an article that Mr. Sato wrote for Pacific Forum, and it appeared on their newsletter, and it was entitled, A Dealmaker Trump Tees Up His Game of Trade War, a very provocative title. And it was a, you know, I must say, Sato-san, you really know how to write English. You know, I was a lawyer practicing for many years, and I was always interested in the quality of English that our associates used, and your English is so precise and so careful and so expressive, you know, and this article was so well-written, honestly, I must say that. I wouldn't always say that, but I say that in this case with you. So my compliments to you on this article. Thank you. In any event, I would like to cover this subject because it's a way of looking at the article covers, a way of looking at the relationship between the United States, the Trump administration, and China in the context of the trade wars, but from the viewpoint of Japan. Because Japan is involved, like it or not, Japan is a comparison, Japan is a beneficiary, Japan is somebody who is going to have, you know, benefits or disadvantages as a result of what happens in this trade war, this tariff war. And I wonder if you could give me a handle on how it looks from your point of view on the trade war, because there are so many views about how this is working, and I really want to hear yours. Sure. Yeah. Well, first of all, I think so much attention is paid on the bilateral trade war between the United States and China, but in reality the U.S. is pretty much declaring the trade war everywhere, globally, and the Trump has demanded that Canada and Mexico to renegotiate the terms of NAFTA, and after putting out from the Trans-Pacific Partnership, TPP negotiations, the United States and the Trump demanded to lift up the negotiation on bilateral free trade with Japan, and through those negotiations, the U.S. is trying to get more than it could have under the TPP negotiation or the existing NAFTA agreement with its trade partners. So there's a very comprehensive campaign to renegotiate or newly negotiate a trade agreement which favors the United States, so define one of those efforts. So you know one thing that strikes me is that Trump is trying to do bilateral negotiations instead of multilateral negotiations. He's pulling out of multilateral trade negotiations, trade agreements, and going into bilateral, and I guess it's in the thought that the United States will do better that way. Unfortunately, he's given up some very important multilateral agreements like the ones with Mexico and Canada, and certainly the Pan-Pacific multilateral agreement. So the question is, and I think I know the answer of your article, is that realistic? Can he really do better by dropping out of those agreements and coming up with bilateral agreements to replace them? Or is that simply not going to work? I think as far as the trade is concerned, the Trump's approach to negotiate bilateral with individual members of the TPP grouping seems to be working, and you know when you look at the Japan-US trade negotiations, the U.S. has been very reluctant to open up the automobile sector, and one of the primary interests of Japan in entering the TPP negotiation was to kind of borrow the collective strength of all TPP members to kind of force the United States to drop the remaining automobile tariff, which is currently at 2.5% on passenger vehicles, which doesn't seem to be too high, but I mean as consumers, you know, if you look at the price of the car and 2.5% of that is actually quite significant, and for the Japanese companies that would be quite important competitive factor to get rid of this tariff. And the 2.5% is for passenger vehicles, but what's not very well known is that the U.S. categorizes the two-door SUVs, the smaller SUVs, under the light truck category, which comes with 25% tariffs, and in order to get Japan agreed to a bilateral negotiation, the Trump actually threatened Japan to raise the passenger vehicle tariff also to 25%. So with that kind of threat, the Japan was brought into, very reluctantly brought into a bilateral negotiation, whereas initial hope of Japan was that the United States would return to a multilateral TPP negotiation. Well, you know, I just wonder that, you know, whether this is sustainable in the long term, because, you know, an ex-country who is involved in the Trans-Pacific Partnership sees that Trump is dropping out, sees that Trump wants to better his position by bilateral negotiations, and it may say, I mean, it depends on your bargaining position, but it may say, when are you going to do that? We're going to focus on TPP. We're going to focus on other markets, you know, have a nice day. We're not going to play with you. And I think that happens. I mean, he forces, he bullies countries into doing that. And over time, it seems to me that if he keeps on doing that, countries will find other markets. And we live in a global economic community, and there are other markets. Could Japan stand that? Or is Japan too dependent on the U.S.? Yeah. Yes, the trade is not only bilateral. So, of course, when the U.S. act in a protectionist manner, then the trade diversion can occur. And Japan is already working on signing free trade agreements or negotiating free trade agreements with other partners. As soon as the Trump pulled the U.S. out of the TPP negotiation, Japan quickly signed free trade agreement with the European Union. And also, Japan approached China and South Korea and tried to jumpstart the ASAP negotiation, regional comprehensive economic partnership, which is basically a free trade of the three North East Asian countries, Japan, Korea, China, plus the ASEAN 10 members. So, in that sense, yes, Japan is working on these three projects. One is the East Asian integration free trade. The other one is the East Asia-Europe kind of free trade. And then Japan-U.S. free trade. So, by leveraging one negotiation against another, Japan is trying to counter Trump's kind of non-compliant offensive. Yeah. I wonder, as an observer of this for a long time, you know, how you feel about a situation where Trump is first trying to bully China. And then next time you look with all these tariffs that he set up, he started this crisis, this war. The next time you look, he's doing it to Japan. And whatever you want to say is that Japan has been our closest ally by far in all of Asia. It's been our friend. It's been more than a friend ever since the war. And we have a really exclusive special relationship with Japan as we have with no other country. And here, Trump is going after Japan, too, as if we were not friends. And I wonder, you know, I mean, I think you already know how I feel about that. But I wonder how you feel about it, seeing him do that to undermine and to stress out the relationship we have had with Japan all these years. Well, I think that Trump is really pursuing realist foreign policy. And the rising security tension between China on one hand and Japan on the other is actually providing an opportunity for the US to improve its trade terms with both China and Japan. So in a sense, the US is playing the two parties separately and taking advantage of the rivalry between them. So in other words, if Japan feels a stronger growing need for security protection from the United States, Trump thinks that Japan needs to pay a higher due for the alliance. And improving the terms of trade for the United States is considered one of those the dues Japan would have to pay. That's a very chilling and uncomfortable thought, but I think you've hit on something there. The other aspect is that we have our relationship with Japan. And this stresses out that relationship. I wonder, you know, how this how the average citizen in Japan feels about this. And, you know, especially in view of Trump's recent trip to Japan, where, and this is reflected in the title of your Pacific Forum show about teeing up, Trump teeing up his game, because he did he did a lot of sports with Mr. Abe while he was there. It seems inconsistent. On the one hand, you do a lot of sports with Mr. Abe. On the other hand, you get into this bullying mode, which it just seems oxymoron to me. What are the people on the street think? Well, I think the most common understanding of the recent summit meeting was that it was a success. And that Mr. Abe successfully entertained Mr. Trump, so that Mr. Trump went home happy. And because Trump didn't mention much about trade during the visit, many people are thinking that the kind of personal relationship which you can see on the media is working to smoothen the bilateral relationship. But I'm arguing in my paper that this is temporary. And there was a lot of effort to manage the media reporting of this particular event on both sides of the Pacific. You know, sometimes you have to watch out when some people get close to you, because they don't have good intentions. That's that's what comes to mind. You may be wanting and dining with Mr. Abe, but he doesn't necessarily have good intentions. Yeah, but one of the biggest concessions Trump made is obviously not to raise the trade issues to the front line of the bilateral negotiations at this particular time, because the Japan is scheduled to go into an upper house election for the parliament in the end of July. And the ruling LDP doesn't want to have a trade dispute right before the election, and especially the pressure from the United States to open up the agriculture sector, most importantly the beef market. And so not raising these issues before the election is a favor Trump gave to Abe. And there's even greater speculation, growing speculation, that Abe is actually planning the double elections by dissolving the lower house of the parliament as well, so that the two elections will concurrently happen this summer. So this is going to be Abe's big gamble, because if Abe catches the opposition parties unprepared with dissolution of the lower house and wing some additional seats and prepare his party toward the constitutional amendment, then that's going to be Abe's dream come true. And with that kind of victory, the LDP may bend the existing rule about how in terms the Prime Minister can serve and give Abe possibly another term. So this is a big gamble for Abe if he's going to do the double elections. Yeah, right, it puts him in an interesting spot. We're going to take a short break, Sato-san. And when we come back, I would like to ask you where the G20 meeting fits in all of this and how it will affect the U.S. relationship with Japan, if at all. And then I would like to also ask you about the tripartite effect of all of this, because nothing in Asia happens in a vacuum. We'll be right back after this short break. Aloha, I'm Dennis Wong, a host here at Think Tech, Hawaii, a digital media company serving the people of Hawaii. We provide a video platform for citizen journalists to raise public awareness in Hawaii. We are a Hawaii nonprofit that depends on the generosity of its supporters to keep ongoing. We'd be grateful if you'd go to thinktechhawaii.com and make a donation to support us now. Thanks so much. Aloha, I'm Sharon Thomas Yarbrough, a host here at Think Tech, Hawaii, a digital media company serving the people of Hawaii. We provide a video platform for citizen journalists to raise public awareness in Hawaii. We are a Hawaii nonprofit that depends on the generosity of its supporters to keep on going. We'd be grateful if you'd go to thinktechhawaii.com and make a donation to support us now. Thanks so much. We're back on Global Connections with Professor Soichiro Sato, a Richard Macon Asia Pacific University, talking about an article he wrote for Pacific Forum, a dealmaker Trump teased up his game at trade war. I'll take a moment and ask why you could style it that way? Because, you know, I happen to agree that whatever Mr. Trump does is a game anyway, and there's an interesting kind of irony when you title it that way, especially after the trip where they played golf all day. Can you give me the background of the title of your article? Well, I wanted to kind of portray him as a negotiator, and he's known for that, through his TV shows and all that. And also because of the scheduled golf event, I wanted to combine that with a golf analogy. And thinking that the trade issue was kind of set aside during the meeting, but I could use the key up analogy so that, you know, we see that he has made his preparations already. It really strikes me. So anyway, going back to the G20, the G20 is in a week or two, it's coming very soon. And this is going to play into things. Isn't it between US and Japan, US and China? What do you expect will happen and how will it affect the trade war? Well, US and China are the main focus of the ongoing trade war. And if their talks don't go very well, then there will be a mutual retaliation with punitive tariffs. And that will slow down not only to economies, but the other countries trade with these two countries will also suffer. So this is a great concern in both European Union and in Japan. And they want to make sure that US and China will manage their differences and refrain from importing those extremely high tariffs against each other. And they wanted to insert this particular language against protectionism. But, you know, the name of the US protectionist is a very diplomatically difficult thing. Most likely, they will pronounce some in general support for the free trade in principle. But naming particular companies or using the word protection is very much difficult to do. So am I right to think that everybody in Japan and I guess Taiwan and South Korea would all like to see the trade war between the US and China ended because they will benefit from a secession of the hostilities? Is that what you're saying? Yes. For example, US major imports from China are electronic devices such as smartphones. And if the US raises tariffs on these products, what will happen is that the Japanese companies are exporting a lot of components to China for assembling these electronic devices. And their exports will suffer as a result of the US tariffs on the final Chinese products. So this actually relates to what I said earlier that the bilateral trade does not stop at two nations. There are multilateral implications and the Japanese companies will clearly suffer because they have relocated a lot of factories into China and the components produced in those factories end up in the US market in the form of completely finalized products. Yeah. So okay, I mean this is interesting. But let me take the other side of it for a moment. But let's assume the trade war between the United States and China goes on. Trump tends to double down on things. Whenever you think he would stop bullying somebody, he keeps on doing it. And that's a fair chance of that happening. If he doesn't get what he thinks he wants, which may change from time to time, minute to minute, then he will continue the way he has threatened Mexico and other countries. Suppose in our discussion, suppose that happens, suppose he doubles down, he ups the ante, he applies tariffs on more Chinese goods. Of course, by your discussion a moment ago, that's not good for Japan or of South Korea. And it may have a negative effect at least on those countries. What about the implications for global effect? I mean, can we say that there is a connection of all of this to the global economy? I think so. The European exports to China will also suffer. And the prolonged trade war between the US and China may actually trigger global economic downturn. But having said that, the implications to different countries are not exactly the same. And in the short term, I think China's neighbors, particularly Vietnam's manufacturing is likely to benefit from the exodus of foreign companies and their factories from China and relocation into Vietnam. We can only hope that our State Department will find good policy here, although that hasn't really been the case in the past. So this is a very complex. Reading your article, I got the message that this is very complex. There's a lot of considerations here, a lot of possibilities. Japan is in a very peculiar, if not difficult position because of all the dynamics happening around this trade war, not only directly with Japan, but also with China and others. And I guess what I'm asking you here at the end of our show is, what is your advice to Mr. Abe? How does he stay clear of a long-term problem? How does he keep the country in good economic straits? No one can afford to be involved in a trade war which you don't control and where actions by other countries involving other countries have secondary effects on you. What should Mr. Abe do to protect reserve Japan's economy? Well for Japan, the number one trade partner for the last 10 years or so has been China. The U.S. used to be Japan's number one export destination and overall trade partner, but the China has surpassed and as a result, Japan has to look at both directions, promoting trade with China and promoting trade with the United States. So this balanced approach has become essential for Japanese economic diplomacy. And Japan has to not only protect the free access into the U.S. market but the safety of its investments in China as well as in the United States and also the freedom, as much freedom for those investors to deal with their proceeds whether to reinvest or repatriate and so improving the investment environment in both U.S. and China is extremely important. The one thing Trump recently did is demand Japan to invest more into the U.S. manufacturing sector and particularly in the automobile sector, particular investment target figure has been mentioned and it's not clear if the number of companies that are mentioned as Japan's pledge to Trump is based on the agreed upon amount by individual Japanese auto companies or auto component companies or the figure just came out of the abbey in the top down manner. If the latter, the abbey is going to have a hard time forcing the domestic companies to reach the target. You know, Sato-san, it occurs to me that all this, all that we've been talking about in the last 30 minutes has the possibility of driving Japan economically away from closer relations with the U.S. or previously close relations with the U.S. and driving it essentially into the arms of China so that at the end of the day Japan's relationship is more intense, more connected with China and less with the U.S. That may not bode well for security, but for economics it sounds like an option or a possibility that may have legs. What do you think? Is there any chance of that? I think so far the security issues and economic issues are linked but they're dealt with separately. Despite the potential for the big problem in the economic sector in the trade issues, U.S. and Japan on the security front have been working very closely to cement their alliance and also elevate Japan's contributions to the security of the United States the alliance is no longer one directional in which the U.S. was protecting Japan and now Japan is contributing to the safety and security of the United States as well. So I think that trend on one hand will continue and the two companies will have to find a way to manage the economic dispute so that the economic issues will not halt the security partnership. Thank you Satosan. A wonderful discussion. I really appreciate talking with you if this goes beyond your article and I appreciate that too. Thank you so much. I hope we can get together because you know fact is these are dynamic times. Everything changes every day. There'll be much more to discuss in the future. I will be back too shortly I think. Thank you so much. Thank you.