hile U.S.-China trade negotiations dominate news cycles, another important trade negotiation took place recently. On April 15th, trade delegates from Japan and the United States conducted a two-day summit to negotiate a new trade agreement. And 12 days before the meeting, the Ronald Reagan Building and International Trade Center held a panel about the future of U.S.—Japan trade relations in which the panelists shared their insights about where these negotiations would go.
Current trade relation between Japan and the United States are not especially positive—as viewed from the American side. After the United States withdrew from the Trans-Pacific Partnership (TPP) in 2017, Japan signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in Santiago, Chile, along with 10 other Asia-Pacific countries in March 2018, and the CPTPP went into effect late last year. Japan also signed an economic partnership with the European Union in February this year. When the United States stood still, its competitors benefited greatly from the lower trade barriers in Japan, formerly the 4th largest goods export market for the United States.
U.S. industries have been asking for a trade conversation between the two governments. To deliver the goal effectively, it is important to bridge what the experts say to the public and communicate about the cost-benefit analysis, which is what the World Trade Center (WTC) has been doing all along. Andrew Gelfuso, director of WTC in Washington, DC, spoke to Diplomatic Courier about WTC’s mission in an interview: “We are involved in facilitating trade missions, drafting trade content and publications and we host or promote 300 trade events per year.” He further explained: “By partnering with the Washington International Trade Association (WITA), we bring world-class speakers together to comment on policy and advocate on policy situations.”
Presented by the WTC and in partnership with the WITA, the panel about the future of U.S.—Japan trade relations comprised two sections, looking at the trade from the policy and the industry perspectives respectively. While the first sector was moderated by Ambassador Ira Shapiro, president of Ira Shapiro Global Strategies, the second sector’s moderator was Ambassador Robert Holleyman, the president and CEO of C&M.
The result: several of the issues addressed at the panel were successfully reflected or addressed in the subsequent meeting.
First, success in the negotiations is the result of good groundwork that has been completed beforehand. According to Wendy Cutler, Vice President and Managing Director of the Asia Society Policy Institute (ASPI), although the Free Trade Agreement (FTA) might not be identical to what we agreed with Japan in the TPP, “a lot of good work can find its way in the FTA, so the negotiation should be smooth and quick.”
Cutler explained that a quick meeting is in the interest of both countries. The Trump administration needs to show the public that bilateral agreements are as good as multilateral agreements to justify its move away from the TPP. At the same time, since Japan is in line with the United States in other important areas (such as national security), Prime Minister Abe really strives for agreement on trade issues where the real frictions exist. Daniel Bob, a Visiting Scholar at the Resichauer Center for East Asian Studies at John Hopkins SAIS, added his analysis based on Japan’s domestic situation. He believes that since Abe is highly likely in his last term as prime minister, his power and influence might be weakened to a certain extent, so he might want this agreement to strengthen his domestic support.
The panelists were optimistic about future cooperation opportunities with Japan brought by the technology revolution. Emerging technologies might turn the entire market upside down, and since both Japan and the United States are innovative countries, they are highly prone to harmonize their standards and reach a regulatory coherence.
The panelists agreed that several factors make this negotiation complicated, which is why it took so long for the meeting to happen. According to Daniel Bob, Senior Fellow and Director of Programs at Sasakawa Peace Foundation, since Prime Minister Abe has frequently given speeches on the importance of climate change and on himself being a “free trade fighter,” his words might decrease the possibility to have a direct trade talk with President Trump. What’s more, the United States already has other trade issues to deal with. This bilateral negotiation was expected to happen in January, but it was delayed because of the U.S. focus on trade with China.
The panel stressed the need for prioritizing the negotiation over agricultural goods, which was addressed in the recent meeting. Maria Zieba, director of International Affairs for the National Pork Producers Council who represents 60,000 U.S. pork producers in Washington, DC, believes that the pork sector had gained a great deal from the TPP, which was a good starting point, and the gain could be seen more clearly if the U.S. could stay longer in the agreement. The pork industry has depended on exports so much that it exported over 25% of its production to over 100 countries last year. Under that expansion mode, the pork industry had invested in more packing plants before the United States withdrew from the TPP. When the United States no longer enjoyed Japan’s low trade barriers, the U.S. pork industry lost its largest export market, while its competitors still benefit greatly from it. “It is not only a pork issue. It is rice, beef, and dairy issues too,” she added.
And there are other problems that should be addressed in the next trade negotiations.
First, Japan’s current policy over pharmaceutical devices is very unfriendly to the United States. According to Ambassador Christopher LaFleur, Chairman of the Board at the American Chamber of Commerce in Japan, Japan’s fiscal policy was not able to fund its expensive healthcare system given the increasing need of the aging population. Thus, Japan tried to unilaterally cut drug prices and reimburse healthcare costs, which directly influences U.S. companies in Japan because the U.S. international companies have a 20% share of Japan’s pharmaceutical market and a 25% share of the medical device market.
Elissa Alben, Senior Director and Head of Global Trade Policy team for Pfizer, has a similar opinion from a pharmaceutical industry perspective. She believes that pharmaceutical products are a strength of the United States, but unfortunately, Japan’s recent policies did not respect innovations. And the annual pricing systems, which moved from the previous two-year evaluation, created more uncertainties. These price cuts favor small Japanese productions more. “If U.S. therapists were not able to enter the market, it will be a loss to everyone,” explains Alben.
Second, the automobile sector faces a lot more challenges in exports. As Charles Uthus explains (vice president for International Policy and a member of the Board of Directors of the American Automotive Policy Council), increasing U.S. competitiveness in the auto industry is a priority. Given that 80% of the trade deficit happens in the auto industry, he hopes that the future agreement can change the situation.
Uthus shared his worries for the development of the U.S. auto business in Japan. The 1996 the automobile agreement was disrupted by Japan’s devaluation of yen; the same could happen again. Also, the United States has a problem in establishing distribution networks such as finding dealers in Japan, because Japanese auto businesses do not work this way. When there is not enough supply, the demand cannot be met. Despite the uncertainties, Uthus was still optimistic about U.S. auto business in Japan’s market, and believes the U.S. auto industry is in a better position than it was decades ago.
Third, U.S. negotiators should be cautious about not getting a red light from Japan. Christopher LaFleur explains that Japan would want a win-win solution in which it could see flourishing economic collaborations with the United States. According to Wendy Cutler, Japan would absolutely not accept the deal if it had to unilaterally cut the tariff without the United States doing the same thing. Also, the negotiation would not work if the United States imposed a quota, “which not only does not include growth but also is less than the current trade,” she said.
Despite all this, the panelists were optimistic about future cooperation opportunities with Japan brought by the technology revolution. Emerging technologies might turn the entire market upside down, and since both Japan and the United States are innovative countries, they are highly prone to harmonize their standards and reach a regulatory coherence. By reaching an agreement with Japan, the United States can show the world that “we can do this and this is what we expect from the rest of you,” Maria Zieba said.
Andrew Gelfuso echoes the sentiment, “trade will continue regardless of economic situations, and sometimes a fresh look over some outdated agreements is necessary.” We should be more confident in the trade relationship between Japan and the United States because more opportunities hide in the hardest times. That is especially true when current technologies have the power to overthrow everything agreed before; an entirely new outlook will be necessary.
We’ve already agreed.
Our agreements are grounded in deep value centers that are globally shared, but undervalued and unfulfilled. The reason for this is our inability to quantify intangible value. All of these rich, inherent values are still nebulous and fragmented in implementation—largely existing as ideals and blueprints for deep, globally shared common agreement. That is, we all agree education, health, and equality have value, but we lack common units for understanding who and who is not contributing value—leaving us to fumble in our own, uncoordinated siloes as we chase the phantoms of impact. In essence, we lack common currencies for our common agreements.
Now we find ourselves at the nexus of the real paradigm of Blockchain, allowing us to fuse economics with inherent value by proving the participation of some great human effort, then quantifying the impact of that effort in unforgeable and decentralized ledgers. It allows us to build economic models for tomorrow, that create wholly new markets and economies for and around each of the richest of human endeavors.
In late 2017 at the height of the Bitcoin bubble, without individual coordination, planning, or the help of institutions, almost $1 trillion was infused into blockchain markets. This is remarkable, and the revolution has only just begun. When you realize that Blockchain is in a similar stage of development as the internet pre-AOL, you will see a glimpse of the global transformation to come.
Only twice in the information age have we had such a paradigm shift in global infrastructure reform—the computer and the internet. While the computer taught us how to store and process data, the Internet built off that ability and furthered the conversation by teaching us how to transfer that information. Blockchain takes another massive step forward—it builds off the internet, adding to the story of information storage and transfer—but, it teaches us a new, priceless and not yet understood skill: how to transfer value.
This third wave kicked off with a rough start—as happens with the birth of new technologies and their corresponding liberties. Blockchain has, thus far, been totally unregulated. Many, doubtless, have taken advantage. A young child, stretching their arms for the first couple times might knock over a cookie jar or two. Eventually, however, they learn to use their faculties—for evil or for good. As such, while it’s wise to be skeptical at this phase in blockchain’s evolution, it’s important not to be blind to its remarkable implications in a post-regulated world, so that we may wield its faculties like a surgeon’s scalpel—not for evil or snake-oil sales, but for the creation of more good, for the flourishing of commonwealth.
But what of the volatility in blockchain markets? People agree Bitcoin has value, but they don’t understand why they are in agreement, and so cryptomarkets fluctuate violently. Stable blockchain economies will require new symbolic gold standards that clearly articulate why someone would agree to support each market, to anchor common agreement with stability. The more globally shared these new value standards, the better.
Is education more valuable than gold? What about healthcare or nutrition or clean water?
We set out in 2018 to prove a hypothesis—we believe that if you back a cryptocurrency economy with a globally agreed upon inherent value like education, you can solve for volatility and stabilize a mature long lasting cryptomarket that awards everyone who adds value to that market in a decentralized way without the friction of individual partnerships.
What if education was a new gold standard?
And what if this new Learning Economy had protocols to award everyone who is helping to steward the growth of global education?
Education is a mountain. Everyone takes a different path to the top. Blockchain allows us to measure all of those unique learning pathways, online and in classrooms, into immutable blockchain Learning Ledgers.
By quantifying the true value of education, a whole economy can be built around it to pay students to learn, educators to create substantive courses, and stewards to help the Learning Economy grow. It was designed to provide a decentralized way for everyone adding value to global education to coordinate around the commonwealth without the friction of individual partnerships. Imagine the same for healthcare, nutrition, and our environment?
Imagine a world where we can pay refugees to learn languages as they find themselves in foreign lands, a world where we can pay those laid off by the tide of automation to retrain themselves for the new economy, a world where we can pay the next generation to prepare themselves for the unsolved problems of tomorrow.
Imagine new commonwealth economies that alleviate the global burdens of poverty, disease, hunger, inequality, ignorance, toxic water, and joblessness. Commonwealths that orbit inherent values, upheld by immutable blockchain protocols that reward anyone in the ecosystem stewarding the economy—whether that means feeding the hungry, providing aid for the global poor, delivering mosquito nets in malaria-ridden areas, or developing transformative technologies that can provide a Harvard-class education to anyone in the world willing to learn.
These worlds are not out of reach—we are only now opening our eyes to the horizons of blockchain, decentralized coordination, and new gold standards. Even though coordination is the last of the seventeen sustainable development goals, when solved, its tide will lift for the rest—a much-needed rocket fuel for global prosperity.
“Let us raise a standard to which the wise and the honest can repair.” —George Washington