Publisher’s Note

How Can We Avoid Mounting GeopoliticalRisks?
By Masakazu Toyoda
In the early 1990s, after the fall of the Berlin Wall marked theend of an era of confrontation between the United States and theSoviet Union, Francis Fukuyama wrote in his book The End ofHistory and the Last Man that “history has ended because
democracy has fully proved its legitimacy and triumphed overother ideologies.” Thirty years later the confrontation between theUS and China has become more serious day by day, “aconfrontation between democracy and totalitarianism” that goesbeyond mere trade friction. In this context, in addition to theemergence of countries with increasing totalitarian tendencies,
there is a resurgence of nationalism in many democratic
countries. Has history resumed?
The US and China are increasing their influence onneighboring countries with a momentum that could divide theworld in two. The administration of President Joe Biden is
working to strengthen cooperation with its allies in Europe andAsia – the “Quad” meeting with the Indo-Pacific region in mind
and the “AUKUS” cooperation involving Australia and theUnited Kingdom being examples. On the other hand, the Xi
Jinping administration is bolstering its military presence in theSouth China Sea and East China Sea, and in line with its “OneBelt, One Road” initiative is trying to strengthen relations with
Central and South Asian countries, the Middle East, and even
Africa, using economic support as a lever.
This situation is complicated by the confrontation between
Russia and the West that began with the invasion of Ukraine, byNorth Korea’s repeated missile tests, and by Iran’s possible plansto acquire nuclear weapons. The relationship between
democracy-oriented Taiwan and China is in a state of flux, and if
China were to invade Taiwan a war between the US and China
would be inevitable. Some experts say this could happen within
as little as five years.
The conflict between China and Taiwan, as well as between theUS and China, has also complicated the formation of theinternational economic system. A good example is related tomembership of the Comprehensive and Progressive Agreement
for Trans-Pacific Partnership (CPTPP). After China applied formembership of the CPTPP, Taiwan followed suit. China argued
that Taiwan was not eligible for membership and discouraged
countries from supporting it. After President Donald Trump
withdrew the US from the Trans-Pacific Partnership (TPP),
American administrations, including Biden’s, have been focusing
on domestic politics for a while, but the US at least wants toprevent China from joining the CPTPP and is putting pressure onother member countries.
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In this context, many countries and corporations around theworld are perplexed by growing geopolitical risks. For many
Asian countries, both the US and China are important, and theycannot choose one over the other. The same is true forinternational corporations. What can Japan do? I hope that thisissue of Japan SPOTLIGHT will suggest some answers. There
are several responses that are becoming the basis for a consensus.
First, militarily, Japan needs to strengthen its deterrence
capabilities. Japan has renounced war under Article 9 of its
Constitution, but does have the right to defend itself. Japan’s
defense budget is limited to 1% of GDP, but it may now benecessary to go beyond this limitation. There are many who say
Japan should deter countries that attack it with the capability toattack enemy bases. This could be an important policy for thenew government of Prime Minister Fumio Kishida to tackle.
Although there is a confrontation between the US and China,
neither side should launch a war. But there is a danger of an
accidental collision, and this is why communication is soimportant. Japan should work to facilitate communication
between the two countries in addition to deepening its own
communication with them.
Secondly, what about the international economic system? It is
important to strengthen a rules-oriented approach, and it is naturalto implement existing rules, such as through the WTO andvarious FTAs. For example, when it comes to accession to theCPTPP, it is difficult for large countries to make exceptions thatare allowed for small countries. In addition to reviewing domestic
laws and regulations, it is important to verify whether they arebeing implemented. In areas where rules do not exist, we mustspare no effort in forging a new consensus at venues such as theG20 and APEC.
Why are geopolitical risks increasing? It probably stems fromthe fact that the US is perceived to have abandoned its role as theworld’s policeman and that Pax Americana has ceased to exist inearnest. That’s not all bad, as it is also a sign that more countries
are growing up. Japan is a strong ally of the US and neighbor ofChina. It now needs to play a role in bridging the gap between theUS and China and to contribute to the avoidance of geopoliticalrisks.

Masakazu Toyoda is chairman and CEO of the Japan Economic Foundation(JEF). He previously served as chairman and CEO of the Institute of Energy
Economics, Japan, after having been vice minister for International Affairs at theMinistry of Economy, Trade and Industry.
Japan SPOTLIGHT • January / February 2022

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