Strategic Annual Report 2023
Chapter 4: The Future of International Cooperation

Chapter 4: The Future of International Cooperation
As confusion in world affairs deepens due to the prolonged Russian invasion of Ukraine and the outbreakof the Hamas-Israel conflict, the dysfunction of the United Nations Security Council has become
apparent, making multilateral international cooperation in achieving the Sustainable Development
Goals (SDGs) and addressing other global challenges even more difficult. Finding it necessary to respondto such unfolding situations, countries are seeking new forms of international cooperation throughminilateralism. These conflicts have shaken the existing international order, and emerging and developing
countries in the so-called Global South are intensifying their efforts to assert their autonomy and increase
their influence. The international community thus needs to discuss UN reform in preparation for the 2024
UN Summit of the Future, and to work on climate change and other global issues as well as rulemaking
on generative AI.

“The failure of global governance” and failing attempts to resolve global issues
Russia’s invasion of Ukraine has exposed the United Nations Security Council’s inability to stop thedestruction of the international order by a permanent member. Calls for UN Security Council (UNSC)
reform are growing, and Secretary-General António Guterres, whose term of office expires in 2026,
has himself been vocal about the need for such reform. Amid the accelerating fragmentation of theinternational community, Secretary-General Guterres will be convening the Summit of the Future in
September 2024. This gathering will feature a complex intertwining of discussions on UN governancereform and deliberations on the SDGs, climate change and other agenda items from which developing
and emerging countries seek to benefit; it is therefore difficult to predict whether this meeting will produce
any concrete results. Although an increasing number of countries are recognizing the necessity of reform,
it remains uncertain whether this reform will come to fruition during the Summit of the Future in the fallof 2024, or by 2025, when the UN celebrates its 80th anniversary.
As one of the G4 members (Brazil, Germany, India, and Japan) calling for early realization of UNSC
reform, Japan has been advocating reform based on key principles, namely by supporting a) efforts tocurb the use of the veto power, b) an increased representation of Africa in the Council, and c) expansionof both permanent and non-permanent seats, as elaborated by Japan’s Prime Minister Fumio Kishidain his speech at the UN General Assembly General Debate Session in September. However, the support
these arguments will garner from emerging and developing countries in the Global South will depend on
the extent to which progress can be made in addressing the socio-economic and developmental challenges
faced by these nations.
With governments around the world preoccupied with responding to immediate crises in theaftermath of the invasion of Ukraine and the outbreak of the Hamas-Israel conflict in October, it remains
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Chapter 4: The Future of International Cooperation

uncertain whether discussions requiring consensus among many countries will make any progress. In
Japan’s neighborhood, North Korea has repeatedly conducted missile launches in violation of Security
Council resolutions but, due to resistance from China and Russia and the exercise of their veto power,
the Security Council has been unable to issue any new resolutions. The UN General Assembly held an
emergency special session in February 2022 in response to Russia’s aggression and, within one year after
the invasion began, it had adopted six resolutions, including one condemning Russia, in the stead of thedysfunctional UNSC. Still, General Assembly resolutions have their limits.
The escalating frequency of conflicts worldwide places an even greater burden on addressing global
challenges such as climate change mitigation and poverty eradication. In July, Secretary-General Guterres
declared that the era of “global boiling” had arrived, with the world’s average temperature hitting arecord high. The UN General Assembly convened a SDG Summit in September to garner international
attention. However, attaining the SDGs by the 2030 deadline is at significant risk due to the uncertain
global economic outlook and a decline in development finance, influenced by factors such as escalating
war expenditures.
Solving global-scale problems undoubtedly requires a substantial amount of development funding.
Yet the gap between the funding needed and the actual amount provided is widening, exacerbating thedevelopment funding gap issue. In June, President Emmanuel Macron of France held a summit on
development finance to address this issue, but it failed to outline a pathway to bridge the development
financing gap. With countries becoming more inward-focused and the Ukraine war pushing aside
development issues faced by developing countries in Africa and elsewhere, resources for development
finance are dwindling overall. Accordingly, there is rising advocacy within the Global South for redirecting
concessional funds, traditionally allocated mainly to low-income countries (IDA-only countries), toward
emerging economies to address global challenges such as climate change. The tension between emerging
and middle-income countries on the one hand and low-income countries on the other over the allocationof concessional funds, often described as a struggle for a share of the pie, will persist until there is an
expansion in the overall volume of development finance. The prospects for an increase in development
finance are not bright.
Development financing is also closely related to the question of how to reconcile the interests ofdeveloped and developing countries on “loss and damage,” a major topic of discussion at the United
Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP).
COP28, held in Dubai in December, was an important occasion to assess progress on the measures tomitigate climate change developed under the Paris Agreement during the first year of a two-year process
known as Global Stocktake (GST). The assessment noted that, in order to achieve the 1.5℃ target, global
greenhouse gas emissions would have to peak out in 2025 and be reduced by 43% in 2030 and by 60% in
2035. Oil-producing countries were opposed to including in the document the expression “phasing out offossil fuels” advocated by developed countries and small island nations, so instead the phrase “transition54

away from fossil fuels” was used. Furthermore, targets were set for emission reductions in all sectors
by 2030, and a tripling of global renewable energy generation capacity and a doubling of the rates ofimprovement in energy efficiency and conservation were agreed as a sectoral contribution. Regarding
the “loss and damage” fund agreed upon at COP27, it was decided that the fund would be set up under
the World Bank, with developed countries taking the lead in making contributions that would come fromall sources, including public and private funds. On adaptation, a framework was adopted to achieve the
Global Goal on Adaptation (GGA), as stipulated in Article 7 of the Paris Agreement, and it was decided
to set thematic and adaptation cycle targets and to begin discussions on how to accelerate the pursuit ofthese targets under the GGA framework.
That said, given that rising global greenhouse gas emissions have led many observers to believe
achieving the 1.5℃ target will be extremely difficult, the hurdles to achieving the reduction targets agreed
to at the COP are extremely high. If these targets are not achieved, criticism against developed countries
will intensify, especially from island nations whose lands may be submerged because of global warming,and divisions in the international community may thereby deepen.

The Global South and global governanceIndia,

which

populationinsurpassed
2023,

China
seizedintheopportunity as the G20 chair to establish
a leadership role for the Global South.
Upon assuming the G20 presidency inDecember 2022, India made clear its
intentions to strengthen ties with the
Global South and to address diverse
international issues. The “Voice of
Global South Summit 2023” held inJanuary 2023 embodied this policy, and124 emerging and developing countries
that were not members of the G20 were

G20 New Delhi Summit in New Delhi, India (September 2023, Photo: Reuters/Aflo)invited to participate in G20 policy
discussions. The focus of the G20 Summit held in New Delhi from September 9 was how the G20 should
respond to, as well as achieve cooperation between developed and emerging countries on, issues suchas Russia’s aggression in Ukraine and food, energy, and debt crises. Since joint statements could not be
adopted at the G20 finance ministers’ and foreign ministers’ meetings due to opposition from China andRussia, it was anticipated that adopting a joint statement during the G20 summit meeting in the absenceof Russian President Vladimir Putin and Chinese President Xi Jinping would be challenging. However,55

Strategic Annual Report 2023
Chapter 4: The Future of International Cooperation

India took the unusual step of putting together a summit declaration that avoided explicit mention of
Russia, and announced it on the first day of the summit. The language of the declaration, which was moreconsiderate of Russia than the previous year’s, was strongly opposed by the spokesperson for Ukraine’s
Ministry of Foreign Affairs.
While a joint statement was ultimately issued, the future direction of the G20 is at a criticaljuncture. At the inception of the G20 summit in 2008, there was an expectation that it would serve as aninternational forum for making rules and addressing a wide range of global economic and social issues
involving major emerging economies, including all BRICS countries. Indeed, the G20 has made progressin rulemaking on issues such as digital taxation and the free flow of data. However, with over 20 members
at different stages of development and having diverse political systems, consensus-building among G20
nations has proven challenging. Additionally, as there is no permanent secretariat, the discretion of therevolving G20 presidency is substantial. Emerging countries have recently assumed or will be assuming
the G20 presidency (Indonesia in 2022, India in 2023, Brazil in 2024, South Africa in 2025), leading toa shift in focus toward agenda items to which developing nations attach great importance, such as foodand energy security, development funding, reform of international financial institutions, and climate loss
and damage. Consequently, expectations for achievements in areas such as countering protectionism anddevising rules have diminished. The formal decision taken by the G20 to invite the African Union (AU)as a member to this year’s summit is likely to accelerate this trend.
On the other hand, there have been moves towards establishing cooperative relationships based on
smaller groups in view of heightened geopolitical tensions. These collaborations, often referred to as
minilateralism, are becoming increasingly prevalent and include the Quad, the Indo-Pacific Economic
Framework (IPEF), the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP)
joined by the UK, and AUKUS.
Emerging and developing countries themselves are also attracted to the idea of minilateralism. At
the BRICS Summit held in South Africa in August, the BRICS Plus initiative was announced, with
Argentina, Iran, Egypt, Ethiopia, Saudi Arabia and the United Arab Emirates declaring their intention
to join the BRICS starting in 2024 (Argentina, under its new president Javier Milei, who came into
power in December 2023, has since formally notified the BRICS member countries that it will not be
joining the BRICS). The BRICS as a group has achieved concrete results, such as financing infrastructuredevelopment in the BRICS countries via the New Development Bank (commonly known as the BRICS
Bank) created in 2015. This bank has a financing target of $60 billion by 2026, comparable to the US
International Development Finance Corporation (DFC). It remains to be seen how the BRICS expansion
will affect the nature of the BRICS as a group.
Russia and China, two countries increasingly in opposition to Western countries as forces seeking tochallenge the status quo, have been striving to position the BRICS as a coalition of like-minded countries
since Russia’s invasion of Ukraine. This direction, however, is not unanimously shared among the five56

nations, especially India, which has ongoing border disputes with China. Yet it should be noted thatmoves are underway within the BRICS to reduce the influence of the US dollar as a reserve currency.
China is expanding the adoption of yuan settlements with emerging economies, and China`s yuandenominated transactions surpassed those denominated in US dollars for the first time in 2023. The movetoward de-dollarization is gaining support beyond China and Russia, as Brazilian President Lula da Silva
has installed his confidant former president Dilma Rousseff as the new president of the aforementioned
New Development Bank and has proposed the adoption of a common currency for trade settlements.
The addition of oil-producing Saudi Arabia and the UAE to the BRICS will help China further promoteinternationalization of the renminbi. It will be interesting to see how the expanded BRICS as a minilateralgrouping will face off against the developed countries.

Global challenges in the era of generative AI
As artificial intelligence (AI) rapidly
develops and gains recognition as asocially useful tool, there is a growing
demand for international regulations to
mitigate the potential negative effectsof AI. In preparation for the Summitof the Future to be held in September
2024, Secretary-General Guterres isformulating a Global Digital Compact(GDC) that includes the promotionof agile governance for AI and otheremerging

technologies

to

AI Safety Summit at Bletchley Park in Milton Keynes, Britain (November 2023, Photo:
Pool/ Reuters/ Aflo)provideprinciples for an open, free and secure digital future.
The Hiroshima AI Process, initiated under the G7 Hiroshima Summit, aims to discuss the impact ofgenerative AI and identify principles for the responsible deployment of AI. The summit recognized theimportance of international governance of AI and other emerging technologies, discussing the adoptionof international technical standards, the promotion of transparency, and the protection of intellectual
property rights. “Interoperability” among differing national and regional regulations and regimes was
advocated, highlighting the necessity of agile governance. To ensure interoperability, the discussions
provided a foundation that allows countries flexibility in how they enforce domestic action plans,
recognizing different approaches such as non-binding guidelines in addition to legal regulations.
As a result, agreement was reached in December on the “Hiroshima AI Process Comprehensive
Policy Framework” as the culmination of the Hiroshima AI Process, based on the “Hiroshima Process
International Guiding Principles for Organizations Developing Advanced AI Systems” and the “Hiroshima
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Process International Code of Conduct for Organizations Developing Advanced AI Systems” agreed toin October. The framework calls for individual users to improve their digital literacy to understand therisks of AI and to share information about AI defects and malfunctions with relevant parties as a measureagainst disinformation. This makes it the world’s first comprehensive guideline targeting not only AI
developers but also users. It will be important to expand the adoption of this framework beyond the G7
countries.
The US and Europe are competing for leadership in shaping international standard rules for thedevelopment and use of AI. The EU has adopted a risk-based approach and prepared a comprehensive
AI regulation proposal that classifies AI risks into four levels and sets obligations for each level, reaching aprovisional political agreement on this proposal in December. The aim is to ensure the safety of AI systems
operating in the EU and the protection of EU values such as fundamental human rights. This hardlaw-oriented proposal includes a policy banning the use of AI with unacceptable risks, with regulatory
violations punishable by fines of up to 35 million euros or 7% of global sales, whichever is higher. On theother hand, the soft law-oriented US has focused on the use of existing legal systems so as not to inhibit
companies from developing AI. In July and October, President Joe Biden agreed with 15 major techcompanies in the US on introducing self-regulation to ensure AI safety and issued an executive order on
pre-screening AI development companies in October to promote technological innovation while ensuring
AI safety, without introducing penalties for companies. Although this measure entails introducing legallybinding AI regulations in the US, it is essentially based on self-regulation among the 15 major US techcompanies, and no penalties were established for regulatory violations.
In this context, the UK, which has taken a stance against rushing to introduce regulations, hosted
the AI Safety Summit in November. The summit, organized under the leadership of UK Prime Minister
Rishi Sunak, discussed strengthening international cooperation on frontier AI safety and advancing
safety inspections and research, focusing on potential risks such as the misuse and loss of control of AI
technology. The Bletchley Declaration calling on AI development companies to identify and monitor
potential risks was announced at the summit and signed by more than 25 countries, including China andthe EU.
The Chinese government became the first major country to enact full-fledged regulations on generative
AI as a preliminary step. These regulations, aimed at preventing threats to national security, effectively
eliminated the use of foreign generative AI, especially US-made products. Like proposed regulations in
Europe and the US, China’s regulations, which are expected to be revised during the course of assessing
their actual application, include the protection of intellectual property rights and the prohibition ofdisinformation and discrimination. China also promotes voluntary innovation in basic technologies andparticipation in the formulation of international rules. The fact that the criminal penalties have been
removed from initial provisions also indicates its interest in striking a balance between AI regulation andinnovation.
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Japan, on the other hand, announced in November that it would be finally commencing a study
on measures to ensure compliance with guidelines for developers and providers. This study is aimed at
mitigating the risks of generative AI, and legislation is among the options under consideration, although
the direction of such legislation is not yet clear.

Progress in economic cooperation in the Indo-Pacific region and multilateral
economic frameworks
Some important progress was made inmaintaining and strengthening the rulesbased free trade regime. Firstly, the UK’s
accession to the CPTPP was approvedin July, making the UK the first new
member country since the CPTPP
came into effect in 2018. Following its
departure from the EU, the UK has been
advocating a “Global Britain” policy, a
diplomatic strategy that aims to secure
an integrated economic and security

A family photo during the IPEF Leaders event at the APEC CEO Summit in San Francisco,California, US (November 2023, Photo: Reuters/Aflo)presence in the Indo-Pacific region. The
CPTPP is expected to be an important trade agreement that will enhance economic ties between the
UK and the fast-growing Indo-Pacific countries under a high standard of rules. According to the latest
economic estimates by the UK government, joining the CPTPP will contribute to a £20 billion increasein the UK’s GDP and a £49 billion boost in trade with other member countries. Furthermore, the CPTPP,
with its advanced regulations on free data flow, also helps improve business environments, particularly
for digital-related companies. The UK intends to reinforce its economic security by countering unfair
trade practices and economic coercion through the CPTPP and maintaining its high standards, and it has
expressed a willingness to contribute to this trade agreement’s future development. From a geopoliticalperspective, the UK’s accession to the CPTPP holds great significance in that it adds a G7 member
committed to sharing fundamental values and deepening engagement in the Indo-Pacific.
The UK’s participation will also facilitate the strengthening of various forms of partnership with theregion. In fact, Japan and the UK are cooperating in joint investment in mineral resources in Africa, andin September they agreed to establish the “UK-Japan Strategic Economic and Trade Policy Dialogue,”a framework for ministerial-level dialogue on economic security. China, Taiwan, Ecuador, Costa Rica,
Uruguay, and Ukraine (in July) have formally applied for accession to the CPTPP. The expansion of
the CPTPP carries significance as it enlarges the sphere of the “rule of law”. Japan needs to develop
strategies for expanding and utilizing the CPTPP in the future, including approaches for convincing the59Strategic Annual Report 2023
Chapter 4: The Future of International Cooperation

US to return to the CPTPP.
Negotiations on the US-led Indo-Pacific Economic Framework (IPEF) were carried out in fourareas: (1) trade, (2) supply chains, (3) clean economies, and (4) fair economies. An agreement on supply
chains reached at the ministerial meeting in May stipulated that countries are required to identify
critical sectors and essential goods, and to formulate action plans that include diversifying sources andimproving connectivity to enhance resilience. Furthermore, a crisis response network will be set up toaddress supply chain disruptions, outline provisions for supporting countries facing interruptions throughcollaborative procurement and facilitate alternative routes. While substantial agreements regarding clean
and fair economies were announced at the ministerial and summit meetings held in conjunction with
the APEC Leaders’ Meeting in November, an agreement on trade was deferred. The negotiations on
a digital agreement and other trade issues ran into challenges due to reluctance on the part of the US,
whose giant IT companies were facing growing domestic antagonism. As for the clean economy pillar,
the US DFC provided $300 million in loans to IPEF participating countries for renewable energy anddigital infrastructure projects, and a $30 million fund was launched by Japan, the US, and Australia. To
promote fair economies, provisions to ensure compliance with measures against tax evasion and money
laundering were incorporated. US Commerce Secretary Gina Raimondo has referred to the IPEF asa way to strengthen ties between Indo-Pacific countries and the private sector, stating that “all of theeconomies want to be in that club”. However, concerns about the sustainability of the IPEF have beenraised due to constraints such as a lack of market access and non-binding provisions. The institutionalfoundation is considered fragile, especially in the face of a possible change of administration in the US.
The WTO’s Appellate Body, which serves as the final adjudicator in the dispute settlement system,has been in a state of dysfunction since 2019. In response, Japan decided to join the Multi-Party InterimAppeal Arrangement (MPIA) in March. The MPIA, established by a group of willing countries in
2020, currently has 53 participating nations, including the EU and China. Participating in the MPIA
means there is no risk of cases being stalled in the vacant Appellate Body, ensuring the continuity of the
dispute resolution process. In a case related to anti-dumping measures taken against Japanese stainlesssteel products by China, a panel ruling on China’s violation of its obligations was issued in June. The
final decision was confirmed because Japan and China, both participating in the MPIA, were able tosuccessfully resolve the dispute through this interim mechanism. While the use of the MPIA can beseen as a stopgap measure substituting for the non-functioning dispute settlement system, it is essential
to address reform of the original dispute resolution system in preparation for the WTO Ministerial
Conference (MC13) scheduled for February 2024 in Abu Dhabi.

Prospects and recommendations
The UN has a universal nature since nearly all countries around the globe are members, and no otherinternational organization can replace it in terms of the legitimacy of its decisions. Therefore, the UN60should be used as a forum for setting agendas and rules for the international community despite its
apparent institutional fatigue. In pursuing value-oriented diplomacy based on a geopolitical vision of a“free and open Indo-Pacific,” Japan should make particular use of the UN as a forum to emphasize theimportance of the rule of law at the onset of the post-post-Cold War era. Japan, in this regard, had set“the rule of law” as a theme for the Security Council President’s monthly open discussion for January
2023. As one of the status quo powers, it should clearly assert that unilateral changes to the status quo by
force will not be tolerated and thereby gain the support and trust of other UN member states.
The SDGs will reach their deadline in 2030, and all stakeholders should exert maximum efforts
towards achieving the goals by that time. Preliminary discussions on post-2030 development objectives(post-SDGs) may also be intensified by the 2024 Summit of the Future. Japan urgently needs to begin
preparations for narrowing down the agenda items that should be incorporated. Japan has advocatedfor “human security” for over two decades, working towards incorporating it into the SDGs and otherdevelopment goals. Due to the broad and ambiguous nature of this concept, however, it is challenging
to garner sufficient international support to have the concept included in the upcoming universal goals.
The Japanese government should propose specific development goals that are relevant to the current
situation when incorporating such concepts into its post-SDGs framework. For example, Japan should
propose disaster prevention, which is currently categorized as a sub-item under “Sustainable Cities andCommunities (Goal 11)” in the SDGs, as a full-fledged development goal in consideration of the factthat worsening natural disasters due to climate change have become a global concern. As a disasterprone nation that compiled the Sendai Framework for Disaster Risk Reduction, an international disasterprevention guideline for the years 2015-2030, Japan could leverage its knowledge and expertise by making
disaster prevention an independent development goal in the post-SDGs framework.
Japan’s status as a non-permanent member of the Security Council for the 2023-2024 term
is a significant asset in continuing efforts to reform the Security Council and thereby make the UN
more functional. Japan should capitalize on the momentum generated by numerous member statesby emphasizing the need for reform during the UN General Assembly general debate in September.
Proactively collaborating within the G4, Japan should present a roadmap to guide negotiations on a
textual basis through an intergovernmental negotiating working group, ultimately preparing a deliverable
document. At the same time, it should lobby the President of the General Assembly and reach out tothe countries of the Global South, especially African countries, which constitute a large voting bloc. In
this connection, it is important that both the UN and the World Bank/IMF (Bretton Woods institutions)cooperate in deepening discussions on measures to expand development finance and on mechanisms
to facilitate disbursement to developing countries. As the second-largest voting member of the World
Bank, Japan can gain an important foothold in the UN by acting as a bridge between the UN and Bretton
Woods donors and developing countries, while respecting the unity of the G7.
It is necessary for Japan to exercise thought leadership to ensure that this series of UN-related agenda
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Strategic Annual Report 2023
Chapter 4: The Future of International Cooperation

items is fully discussed at the 2024 Summit of the Future and that a consensus is reached on a Pact for
the Future among the leaders attending the summit. The Japanese government could also advocate fordiscussion forums involving experts within the United Nations Secretariat and various UN organizations.
The UN process for formulating a Global Digital Compact (GDC) as well as international fora suchas the G20 and APEC should be utilized along with the G7 to promote international discussions on thetransparency, reliability, and safety of AI. The Hiroshima AI Process stressed the importance of ensuring
interoperability so that nations with different regulations can cooperate with each other. The principle ofresponsible AI deployment can be extended to countries outside the G7, and concrete measures should
be developed to this end. Given the difficulty of setting international regulations, the first step should be
to harmonize different policies and regulations and formulate an international code of conduct.
As for strengthening cooperation with the countries of the Global South, it is crucial that Japan takea leading role in the rehabilitation of global governance based on the rule of law and other fundamental
principles that many countries can agree upon by encouraging various institutions to promote norm-setting
and rule formation at the United Nations and other institutions. Rather than viewing new movements
such as the expansion of the BRICS as a binary struggle between two different camps, Japan should foster
diverse networks of minilateral partnerships by forming various groups with BRICS members. Specificcooperation for developing countries that is closely tailored to the needs of each country can be pursued
through the utilization of Official Development Assistance (ODA) and Official Security Assistance(OSA), as well as through offer-based cooperation. As part of collaborative efforts with friendly nations
through the G7 and minilateralism, initiatives such as promoting the G7 Global Infrastructure Investment
Partnership (GIIP) and facilitating practical cooperation by, for example, leveraging the Quad for disastermanagement can help lay the groundwork for rehabilitating the international order.
The rule-based free trade system is facing significant challenges. It is imperative to continue efforts toreform the WTO, especially the dispute settlement system, and to maintain and buttress the architectureof free trade agreements (FTAs) such as the CPTPP, the RCEP, and the Japan-EU FTA. The CPTPP
holds a particularly advantageous position thanks to its advanced content and the appeal of membership.
With the premise of not compromising the high standards of the CPTPP, it is crucial to strategicallydetermine the best approach to new membership applications. Some cautious consideration is necessary
here for handling China’s and Taiwan`s applications for accession. While there could be a time in the
future when simultaneous accession of the two would be considered appropriate, the current focus
should be on expanding membership with other countries that can maintain the CPTPP’s high standards.
Moreover, addressing new challenges such as economic coercion through WTO reform and the trade
rules in individual FTAs is essential. Leading up to the WTO’s MC13, it is crucial to achieve concrete
results in reforming the dispute resolution system, improving transparency through mandatory subsidy
notifications, and formulating e-commerce rules. Failing to deliver results in these areas could undermine
the validity of the WTO system.
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China will face a number of high hurdles on its path to CPTPP participation due to the inconsistencyof its trade practices with the trade rules and its decreasing predictability. Long-standing issues such as
non-market-oriented policies and practices, as well as new moves such as enacting the National Security
Law in 2015, developing cyber-/data-related regulations since 2017, and passing anti-foreign sanctions
laws in 2021, are by no means helpful. Encouraging China to move to a more open and transparent
economic and trade regime under the trade rules is vital. More specifically, it is necessary to ensurecompliance with the rules of existing agreements such as the WTO agreements and RCEP and to engage
in policy discussions and other efforts to upgrade these agreements. Exploring a diverse approach, JapanChina-ROK or bilateral Japan-China economic consultations should also be considered. Furthermore,close coordination with the EU-China economic and trade dialogues and collaboration with the USChina economic and trade negotiations should be pursued to address common concerns collectively.
Japan should focus on promoting bilateral Economic Partnership Agreements (EPAs) with emerging
and developing countries in South Asia, Africa, and Latin America where future economic growth isanticipated and economic ties with Japan are increasing. This should be a central pillar of Japan’s new
economic and trade strategy. Collaboration with the IBSA (India, Brazil, South Africa) trio is crucial,serving as a key element for Japan to enhance its cooperation with the Global South.
Japan-India economic ties have been significantly enhanced by the interactions between the leadersof the two countries, the Quad framework, and the relationship between the 2023 G7 presidency (Japan)
and the 2023 G20 presidency (India). It is also vital that Japan bolster economic ties with other nations
in South Asia, particularly Bangladesh, which has emerged as an apparel manufacturing hub hosting
an increasing number of Japanese companies. In December 2022, the two countries initiated a joint
study for an Economic Partnership Agreement (EPA). Looking ahead, efforts should be directed towards
concluding this EPA, especially given that Bangladesh will graduate from the category of Least Developed
Countries (LDC) in 2026.
On the rapidly growing African continent, there is currently no country that has concluded a bilateral
FTA with Japan. Japan has consistently provided development assistance through the Tokyo International
Conference on African Development (TICAD) and supported economic corridors linking trade hubs suchas Nacala and Mombasa ports as part of the Free and Open Indo-Pacific (FOIP) initiative. Considering
the importance of enhancing infrastructure connectivity and securing key mineral resources to reinforce
supply chains, the time has come to explore the possibility of bilateral FTAs with major African countries.
Particular efforts should be directed towards considering an FTA with the Southern African Customs
Union (SACU) led by South Africa, which is known for its abundant natural resources and which plays
a key role within the BRICS.
As for Latin American countries, EPAs and the CPTPP have already been concluded with Pacific
Alliance countries, including Mexico, Peru, and Chile. Yet economic cooperation with Mercosur countries,
including Argentina, Brazil, Paraguay, and Uruguay, has not progressed. Economic, trade, energy and63

Strategic Annual Report 2023
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resource cooperation between Brazil and China, on the other hand, is currently on the rise, as evidenced
by President Lula’s visit to China in April. The challenge in trade negotiations with Japan arises from thefact that Mercosur countries are major exporters of sensitive agricultural items for Japan. Nevertheless, itis critical that Japan approach Mercosur countries with due consideration for contemporary issues suchas digital trade and supply chains and propose fostering stronger ties.
It is commendable from the perspective of IPEF sustainability that IPEF ministerial and summit
meetings will henceforth be held on a regular basis. However, the course of the US presidential election
is casting a shadow here, making it difficult to predict whether such efforts will continue over the
medium to long term. To make the project politically sustainable and to boost its appeal, translating the
IPEF’s achievements, e.g., investments in renewable energy and digital infrastructure and partnerships
with development finance institutions such as the US International Development Finance Corporation(USDFC), the Japan Bank for International Cooperation (JBIC), Export Finance Australia (EFA), andthe Export-Import Bank of Korea (KEXIM), into concrete lending projects for its members will beessential.

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