Last week the US government announced two trade measures. The first was a decision to take action against China based on Section 301 of the US Trade Act, on the grounds of unfair trade practices relating to intellectual property. This is an issue between the US and China, and Keidanren will monitor it closely. On the other hand, the problem is not limited to the US, and Japanese companies also complain about infringements of intellectual property rights. Essentially such disputes should be addressed according to WTO rules. Unilateral action such as that taken under Section 301 of the US Trade Act could trigger counter measures from the target country. China is now indicating its intention to take such measures. If these moves escalate, they may develop into a trade war. I fear that this kind of situation could have a major impact on the global economy.
The second measure was to impose tariffs on steel and aluminum imports, which also apply to Japan. This measure could have serious effects on world trade in steel and aluminum. If other countries take countermeasures, the dispute may extend beyond steel and aluminum to affect other industries, which could have an impact on the entire global economy. Keidanren will keep a careful watch on developments. We will strongly urge the Japanese government to seek an exemption from the US government. Some commentators have suggested that one of the reasons for South Korea being exempted while Japan has been targeted is that Japan does not have a free trade agreement with the United States, but US intentions are unclear. I hope that the government will take opportunities such as the Japan-US summit scheduled for April to clarify the situation. I remain convinced that bringing the TPP 11 agreement into effect is a priority.
These trends prompted a sharp fall in stock prices last week. Analysts noted that markets were reacting to background events including protectionist actions invoked by the US that could affect the global economy, risks associated with expansionary fiscal policies in the US, and a series of key personnel changes in the US administration. Keidanren will continue to closely observe market trends, but economic fundamentals have not altered and remain firm. We will seek to discern whether current trends are merely temporary, or if they will change the course of events significantly.