China and Japan Agree That Protectionist Policies Harm Everyone

(Bloomberg) -- Chinese and Japanese leaders agreed that protectionist and inward-looking policies harm everyone, and Japan called on China to work through the World Trade Organization to resolve such problems.

Both nations agreed that "making protectionist moves, or using so-called inward-looking policies, isn’t in the interests of any nation," Japanese Finance Minister Taro Aso told reporters in Beijing after meeting with Chinese Vice Premiers Liu He and Han Zheng, There was also discussion of trade with the U.S. at the meetings on Thursday, Aso said.

Japan will use the WTO system to resolve any such issues, and called on China to do the same, according to a Japanese finance ministry official who spoke to reporters on condition of anonymity. Aso also warned that retaliatory measures would not benefit anyone, the official said.

The two sides also discussed how to further relations ahead of the planned visit of Japan’s Prime Minister Shinzo Abe, including on financial cooperation, Aso said. Aso, 77, who also serves as Japan’s deputy prime minister, will meet with his Chinese counterpart Liu Kun tomorrow, where he is expected to discuss the resurrection and expansion of a currency-swap arrangement.

Islands and Swaps

The previous bilateral $3 billion currency swap line lapsed in 2013 amid heightened tensions over a group of uninhabited islets occupied by Japan and claimed by both nations. That dispute is a demonstration of how quickly relations between the Northeast Asian neighbors can fray.

The currency swap deal would follow other modest progress in patching up the bilateral relationship. During his May visit to Japan, Chinese Premier Li Keqiang and Abe announced a communications mechanism to avoid maritime and air collisions.

But deeper cooperation between Beijing and Tokyo on trade or a firm demonstration of unity against U.S. tariffs is unlikely, given historical grievances, the unresolved territorial dispute and a lack of appetite in Japan to be seen as teaming up against the U.S. China’s sustained economic rise and military modernization also leave Japan feeling nervous.

There is no shortage of disagreement in the economic realm either. Earlier this year, Japan sided with the U.S. and European Union in a dispute at the World Trade Organization over China’s intellectual property regulations. According to the official, Aso raised the issue of intellectual property with the Chinese leaders.

--With assistance from Connor Cislo.

To contact Bloomberg News staff for this story: James Mayger in Beijing at jmayger@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger, Philip Glamann

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