33
Ricardo Vega Geo-economics and the Hub and Spokes system: the Japanese case
Geo-economics and the Hub and Spokes
system: the Japanese case
Geoeconomia e o sistema Hub and Spokes: o caso japonês
La Geoeconomía y el sistema eje-rayos: el caso japonés
Ricardo Vega1
DOI: 10.5752/P.2317-773X.2021v9.n3.p33
Recebido em: 01 de junho de 2020
Aceito em: 09 de setembro de 2020
A
This paper examines the reasons why Japan has been building a foreign trade
policy based on a hub-and-spokes system. It will be argued that aside of exports
promotion, Japan’s trade policy needs a broader reconsideration through a
geo-economics approach. Geo-economics provides an appropriate framework
of study for it considers that economic means have been becoming more
relevant to exert power overseas so as to reach political and economic goals
altogether. What denes Japan’s pursuit of several bilateral trade agreements is
assuring its relative economic hegemony whilst changes in the world balance of
power are taking place. In order to achieve so, Japan uses its economic power
to promote its interests through a comprehensive trade strategy. In this sense,
Japan strategically pursues geo-economic goals since it faces an uncertain and
unforeseeable future, and it needs to strengthen its trade policy to guarantee
access to international markets as well as pursuing geo-economic goals through
its hub-and-spokes.
Keywords: Japan. Geo-economics. Hub and spokes. Bilateralism. International
trade.
R2
Este artigo examina as razões pelas quais o Japão vem construindo uma política
de comércio exterior baseada num sistema hub-and-spokes. Argumentar-se-á que,
além da promoção das exportações, a política comercial do Japão precisa de
uma reconsideração mais ampla por meio de uma abordagem geo-econômica.
A geoeconomia oferece um adequado arcabouço de estudo, pois considera que
os meios econômicos têm se tornado mais relevantes para o exercício de poder
no estrangeiro de forma a atingir conjuntamente os objetivos políticos e econô-
micos. O que dene a busca do Japão por vários acordos comerciais bilaterais
é o asseguramento de sua relativa hegemonia econômica enquanto ocorrem
mudanças na balança de poder mundial. Para tanto, o Japão usa seu poder
econômico para promover seus interesses por meio de uma estratégia comercial
abrangente. Nesse sentido, o Japão busca estrategicamente objetivos geoeconô-
micos, visto que enfrenta um futuro incerto e imprevisível e precisa fortalecer
1. PhD in Economic Science. Professor
at Universidad Tecnológica de México
– UNITEC MÉXICO – Campus Ecatepec.
Contact: ricardo_vegap@my.unitec.
edu.mx.
2. Translated by Cláudio Augusto Ferreira.
Doctoral student in Media and Audiovisu-
al Processes at University of São Paulo.
E-mail: claudio.ferreira@usp.br.
34
estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 9, n. 3, (set. 2021), p. 33-52
sua política comercial para garantir o acesso aos mercados internacionais bem
como perseguir objetivos geoeconômicos por meio de seus hub-and-spokes.
Palavras-chave: Japão. Geoeconomia. Hub and spokes. Bilateralismo. Comércio
internacional.
R
Este trabajo tiene por objetivo examinar las razones por las que Japón ha estado
construyendo una política de comercio exterior basada en un modelo eje –
rayos. Se argumentará que además de la promoción de exportaciones, requiere
una reconsideración mediante un enfoque geoeconómico. La geoeconomía
permite establecer un buen marco de análisis debido a que su cuerpo teórico
propone que los medios económicos son más relevantes para ejercer poder en el
exterior con el propósito de alcanzar objetivos tanto de naturaleza política como
económica. Japón se ha dedicado a rmar varios acuerdos bilaterales en los úl-
timos años, pero la promoción de exportaciones no es el principal componente
de esta estrategia. Por el contrario, lo que dene la rma de acuerdos bilaterales
por parte de Japón es asegurar su hegemonía económica relativa en el medio de
cambios que están ocurriendo en el balance de poder mundial. Mientras Japón
enfrenta un futuro incierto e impredecible, se ve obligado a reforzar su política
comercial para garantizar el acceso a los mercados internacionales, así como la
persecución de objetivos geoeconómicos a través de acuerdos bilaterales en un
sistema eje-rayos.
Palabras clave: Japón. Geoeconomía. Eje-rayos. Bilateralismo. Comercio inter-
nacional.
Introduction
Japan has put into action a vast array of free trade agreements (FTAs)
in the last twenty years. However, Japan, since the end of WWII and well
into the nineties, had been reluctant to sign trade agreements, mostly
due to the far-reaching political leverage of rural elites inside the Liberal
Democratic Party (LDP) dominance. Whilst the US had already nego-
tiated and agreed NAFTA and the European Single Market has already
been in place as early as 1993, Japan engaged in its rst FTA negotiations
with Singapore and reached an agreement in 2004, and few months later,
it signed a new FTA with Mexico. In subsequent years, Japan has put a
total of 16 bilateral FTAs in eect with countries and regions from four
dierent continents.3
This new appetite for trade agreements prompts a discussion on
the underlying reasons why Japan has engaged into pushing ahead such
a trade agenda. This paper will single out that the purpose of putting
several FTAs into eect is aimed at begetting a hub-and-spokes (H&S)
system, capable of safeguarding its economic and political interests in the
world economy. The H&S hypothesis’ theory supposes a (hub) country
that decides to sign two (or more) FTAs with two dierent (spokes) coun-
tries, but there is no FTA signed between those spokes.
It will be argued that the Japanese government has set up a H&S,
attempting to hold the hub position and make the most of each FTA, in
order to ensure its relative economic hegemony. Given the new world
changes in the last twenty years, Japan needs to maintain its economic
3. The Ministry of Foreign Affairs of
Japan refers to its trade agreements
as FTA and EPA (Economic Partnership
Agreement). EPA’s incorporate several
kinds of economic cooperation between
Japan and each of its partners, aside of
sheer trade liberalisation. For purposes
of this paper, FTA will be used to refer
to those agreements signed by Japan,
in which tariffs and regulations on
services sector have been reduced or
eliminated, business environment has
been improved and intellectual property
protection rules have been enhanced;
all characteristics are found in all FTAs
listed in this paper. Source: Ministry of
Foreign Affairs of Japan.
35
Ricardo Vega Geo-economics and the Hub and Spokes system: the Japanese case
dominance over its regional and global production networks by enhan-
cing its trade policy as well as international political and geo-economic
goals through several FTAs. The Japanese H&S system goes beyond in-
creasing exports alone, and a geo-economic approach could contribute
to elucidate that Japan pursues goals that entail protecting its produc-
tion networks, maintaining a competitive export sector, securing access
to energy supplies, supporting liberal values and containing the Chinese
inuence in the Asian region.
The rst section will make a brief appraisal of the main H&S con-
tributions. An important debate is the eciency of a H&S economic in-
tegration vis-à-vis a free trade area, wherein leading discussions have put
their attention to the eects caused by an H&S integration to the hub
and to spoke countries. Afterwards, a geo-economics approach will be
introduced in order to explain the Japanese H&S integration system, as
well as preferences, interests and goals pursued. Finally, it will be possible
to arm that Japan’s trade policy rationality goes beyond increasing ex-
ports. Instead, Japan has pursuit geo-economic objectives through every
FTA signed.
The hub-and-spokes hypothesis
Wonnacott (1975) proposed a two-sided triangle trade integra-
tion model by considering that the globalisation process was frag-
menting into regional blocs and how this could disrupt global trade4
. In order to compensate that situation, he suggested, Canada should sign
two dierent trade agreements, one with the US and another with the
Single European Market, creating a two-sided and overlapping trade area
with Canada at its centre. He supposed that his overlapped two-sided
triangle would benet Canada by enjoying a preferential access to each
market and make the most from the global fragmenting process (WON-
NACOTT, 1975, p. 6-8).
Park and Yoo (1989) dened Wonnacott’s two-sided triangle as a
star. They supposed cases in which the core (hub) country’s trade gains
could take place in more inexpensive intermediate goods, greater market
4. Part of Wonnacott’s diagnosis is that
GATT’s liberalisation agenda of creating
a global free trade zone has been
being replaced by the conformation
of economic blocs that would actually
stifle international trade by stablishing
regional protectionist barriers against
outsiders. In his particular study, he
considers the situation in which Canada
would be left out of any regional bloc.
On the one hand, Canada would not
be part of the Single European Market
project but, on the other hand, a deeper
integration to the US economy would
cause political and economic upheavals
in Canadian politics.
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estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 9, n. 3, (set. 2021), p. 33-52
access, replacement of imports and how dierentiation between two si-
milar national economies could only take place by taris, a situation that
would be benecial for the core country. Lipsey (1990) later named Won-
nacott’s two-sided triangle and Park and Yoo’s star as hub-and-spokes as
depicted in gure one.
A H&S system consists of a (hub) country that decides to sign two
(or more) bilateral agreements with two or more (spokes) countries. The
hub country will hold a central position since all economies are linked to
it by bilateral agreements. The spokes countries are incorporated into the
H&S system once a bilateral agreement is signed. As Figure 1 depicts, a
H&S does not create a free trade zone since spokes countries do not enjoy
preferential access to all markets. In fact, spokes face discrimination since
there are not trade agreements signed amongst them. A H&S integration
system is more complex than sheer bilateralism since economic integra-
tion is designed by the hub country, which strategically decides to sign
several bilateral agreements in order to hold a central position to shape
economic integration. In other words, a H&S system is formed by several
bilateral FTAs that links the hub country to other national economies, in
which it retains a central position within this form of economic integra-
tion.
Lipsey (1990) proposed his H&S theory as an alternative to a pluri-
lateral regionalism or a free trade area in the North American integration
process. Lipsey’s discussion revolves around what a country could either
win or lose if embarked upon a H&S integration path in comparison to
a free trade area. His reckonings consider that each model of integration
brings about dierent outcomes in trade gains and economic dominance.
Subsequent debates picked up on the H&S eciency, using sundry eco-
nomic variables of study, econometric models and single country cases.
Wonnacott (1996) has argued that the hub tends to increase its wel-
fare in both situations, a free trade area or a H&S area because in both
cases the hub enjoys preferential access to all markets. Hur, Alba and Park
(2010) estimated that a hub could increase its exports quota by 5.57% per
year and doubles after 12 years1 . Similarly, they arm that spokes are
able to increase its exports as well. Mukunoki and Tachi (2006) explore
the possibility of achieving greater trade liberalisation through a H&S
system due to the associated exibility in setting trade policy in compa-
rison to a free trade area. Therefore, their study concludes that a H&S
system provides more solid ground to achieve trade liberalisation.
However, a recurring conclusion in H&S literature is that a larger
portion of trade benets and eciency are achieved by the hub alone.
Yildiz (2014) uses an oligopoly model of trade and assumes that the hub is
more ecient than spokes, which under such conditions the hub benets
at the expense of the spokes. The author argues that the hub’s preferen-
tial access to markets improves world welfare because it helps allocate
resources more eciently and, therefore, it could gain more from a H&S
system than a free trade area; nonetheless, an inecient spoke ends wor-
se o. Das and Andriamananjara (2006) also conclude that a H&S sys-
tem disproportionally benets the hub in comparison to spokes since the
former becomes more advantageous to export to spokes’ markets than
1. Their data comprises time series
of 96 countries covering the period of
1960 – 2000.
37
Ricardo Vega Geo-economics and the Hub and Spokes system: the Japanese case
spokes exporting to the hub market. Wonnacott (1996) explains what in-
centives the hub has within a H&S at spokes’ expense. For instance, if the
hub is a large economy, such as the US, it would benet more based on
its volume of trade and preferred locations because it has the possibility
of enlarging its dominant role through a trading structure that sets its
preferences. Wonnacott and Kowalczyk (1992) emphasize the possibility
of a hub, which holds specic economic advantages, to set its preferences
when building a H&S system. Thus, comparative advantage and econo-
mies of scale work positively to build a H&S system, which is more favou-
rable to the hub (WONNACOTT, 1991, p. 34).
Other works underscore the hub status for dierent types of cou-
ntries. For instance, Mukunoki and Tachi (2006) modelled a situation in
which small economies (i.e. Singapore) prefers to be a hub in the middle
of two big economies (US and Japan) as spokes. Their study suggests that
pursuing a hub status is also advantageous for small economies. Deltas,
Desmet and Facchini (2012) discuss Israel’s case as the only country to
have an FTA with the US and the EU. Israel’s bilateral trade with both
economies increased when both agreements were signed and beneted at
the spokes’ expense. De Benedictis, De Santis and Vicarelli (2005) conclu-
de that small economies orbiting around the EU15 and other European
trade blocks report them more trade gains. Therefore, it is demonstrated
in several works that pursuing a hub status within a H&S is determinant
for a country to sign more FTAs because it rearms its hub position and
its corresponding gains (CAO, 2015).
Nevertheless, spokes do not attain comparable benets. Whereas
the hub increases its exports, spokes lose. Hub rms could buy inputs
from spokes and could increase their exports share into the spokes’ mar-
kets; spokes, on the other hand, get less rich specially if separate FTAs
substitute trade (WONNACOTT, 1996, p. 241). Thus, as the hub adds new
spokes to its H&S system, each substitute agreement will hurt an existing
spoke because of trade deviation eect. Wonnacott and Kowalczyk (1992)
suggest that a trade paradox arises to spokes: a spoke country loses when
the hub expands its H&S system by signing another FTA, but the afore-
mentioned spoke will still have incentives to remain in the integration
process because the spoke will prefer to be part of a H&S since it provides
benets in the long run than being left out of any trading bloc (LIPSEY,
1990; WONNACOTT, 1996).
A dierent portion of literature upholds that hub countries gains
are limited or, in some cases, absent. Horaguchi (2007) arms that trade
diversion is an eect caused by an accumulation of FTAs by a single hub
which could cause overproduction and turmoil in regional economies2 .
Lloyd and Maclaren (2004), and De la Reza (2014) point out the problem
of facing dierent rules of origin (ROOs) in a H&S system, which may
lead to administrative costs related to verication. Lee, Park and Shin
(2008) concluded the same argument on overlapping FTAs and the costs
involved to administrate dierent ROOs to identical products traded in
dierent countries3. Nonetheless, Hayakawa and Matsuura (2017) arm
the opposite in the case of Japanese aliates in Southeast Asia when com-
plying with ROOs since there are high shares of originating inputs. In
2. Spaghetti Bowl effect and trade
diversion are effects attributable to not
well-connected markets (HORAGUCHI,
2007) since spokes markets are diffe-
rentiated by multiple rules of origin. As
Horaguchi (2007) demonstrates through
an equilibrium model, such conditions
alter production decisions leading to
overproduction.
3. An effect commonly known as
spaghetti or noodles bowl caused by
signing several trade agreements,
which forces companies to administrate
many ROOs when exporting to different
markets, causing additional costs to
exporters.
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estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 9, n. 3, (set. 2021), p. 33-52
summary, the H&S supposes cost raises due to taris dierentiation sti-
pulated on each FTA which would force companies to hire specialised
human resources in order to get the best benets of all FTAs (WON-
NACOTT; KOWALCZYK, 1992, p. 18). Therefore, bilateral FTAs, which
build up a H&S system have a small impact on welfare and employment
(BROWN et al, 2006).
All these works acknowledge that a H&S either results in a grea-
ter benet for the hub and loses for spokes or they denitely argue that
there are no trade gains whatsoever. Its eciency over free trade areas is
debatable and it depends on which variables, circumstances, assumptions
and time series are analysed. Then, a relevant question to ask at this point
would be why Japan is constructing a H&S system. In order to answer
that enquiry, it is necessary to understand Japan’s geo-economic goals
pursued in each FTA. Such goals may not necessarily result in greater
export quotas, but other benets of geo-economic nature are gained as it
will be discussed in the following pages.
The Japanese Hub-and-spokes system
The post-war Japanese economic miracle narrative embedded a
state-led industrial policy which focused on extensive capital goods in-
vestment, industrial promotion and a technology catch-up strategy. This,
in turn, underpinned an export-led growth, in which the US – Japan al-
liance provided a stable framework of access to international markets to
obtain natural resources for industrialisation as well as outstanding re-
venues from exports. The high-growth era (1955 – 1971) provided a sta-
ble outgoing ows of Foreign Direct Investment (FDI) and Ocial De-
velopment Assistance (ODA), which permitted Japan to exert a growing
inuence globally (STUBBS, 2001; HATCH, 2002). ODA and FDI were
important engines of the Japanese economic foreign policy in the post-
-war era (HATCH; YAMAMURA, 1996). Both enabled Japan to start the
construction of its production networks all over the region as it exported
labour intensive production processes overseas. The export-oriented in-
frastructure in developing countries contributed to the development and
enhancing of the Japanese regional industrial project since the late 70s. As
a result, the Japanese industrialisation success turned it into a dominant
exporter of high value-added goods, specially automobiles and electroni-
cs.
Nevertheless, the last two decades of the 20th century beheld Ja-
pan’s boom and decline of its economic model. Japan now faces a distinct
and unforeseeable economic future. This has thrusted Japan to rethink
policies that two or three decades ago would have been unlikely. As in-
ternational conditions changed, Japan’s ability to fuel its own economic
interests are no longer supported by neither a robust economic growth
nor a US-led global economy. Furthermore, the 21st century started wit-
nessing how the last WTO’s round of negotiations, the Doha round, has
derailed, struggling with a poorly dened agenda. Ambiguities on ma-
nufacturing sectors of developing nations and agricultural subsidies of
developed countries have been amongst the most important barriers to
39
Ricardo Vega Geo-economics and the Hub and Spokes system: the Japanese case
continue negotiations (HANS VAN MEIJL et al, 2005; AKYÜZ et al, 2006;
GALLAGHER, 2008).
Besides, the regionalisation processes that have been taking place
in Europe and North America, the lasting consequences of the 1997– 98
Asian nancial crisis and the 2008-2009 Great Recession foisted more
obstacles to multilateral cooperation (KAWAI; WIGNARAJA, 2013). As
a result of that international environment, several countries have started
to promote their economic interests individually and it has given way to
a new path of global economic integration through bilateralism4 . Speci-
cally, Japan has decided to build a H&S system by signing sundry bilateral
FTAs.
As shown in Figure 2 below, by the end of 2018, Japan has 16 FTAs
in eect, following a H&S system where it holds the hub position. Ex-
ports have increased to certain markets since each corresponding FTA
became eective; however, not all accords have resulted in positive num-
bers for Japan. If Japan had pursued an agenda based on exports promo-
tion solely, a free trade area would have been preferred; instead, a H&S
was favoured. Japan, aside of augmenting its chances to increase exports,
it is also pursuing other motives of geo-economic nature.
Figure 2. FTAs signed by Japan
Partner Effective date Partner Effective date
Singapore 2004 Brunei 2010
Mexico 2005 ASEAN 2010
Chile 2007 Switzerland 2010
Malaysia 2007 India 2011
Indonesia 2008 Peru 2011
Philippines 2009 Australia 2015
Thailand 2009 Mongolia 2016
Vietnam 2009 European Union 2018
Source: own elaboration from Ministry of Foreign Affairs of Japan.
The Geo-economic proposition
Luttwak (1990) introduced the term geo-economics as a new form
of statecraft in which economic means of power are more relevant than
military ones. His thesis proposes that given the end of the Cold War, the
importance of economic power has surpassed military power and tra-
ditional geopolitics as means to inuence and exert control over other
nations. Scholvin and Wigell (2018) dene geo-economics as a “foreign
policy strategy which refers to the application of economic means of po-
wer by states so as to realize strategic objectives” (SCHOLVIN; WIGELL,
2018, p. 80). In other words, geo-economics deals with economic bases of
power and how economic instruments to exert power. They see geo-eco-
nomics as an extension of geopolitics because its logic entails interstate ri-
valry and superiority over others as the ultimate end, which emphasizes
4. Other forms of regional and transcon-
tinental integration have been proposed
as a form of deepening trade integration
due to the Doha Round paralysis, such
as Trans Pacific Partnership (TPP), RCEP
(Regional Comprehensive Economic
Partnership), or CPTPP (Comprehensive
Agreement for Trans-Pacific Partner-
ship).
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estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 9, n. 3, (set. 2021), p. 33-52
how competition for relative power drives state demeanour (SCHOLVIN;
WIGELL, 2018, p. 80-81).
Kim (2019) denes geo-economics as “state’s foreign economic po-
licy to promote and defend mid- and long-term strategic interests”. Any
foreign trade, nance, investment, and industrial policy can be conside-
red geo-economic instruments as long as they are deliberately designed
and implemented to attain strategic objectives (KIM, 2019, p. 155). He
presupposes that state relations orbit around a condition of vulnerability
and interdependence. States implementing geo-economic strategies try
to create and exploit this condition in its relations with other states in
order to induce desired strategic outcomes.
Geo-economics’ main goal is directly aimed at the accumulation of
wealth through market control (COWEN; SMITH, 2009). Its means are
market-based instruments to assert power and inuence. For instance,
a country could try to bend trade ows, capital and knowhow into its
advantage (HOLSLAG, 2015); or a state could widen exports as a geo-e-
conomic strategy as it expands the country’s wealth and this becomes an
attempt to limit economic vulnerability. Geo-economic stratagems are
also capable to shape how businessman behave in order to adapt to res-
trictions and opportunities provided by the state economic policy (CAL-
VO, 2018). Nonetheless, it must also be acknowledged that all economic
measures for geo-economics work by politically distorting economic con-
ditions and inadvertently, constrain free economic transactions of domes-
tic rms and individuals (KIM, 2019, p. 160).
Furthermore, as Japan pursues greater welfare through trade liberali-
sation, it can also determine its own scope to set rules that are favourable to
its political goals. Pekkanen, Solis and Katada (2007) propose that Japan trades
o between two facets: control and gains in international trade. On the one
hand, they distinguish that Japan favours liberalisation through international
forums, whose rules promise economic gains to those who participate. On
the other hand, as states participate in specic negotiations, they also compete
to exert control over the liberalisation agenda in trade talks. Thence, it is pos-
sible to “maximise gains from trade as industrialised nations must negotiate
with large trading partners, or with numerous smaller countries that agree to
enact common trade and investment rules” (PEKKANEN et al, 2007, p. 956).
In their view, Japan signs trade agreements that augments Japan’s
control to set rules that eects its business and political interests, whether
it means to augment its exports or not, but Japan could get more control
over the economic integration process. A hub-and-spokes bilateralism en-
dorses Japan to choose and set its preferences, values and pace of trade
and investment liberalisation, according to its geo-economic stakes in or-
der to maintain its economic relative hegemony. In order to assert its eco-
nomic supremacy, for the rst time, the Japanese political elite weighed
the possibility of signing trade agreements and embarked in its rst FTA
negotiations to guarantee its economic dominance in two regions rele-
vant to Japanese interests: Southeast Asia and North America. Thus, Ja-
pan sought to sign an FTA with Singapore and Mexico, respectively.
As mentioned before, Japan’s rural elites exerted a vast inuence to
block any attempt to sign trade agreements. However, key FTAs suppor-
41
Ricardo Vega Geo-economics and the Hub and Spokes system: the Japanese case
ters commenced to push a dierent trade agenda. Transnational Japanese
rms with vertically-integrated and regionally-fragmented operations,
that had been moving labour-intensive stages of production into develo-
ping countries since the 70s, are a sensitive group of companies interes-
ted in pushing trade liberalisation because its operations became more
ecient regionally, allowing them to re-export to other markets (MAN-
GER, 2005, p. 810). In order to deepen economic integration and make
the most of these regional networks, such industries organised around
the industrial Keidanren Group5 to concert a lobbying eort to advance
their economic agenda with the Japanese Diet. Hence, Keidanren direc-
ted the evolution of the FTA with Mexico and ASEAN countries in order
to maintain and expand their economic interests (YOSHIMATSU, 2007).
The Japan-Singapore FTA focused on economic complementari-
ness, FDI promotion and increase of exports. Furthermore, since China’s
WTO entry in 2001, the Chinese government expressed its interest in
achieving an FTA with ASEAN, something that was perceived by Japan
as a menace to its own economic interests in the region (WONG; CHAN,
2003; CHENG-CHWEE, 2005). By singing an FTA with Singapore and
using it as a pivot to Southeast Asia, Japan has hoped to maintain its he-
gemonic position in the region. Besides, the FTA with Singapore did not
pose a threat to the rural elites and could provide economic benets to
Japanese multinational rms overseas.
In the case of an FTA with Mexico, Japan had interpreted NAFTA
as a discriminatory treatment to its exports since American companies
could invest and move goods across the border paying no customs duties
or other fees (MANGER, 2005, p. 812; KERBER, 2008, p. 353). Hence, as
early as 2000, Keidanren ocials had undertaken the rst steps to dis-
cuss with the Mexican government a possible trade agreement between
both countries. The Japan-Mexico FTA meant to Japan an opportunity to
get preferential access to the North American region since Japan, as the
second largest economy of the planet (of that time), was in clear disad-
vantage to manufacture in Mexico vis-à-vis its American and European
competitors.
Although Mexico seemed to be a more obvious threat to
the Japanese agricultural sector, the Japanese government was ca-
pable of explaining to its own party members and to the Nokyo
lobbying group6, who both opposed the agreement, that most Mexican
products would not directly compete with Japanese goods (YOSHIMAT-
SU, 2005, p. 270-272; KERBER, 2008, p. 361). As a matter of fact, and con-
trary to what many opponents of the Japan-Mexico FTA feared, Mexican
exports to Japan have not posed any menace to local farmers, nor even
have they grown as the Mexican government initially had expected.7
In both cases, the Japanese government was capable of setting its
preferences when negotiating both FTAs. The Japan-Singapore FTA wor-
ked as path towards deeper integration to the ASEAN region as a way to
respond to China’s involvement in Southeast Asia. In the case of Mexi-
co, Japan attained access to its low-cost labour force and strengthened its
operation in a geographical proximity to the US market. In other words,
Japan pushed its geo-economic interests and used tactical means to set its
5. It is an economic organisation with
a membership comprised of 1,444
representative companies of Japan, 109
nationwide industrial associations and
the regional economic organizations.
6. It is a lobbying group that represents
all agricultural unions and cooperatives
of Japan.
7. Japanese opposers to the Japan-Me-
xico FTA believed that Mexican products
would affect local farmers; however,
main agricultural products exported
by Mexico such as pig-meat, beef and
some vegetables and not produced in
Japan. Once, such belief was overcome,
the agreement cemented more support
in Japan.
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estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 9, n. 3, (set. 2021), p. 33-52
foreign policy to tie its economy to other countries in order to gain strate-
gic leverage. At this point, it is conceivable to realise that geo-economics
has become highly relevant for Japan since its tactical practice has enabled
Japan to increase interdependence on its own advantage
In fact, these two FTA negotiation experiences paved the path for
Japan to negotiate subsequent FTAs. Solis and Katada (2007), for instance,
arm that the whole negotiation process with Mexico helped Japanese
companies and government bureaucrats acquire ‘FTA knowhow’. From a
geo-economic perspective, both agreements (with Singapore and Mexico)
worked as means to support targeted industries and build stronger capa-
bilities to export in greater amounts, with a focus on high-value-added
segments of production networks with both regions (SCHOLVIN; WI-
GELL, 2018). Although, this strategy might represent a loss to Japanese
farmers, Japan ultimately did it in order to uphold its dominant position
in key industries such as automobiles and electronics of two signicant
economic regions, Southeast Asia and North America.
The subsequent FTAs agreed by the Japanese government with its
Asian neighbours responded to the Japanese objective of protecting its
geo-economic interests. Between 2007 and 2010, Japan signed FTAs with
most of ASEAN countries. In all cases, Malaysia8, Indonesia9, Thailand10,
Vietnam11 and Philippines12 have long standing economic interests with
Japan, such as FDI and ODA ows, cross-border production networks
and several infrastructure projects funded by the Japanese government.
Japan and all ASEAN partners have come to perceive that bilateral FTAs
benets would strengthen strategic cooperation as well as enhancing
their economic bonds. In turn, this could lead to a commitment in main-
taining peace and stability amongst them (SEN; SRIVASTAVA, 2009).
Furthermore, when the China-ASEAN FTA was reached in 2010, Japan
was pressured to deepen its economic ties in Southeast Asia.13
FTAs outside the Asian region
Japan’s geo-economic interests stand beyond the ASEAN region.
For that purpose, Japan has signed several trade agreements to either pro-
tect or expand its interests in other parts of the world, specically with In-
dia, Australia and Europe. India and Japan used their mutual interests to
push a deeper economic relation. Since the late 80s, India’ manufacturing
industry entered an export-led growth era and started to attract grea-
ter amounts of Japanese FDI that contributed to expand Japanese rms’
businesses in the country. Thus, India turned into a strategic objective
of Japan’s diplomacy and, consequently, completed an assistance plan for
India in 2006 that would focus on three areas: promoting economic gro-
wth, addressing poverty and environmental issues and supporting the
expansion of human resource development (SATO, 2012).
Japan’s closer relation with India responded to the Japanese gover-
nment’s perception that there are trade and services complementarities
between Japan and India (SATO, 2012; GAURAV; BHARTI, 2018), and
thus, FTA negotiations were completed and came into eect in 2011. Ja-
pan set its preferences with India by removing all obstacles to Japanese
8. The Japan-Malaysia FTA was finally
realised by Japan after several attempts
to deal with post-Mohammad adminis-
trations (1974 – 2004) and build stronger
economic relations. Najib’s administra-
tion (2009 – 2018), particularly, tried to
get closer to China (MD. KHALID, 2011);
a situation that Japan perceived as a
threat to its interests in Malaysia, which
has been a good destination for invest-
ment and a potential link for enhancing
relations with other ASEAN nations.
9. A year after Malaysia’s FTA was
completed, Japan signed an FTA with
Indonesia, where Japan has vast interests
as it is Indonesia’s biggest donor and main
foreign investor. Japan’s presence and in-
terests in Indonesia affords Japan a great
opportunity to influence the democratisa-
tion of Indonesia (PURBA, 2001, p. 55).
10. Thailand looked for closer integration
as a result of China’s entry to WTO and
Doha’s failure (CHIRATHIVAT; MALLI-
KAMAS, 2004), and has viewed bilateral
trade liberalisation as mutually reinforcing,
especially with Japan because its trade and
exports structure is already well established
(TALERNGSRI; VONKHORPORN, 2005).
11. Vietnam’s growing role in ASEAN
and the region has increasingly attrac-
ted Japan’s attention. The Japanese
government saw Vietnam as a potential
player in the East Asian regional
politics. The Japanese government has
sought another foundation of economic
integration with the ASEAN region so as
to retain its dominant economic power
in Southeast; and so, the Japan-Viet-
nam FTA contributes to regional peace
and security and helps increase the East
Asia integration process (LUONG, 2009).
12. Japan was capable to sell an FTA
to the Filipino government as matter of
security due to China’s more assertive
stance in the South China Sea (VAN
DE HAAR, 2011, p. 121). At the same
time, the agreement was promoted
within specific business groups in the
Philippines as the best chance to create
wealth from liberalised trade.
13. China’s involvement in ASEAN has
resulted in several geopolitical mano-
euvres by all parties: Chinese military
bases in the South China Sea, maritime
disputes over territorial waters and Chi-
nese FDI to several ASEAN members.
Japan, in order to dilute China’s in-
fluence, approach each ASEAN country,
so its economic agenda is negotiated
individually. This way, Japan could sell
(or share) to each nation the perception
of China as a threat and build a joint
front to oppose China’s influence.
43
Ricardo Vega Geo-economics and the Hub and Spokes system: the Japanese case
investments, setting strong investment protection provisions and tech-
nology transfer is not compulsory for investor (SENGUPTA, 2011). As
previous FTAs experiences, Japan reserved agricultural products on its
exclusion list in order to protect its political and economic interests with
its rural elites.
By the same token, the FTA with India entailed geo-economics
goals as well. The China menace and the US involvement in Asia pushed
Japan to build stronger ties with India. Strategically, a quadrilateral fra-
mework involving Japan, India, the US and Australia built an alliance of
democracies described as the ‘arc of freedom and prosperity’ to contain
China (JAIN, 2010, p. 409). In this matter, the Japan-India strategic part-
nership counterbalances China’s inuence, which must be a long-term
goal as both countries are more dependant to the prosperity of Asia-Pa-
cic (SEKI, 2000).
Australia, likewise Japan, perceives China as a threat. So, the role of
a bilateral partnership between Japan and Australia, both key regional US
allies, was meant to counter the emergence of China (TERADA, 2007).
An FTA with Australia has been also seen as a complementary trade re-
lation since Japan’s major exports to Australia are manufactured goods
such as automobiles, auto-parts, machinery, and consumer electronics.
Australia’s exports to Japan are primary goods such as energy resources,
raw materials, and agricultural products.
In Europe, Japan pursued geo-economic objectives as well. On the
one hand, Europe has been perceived as a source of inward direct invest-
ment and as an important exports market. On the other hand, an FTA
could reinforce Japan’s global strategy through cooperation with Euro-
pean countries (YOSHIMATSU; ZILTENER, 2010, p. 1073). As a result,
Japan has signed two FTAs, one with Switzerland (2010) and, more re-
cently, with the EU (2018). The Japan-Switzerland FTA became a relevant
entry door to Japanese investments and to the European market; har-
mless to Japanese agricultural interest groups.
Japan signed an FTA with the EU particularly pressured by the
Korean-UE FTA and the strategic relationship that China could bridge
with EU through the One Belt, One Road Initiative. With this brand-
-new Japan-EU FTA, Japan gets the possibility to inuence the EU lea-
ders to avoid a deeper strategic relation between Europe and China that
could make Japan invisible in EU’s agenda (SODERBERG, 2012). In a
globally fragile security environment, Japan and the EU are endorsing
each other as reliable partners with shared values, gaining from a joint
commitment to preserve the rule-based, liberal world order, supported
by ever closer economic integration (FRENKEL; WALTER, 2017). Fur-
thermore, Japan’s automotive, electrical engineering, electronics, me-
chanical engineering and ne chemical industries can expect greater
exports to the EU as the FTA would result in a 0.86% GDP annual gro-
wth for Japan in the immediate years when the FTA comes into eect
(BENZ; YALCIN, 2015).
Lastly, Japan has signed minor FTA’s with less relevant partners, in
terms of Japanese trade. Chile, Peru and Mongolia are seen as peripheral
commodity suppliers of Asia-Pacic’s value chains (DINGEMANS, 2014).
44
estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 9, n. 3, (set. 2021), p. 33-52
Japan’s main foreign policy towards these countries is securing access to
raw materials, promoting overseas business aliates and increasing ex-
ports such as automobiles and electronics (BERRIOS, 2005). Despite these
trade agreements may seem irrelevant to Japanese trade, all parties have
entered liberalisation policies which have led them to open-up its markets
through bilateral and regional initiatives and they could contribute to ex-
pand Japanese exports. Japan has simply taken their chances over shared
economic agendas with as many countries as possible. In that way, and
even if trade benets are not so signicative, Japan has the possibility to
resolve diplomatic, security and trade interests (KAWASHIMA, 2017).
Japanese gains and its H&S
Throughout the H&S theory reviewed, trade benets depend on
several variables and assumptions which do not necessarily mean positi-
ve results. In the case of Japan, each FTA has resulted in varied outcomes,
in terms of exports. Japan possesses advantages that could theoretically
support the objective of creating a H&S area. On the one hand, Japan is a
large economy that has been signing FTAs with minor economies, whi-
ch, in turn, provides more possibilities to export more high-value added
goods. As shown in Figure 3, main Japanese exports are high-value-ad-
ded goods: automobiles, electronics, mechanical equipment, etc., which
comprise about 70% of its total exports. These industries were built since
the high-growth era, when Japan created a space of economic comple-
mentarities with its Asian neighbours. Through shared infrastructure,
Japan has eliminated barriers to trade and investment in the region. The
Japanese H&S system has rearmed its economic and technological
advantage as it gets a larger market share and therefore, more control
over high-value -added goods, safeguarding and deepening such interests
created since then.
Source: ITC statistics. Data is organised by Harmonised System (HS).
45
Ricardo Vega Geo-economics and the Hub and Spokes system: the Japanese case
Exports to countries with whom Japan has signed FTAs are do-
minated by these economic sectors (automobiles, electronics, and so on)
even before Japan started signing FTAs. However, as some H&S theorists
propose, trade has not really improved Japanese exports in all cases. Ja-
pan’s FTAs with Malaysia, Thailand and Indonesia do not have a positive
impact on Japan’s trade due to assorted factors such as a lack of knowled-
ge of FTAs by traders, high costs of using FTAs and diculties to obtain
certicates of origin (ANDO; URATA, 2015). More specically, Rahman,
Molla and Murad (2008) reveal that the Japan-Malaysia FTA has had no
eect on trade benets for any country, conrming the hypothesis of li-
mited trade benets of H&S integration.
Figure 4 displays the destination of main Japanese exports; it can
be realised that most FTAs represent a small cut for all of its exports.
For instance, countries outside the ASEAN and EU28 regions barely ab-
sorb 9% of relevant Japanese exports. As a matter of fact, on an aggregate
perspective, FTA markets represent 33.2% for Japanese exports, which
is still a smaller proportion than its main markets, the US and China.
Even though it is evident that ASEAN and EU28 have been slowly and
gradually getting more important for Japanese goods, there is not clear
growing trend, and in some cases diminish.
Figure 4. Main Japanese exports per destination, in percentages of total (2005-2019)
HS 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
ASEAN
87 5.87% 7.57% 8.13% 8.76% 10.35% 9.14% 7.87% 7.94% 8.16% 7.79% 8.01% 7.74%
84 13.84% 14.80% 15.67% 15.12% 18.83% 17.20% 16.41% 16.38% 14.94% 14.39% 14.52% 14.30%
85 16.13% 16.32% 18.13% 17.69% 18.82% 17.94% 18.24% 17.62% 17.79% 18.28% 19.37% 19.03%
90 9.79% 10.07% 11.41% 11.59% 12.04% 11.25% 10.74% 10.82% 11.05% 11.35% 11.41% 11.61%
Australia
87 4.89% 6.02% 5.86% 5.64% 6.25% 5.57% 5.05% 4.76% 4.76% 5.24% 5.29% 4.62%
84 1.56% 1.63% 1.44% 1.52% 1.66% 1.36% 1.20% 1.16% 1.16% 1.12% 1.18% 1.06%
85 0.78% 0.74% 0.70% 0.63% 0.59% 0.54% 0.42% 0.39% 0.36% 0.36% 0.36% 0.35%
90 0.76% 0.81% 0.67% 0.62% 0.62% 0.68% 0.66% 0.76% 0.71% 0.65% 0.64% 0.60%
Chile
87 0.69% 0.56% 0.86% 0.70% 0.54% 0.65% 0.51% 0.57% 0.60% 0.65% 0.70% 0.53%
84 0.27% 0.13% 0.18% 0.17% 0.18% 0.12% 0.20% 0.14% 0.10% 0.11% 0.12% 0.10%
85 0.04% 0.05% 0.02% 0.03% 0.04% 0.05% 0.05% 0.02% 0.02% 0.01% 0.01% 0.02%
90 0.07% 0.09% 0.09% 0.12% 0.06% 0.06% 0.06% 0.07% 0.06% 0.05% 0.06% 0.05%
EU28
87 15.16% 14.37% 12.68% 13.11% 9.77% 9.43% 10.77% 11.60% 12.51% 12.68% 12.90% 14.61%
84 18.55% 15.71% 13.92% 14.31% 13.00% 13.75% 14.05% 13.51% 13.51% 13.16% 13.30% 13.28%
85 15.05% 12.38% 11.42% 11.63% 10.66% 10.69% 10.56% 10.01% 10.16% 9.86% 10.26% 9.99%
90 19.84% 19.55% 17.28% 17.02% 14.52% 14.23% 14.61% 14.87% 15.59% 14.66% 15.41% 16.11%
India
87 0.31% 0.46% 0.51% 0.56% 0.43% 0.36% 0.35% 0.34% 0.35% 0.37% 0.36% 0.29%
84 1.76% 1.67% 1.85% 2.26% 2.26% 1.78% 1.78% 1.75% 1.99% 1.66% 2.07% 2.20%
85 0.79% 0.96% 0.94% 1.07% 0.97% 0.92% 0.80% 0.96% 1.05% 1.01% 1.19% 1.23%
90 1.15% 1.19% 1.18% 1.30% 1.32% 1.21% 1.12% 1.24% 1.38% 1.25% 1.56% 1.62%
Mexico
87 1.81% 1.86% 1.98% 2.12% 1.95% 1.90% 2.22% 2.52% 2.39% 2.53% 2.29% 2.27%
84 1.02% 0.95% 0.91% 0.89% 1.12% 1.54% 1.73% 1.96% 1.84% 1.87% 1.77% 1.64%
85 1.78% 1.63% 1.75% 1.52% 1.40% 1.62% 1.53% 1.63% 1.73% 1.32% 1.49% 1.47%
90 1.49% 2.02% 2.09% 2.69% 2.97% 1.81% 1.82% 1.21% 1.09% 0.95% 0.97% 0.94%
46
estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 9, n. 3, (set. 2021), p. 33-52
HS 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Mongolia
87 0.08% 0.03% 0.06% 0.13% 0.10% 0.13% 0.14% 0.13% 0.12% 0.16% 0.24% 0.25%
84 0.02% 0.01% 0.02% 0.03% 0.05% 0.02% 0.02% 0.01% 0.01% 0.02% 0.03% 0.08%
85 0.00% 0.02% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
90 0.01% 0.00% 0.00% 0.00% 0.01% 0.01% 0.02% 0.02% 0.01% 0.01% 0.03% 0.02%
Peru
87 0.40% 0.35% 0.45% 0.37% 0.40% 0.40% 0.29% 0.29% 0.27% 0.31% 0.26% 0.24%
84 0.05% 0.05% 0.05% 0.05% 0.06% 0.06% 0.05% 0.04% 0.06% 0.04% 0.04% 0.05%
85 0.02% 0.02% 0.01% 0.01% 0.01% 0.01% 0.01% 0.02% 0.01% 0.01% 0.01% 0.01%
90 0.06% 0.05% 0.04% 0.04% 0.04% 0.05% 0.04% 0.05% 0.04% 0.04% 0.04% 0.04%
Switzerland
87 0.45% 0.66% 0.52% 0.48% 0.45% 0.32% 0.35% 0.34% 0.34% 0.30% 0.27% 0.28%
84 0.11% 0.13% 0.11% 0.12% 0.10% 0.13% 0.10% 0.10% 0.09% 0.08% 0.10% 0.11%
85 0.17% 0.19% 0.17% 0.18% 0.13% 0.08% 0.10% 0.10% 0.09% 0.08% 0.08% 0.08%
90 0.45% 0.35% 0.25% 0.22% 0.18% 0.19% 0.16% 0.17% 0.19% 0.17% 0.17% 0.18%
Source: ITC statistics. Data organised by HS codes.
In spite of a sluggish growth of Japanese exports to some FTA mar-
kets, imports from some specic countries have increased. For example,
energy goods such as oil and gas have soared. Figure 5 displays that Indo-
nesia, Australia, Malaysia and Brunei totalled nearly 26% of all Japanese
energy imports in 2007; twelve years later, these countries export 28% of
Japanese energy needs. Middle East is still the principal energy source of
Japan, but its sources have been slowly diversied within FTA partners.
And as geo-economics goals entail, Japan needs to secure resources for its
cutting-edge industries, but most importantly, such energy goods come
from nations committed to democracy and to a liberal order that will
guarantee Japan a reliable ow of key imports without disturbances of
political and ideological nature.
Figure 5. Japanese imports of energy resources 2015 - 2019 (in millions of dollars)
Partner 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Total imports of
energy 267,787 152,489 199,139 274,652 302,532 281,585 262,106 128,287 110,878 141,218 174,569 155,618
Australia 28,765 21,751 25,819 32,157 34,676 31,368 29,704 21,426 18,838 25,659 31,456 30,580
Indonesia 19,484 10,539 13,174 17,866 17,323 15,033 12,499 7,480 5,776 6,644 6,482 5,182
Malaysia 10,576 6,806 9,965 15,438 19,126 17,258 16,578 10,028 6,115 6,737 6,274 5,127
Brunei 4,539 3,334 4,098 5,687 5,971 4,730 3,983 2,336 1,740 1,704 2,255 2,463
Imports from FTA
markets 63,365 42,430 53,056 71,147 77,097 68,389 62,764 41,270 32,469 40,744 46,468 43,354
As percentage of
total 23.66% 27.83% 26.64% 25.90% 25.48% 24.29% 23.95% 32.17% 29.28% 28.85% 26.62% 27.86%
Source: ITC statistics.
Besides, Japanese exports have not soared enough to push its trade
balance to positive numbers as shown on Figure 6. Partners, from whom
Japan obtains energy goods, show the largest trade decits amongst its
FTA trading partners. European partners have displayed a persisting and
growing surplus against Japan since 2012. India, Mongolia and Mexico
are the only partners Japan get some trade surplus from. Therefore, after
each FTA came into eect, no drastic changes in trade has taken place
47
Ricardo Vega Geo-economics and the Hub and Spokes system: the Japanese case
and there is no corroboration that Japan’s pursuit of bilateral trade agree-
ments has been solely aimed at boosting its exports.
Figure 6. Japanese trade balance per region/country 2008 – 2019 (in millions of
dollars)
Partner 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
World 18,878 28,734 75,715 - 32,197 - 87,411 -118,069 -121,967 - 695 38,008 26,240 - 10,173 -15,222
ASEAN - 3,513 2,497 11,838 - 1,910 213 - 6,822 - 11,202 - 2,879 3,164 2,951 2,252 - 1,560
Australia - 30,236 - 22,583 - 29,199 -38,875 -38,025 -34,056 - 33,942 - 21,942 -16,328 - 22,909 - 28,584 - 30,964
Chile -5,172 -3,966 -5,034 -7,476 -7,335 -6,321 - 6,432 - 4,326 - 3,781 - 4,791 - 5,429 - 4,683
EU28 40,004 13,194 20,533 15,330 -1,840 -6,692 - 5,564 - 5,257 - 1,331 - 728 - 3,881 - 6,817
India 2,639 2,610 3,344 4,255 3,590 1,521 1,143 3,245 3,514 3,509 5,508 5,613
Mexico 6,136 4,026 6,095 6,250 6,168 5,461 6,357 5,723 4,921 5,489 5,253 4,635
Mongolia 194 99 137 305 319 281 309 198 260 319 486 560
Peru -1,136 -1,090 -1,185 -1,431 -1,766 - 1,656 - 1,010 - 449 - 606 - 1,330 - 1,722 - 1,777
Switzer-
land - 2,083 9 978 1,383 -3,846 - 3,984 - 4,187 - 4,695 - 4,524 - 2,728 - 3,971 - 4,078
Source: ITC statistics.
Thus, Japan’s H&S system follows additional goals. First of all, Ja-
pan imposes its preferences on trade, labour division and investment so
as to exert its relative economic hegemony. In this manner, the indivi-
dual rationality of Japanese rms and investors has used FTAs to seek
and benet from the Asian economic integration (KAPUR; SURI, 2014)
by linking and integrating cross-border production networks to Japanese
interests. Thus, Japan has been seeping its trade and investment preferen-
ces to open possibilities to project global power and shape the economic
integration process. In this way, the regionalisation of Japanese interests
is no longer a strategy of maximising exports alone; instead, it is an ins-
trument of regional and political legitimacy (GIACALONE, 2016, p. 135)
that assistances Japan to construct the Asian region – and beyond.
As Japan possesses few instruments to push a regional integra-
tion agenda due to the resilient suspicion image from its WWII past, by
singing bilateral agreements, Japan’s regional and global ambitions are
nuanced by the Japanese government preferences to pursue an economic
agenda with each country. The host country welcomes FDI in order to
create jobs and exports, whereas Japan can assert control over resources,
cheap labour and trade strategies. Hence, Japan’s decisive autonomy in
an interdependent world is secured through creating mutually benecial
relationships of interdependence (BARU, 2013).
In that sense, geo-economics gives Japan a leeway to design and
transform the world order. Japan owns relevant hegemonic tools and ins-
titutions to do so, such as technological capabilities, capital, government
agencies, and it is using them to inuence other states. Since geo-econo-
mics and competitiveness are joint in an unbreakable unity in nowadays’
global order (SCEKIC et al, 2016), Japan is competing with new economic
powers in the region such as China and Korea, and as well as other coun-
tries that have shown interest to link their own economic growth to the
Asia-Pacic region.
48
estudos internacionais • Belo Horizonte, ISSN 2317-773X, v. 9, n. 3, (set. 2021), p. 33-52
On the one hand, China has proposed the One Belt, One Road ini-
tiative as a way to promote its economics interests to other continents
through loans, subsidies and other forms of assistance has beneted these
countries to consolidate power using Chinese money (YEH, 2016). China
also pursued a resources policy towards Australia, reason why strategic
security cooperation with Australia became a more explicit issue for the
Abe cabinet (2012 – 2020) and led to the competition of an FTA with Aus-
tralia. On the other hand, the Trump administration is responsible for the
weakening of US dominance and its lack of strategy is forcing countries
to choose between the US and China (SINGH et al, 2019), which has been
fuelling confrontation, alliances and the emergence of diverse economic
and security initiatives. Amidst uncertainty about the US leadership in
Asia and China’s emergence, Japan has been forced to engage in some
Chinese initiatives and, simultaneously, it has also step up as a leader in
supporting US hegemonic order.
Japan, as a regional stakeholder, is actively shaping the regional and
global economic integration through an H&S as it needs to secure its net-
work productions in the Asia-Pacic continent as they are an important
form of hegemonic and economic power. Japanese rms through econo-
mic engagement policies, such as bilateral FTAs, can make other states
become more dependent on Japanese technology and goods (KIM, 2019,
p. 157). Thus, the Japanese long-term geo-economics power has its foun-
dations in securing access to vital resources, labour and markets which
could contribute to productivity, facilitate industrial development and,
ultimately, control more markets globally.
Aside of economic potential gains and securing economic hegemony,
FTAs have also been working as a joint declaration of common values.
Japan has prioritised the continuation of the current liberal international
order from which it has broadly proted. Japan and its agreements with
Australia, ASEAN and India, for instance, have included binding commit-
ments to support and endorse free trade, democratic values and regional
peace and security. The EU-Japan agreement also represents another way
for Japan to take more responsibility in the world, so the chances and po-
tential for closer EU-Japan cooperation are considerable (HILPERT, 2018)
in a world of uncertainty and potential conict. Thence, Japan’s H&S of-
fers a greater possibility to benet from a global order that will be charac-
terised by a mix of leery cooperation, competition and potential conict.
Thus, states like Japan expect to obtain gains when they abide by
existing rules and make long-term plans based on an understanding of
those rules (KIM, 2019, p. 163).
Concluding remarks
Japan has been constructing a H&S system, attempting to hold the
hub position and make the most of each FTA in geo-economic terms.
Japan has signed several trade agreements and not all of them have provi-
ded more exports. Nonetheless, Japan obtains other benets of geo-eco-
nomic nature. Through a H&S Japan can exert its economic hegemony
to secure its geo-economic objectives which encompasses securing raw
49
Ricardo Vega Geo-economics and the Hub and Spokes system: the Japanese case
material and energy, safeguarding its regional production networks and
getting commitments from its partners to preserve liberal democratic
values and free trade. Furthermore, Japan’s hub position has enhanced
it to set its trade preferences. On the one hand, Japan propels its relative
hegemony through securing markets for its high-value added goods so as
to get the global economy dependant on them. On the other hand, it has
set certain barriers to products due to local political interests.
As bilateralism took stronger roots after the Doha Round failure
and the 2008 Great Recession, Japan has pursued an agenda that contri-
butes to form stable relations with other states, in which Japan is playing
an important role to design and norm them. In turn, Japan could signi-
cantly diminish uncertainty and risks in the long term. In order to gua-
rantee so, Japan needs to participate in writing trade rules under the um-
brella of liberal ideals and institutions through trade agreements. This
way, Japan understands that the global order will be shaped by meticu-
lous planning and engaging in proactive relations that meliorates Japan’s
position to boost its economic progress and protect its geo-economic in-
terests regionally and globally.
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