US, Japan continue trade diplomacy to counter China, says Tokyo envoy

By David Dolan and Yukiko Toyoda

TOKYO (Reuters) – Chips, batteries and energy are key areas of collaboration between the United States and Japan as allies seek to secure supply chains and counter China, the government said. sent from Washington to Tokyo.

Former Chicago mayor Rahm Emanuel has focused on ‘trade diplomacy’ since taking over as US ambassador this year, pushing for trade ties in areas that have broader significance for economic security.

A U.S. firm is now eyeing a “potential major investment” related to chips in Japan, in what would mark the latest collaboration between the countries on semiconductors, Emanuel told Reuters in an interview.

He declined to elaborate or give a timeline.

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“Commercial diplomacy is an important part of overall economic collaboration and coordination between the United States and Japan,” Emanuel said Monday.

The two countries agreed on Friday to establish a new joint research center for next-generation semiconductors.

Japan has announced it will provide up to 92.9 billion yen ($700 million) to help US-based Western Digital Corp and its partner Kioxia Holdings ramp up memory chip production at a Japanese factory.

Meanwhile, Tesla supplier Panasonic Holdings Corp last month chose Kansas as the site for a new battery factory. That deal was reached, Emanuel said, after U.S. President Joe Biden spoke with Panasonic executives in Japan.

The cooperation comes as China has used its economic might to pressure other countries, Emanuel said.

“There’s a pattern here: if they don’t like what you say politically, they put muscle on you economically,” he said, citing Japan’s experience more than a decade ago. when Beijing restricted rare earth export quotas after a territorial dispute.

In a joint statement on Friday, ministers from the United States and Japan said they opposed “economic coercion”, although they did not name any specific country.

However, US Secretary of State Antony Blinken said at a press briefing that “the People’s Republic of China’s coercive and retaliatory economic practices are forcing countries into choices that compromise their security, intellectual property, economic independence”.

China has repeatedly said that it never uses economic coercion against any country and firmly opposes any form of coercion politically and diplomatically. He accused Washington of engaging in economic coercion in the name of national security.

Emanuel said if a country comes under pressure from China, the United States must counter with “economic incentives,” including using energy resources as a “strategic asset.”

Japan, the world’s largest LNG buyer, is a growing market for US natural gas. Between 2018 and 2021, Japanese imports of US LNG more than doubled, according to Japanese government data. Advanced nuclear reactors known as small modular reactors (SMRs) are another area of ​​collaboration.

Emanuel declined to say whether Speaker of the United States House of Representatives Nancy Pelosi, who began a tour of Asia on Monday, would visit Taiwan, the self-governing island claimed by Beijing.

Concerns over Chinese tensions with Taiwan, which makes the vast majority of sub-10 nanometer semiconductors used in smartphones, have prompted countries like the United States and Japan to step up investment in chip production.

Emanuel said there must also be more investment in training skilled workers to support the chip industry.

“We both need to invest in more scientists, engineers and workers to achieve this,” he said.

(Reporting by David Dolan and Yukiko Toyoda; Additional reporting by Yuka Obayashi; Editing by Alexander Smith)

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