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Prime Minister Abe and President Trump at the ASEAN Summit in Manila, November 13, 2017 (JIM WATSON/AFP/Getty Images)
(Photo credit: JIM WATSON/AFP/Getty Images)

Breaking the Defense Barrier

Arthur Herman

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Executive Summary

The key to strengthening and deepening the U.S.-Japan alliance in order to better meet regional threats is to increase defense trade and defense industrial cooperation between the two countries. A Defense Trade Cooperation Treaty (DTCT), a formal agreement between two countries which exempts their trade in certain specified defense and defense-related articles from the arms export regulations of both nations, would be an important way to achieve that goal.

Former U.S. ambassador to Japan Mike Mansfield once stated that the relationship with Japan is America’s “most important bilateral relationship in the world, bar none.” Finding a way to increase defense trade cooperation between Japan and the U.S. deserves a close and thoughtful look as it is a vital aspect of strategic cooperation.

The United States already has a DTCT with the United Kingdom and Australia, but dollar value U.S.-Japan bilateral defense trade dwarfs the United States’ defense trade with these other allies. In FY 2014, for example, the federal government authorized over $7 billion worth of U.S.-origin direct commercial sales of defense articles to Japan, almost twice the value of such sales to the U.K. and approximately four times the value of sales to Australia.

At base, however, it is not the dollar value of the defense trade between the United States and its allies which justifies the signing of a DTCT; it is the profound importance of the bilateral relationship to U.S. national security and protecting U.S. interests in the regions where its allies are present. A DTCT allows the United States to make a high- level determination that for certain classes of defense articles and services, America’s answer to a request from the Japanese government to meet its collective security needs should default to “yes.” The dollar value of the bilateral trade is merely a signal of the enormous efficiencies that could be gained in time and expense by eliminating individual license requests for appropriate items where licenses are almost never denied. Given such an important ally, and trade volumes at this level according to the normal rules and procedures, it makes good sense to enhance bilateral security by streamlining the bureaucratic process.

In the final analysis, requiring a license where the license is always approved serves no legitimate national security purpose. To the contrary, it harms national security by increasing cost and schedule risks with no obvious benefits.

The fact that previous DTCT’s the United States has signed with the U.K. (2007) and Australia (2007) have not worked as well as envisioned should not be a barrier to creating a DTCT with Japan. On the contrary, drafters of a new DTCT can learn from the mistakes of the two previous DTCT’s, and use a new improved treaty to fix its predecessors (see Part Three).

In addition, major changes in Japan’s own defense and defense trade posture—revised interpretation of Article 9 of the Japanese constitution; revision of the Three Principles regarding defense exports; revision of the U.S.-Japan Security Guidelines to encourage more co-development of defense equipment; and creation of the new Acquisition Technology and Logistics Agency within the Ministry of Defense—offer unprecedented opportunities for a new era of U.S.-Japan defense trade cooperation.

From that perspective, the value of a fully functioning and effective DTCT would be inestimable for the following reasons.

  • While license requests for export to Japan are overwhelmingly approved, exempting U.S.-Japan defense trade from the normal export process (described in Part One) will significantly increase the speed, range, and impact of such trade.
  • While Japan currently buys large amounts of defense equipment from the U.S., a DTCT would facilitate defense purchases from Japan, including components essential for advanced technologies.
  • A treaty would also encourage discussions between Japanese companies and U.S. research laboratories. This in turn would help to support the U.S. in its development of advanced defense systems essential to its declared Third Offset strategy for creating the weapons of the future.
  • In order to reap the full benefits of a DTCT, it will be necessary for Japan to revise, improve, and standardize its industrial security system to match that of other DTCT signatories. This will be an enormous boon to the bilateral relationship, significantly advancing Japan’s efforts to more deeply integrate with the U.S. defense industrial base. With its superb technical capabilities in many sectors, Japan is well-positioned to rank among the United States’ most important defense technology partners.
  • Finally, an effective U.S.-Japan DTCT will serve as a model for revisions and improvements to the existing DTCT’s with U.K. and Australia, which can advance defense industrial collaboration across the alliances.

From this perspective, a U.S.-Japan DTCT can inaugurate the creation of a defense trade Common Market among DTCT signatories, which also includes Canada, similar to the “Five Eyes” agreement on intelligence sharing. The resulting five-nation defense industrial community could speed the development of advanced defense technologies and systems in ways that would have been thought impossible in the past—and which cannot happen under the current export regimes of all five nations.

In order to draw up a U.S.-Japan DTCT, the Hudson Institute recommends the creation of a Presidential Independent Advisory Committee which will report to the Deputies Committee of the National Security Advisor and which, together with its Japanese counterpart, will have a two-fold mandate:

1) To study and report on the framework needed to draw up and execute an effective DTCT between the U.S. and Japan, as well as to secure the treaty’s Congressional approval.

2) To oversee implementation of the U.S.-Japan DTCT according to the terms of the treaty, as well as to revise the existing treaties with the U.K. and Australia.

As part of its mission, this Treaty Advisory Council would also generate an annual report on the progress, or lack thereof, in the DTCT’s positive impact on defense trade cooperation and industrial collaboration between the U.S. and Japan. It would submit that report to the Office of the President, the Secretary of Defense, and to Congress (with similar submission to their Japanese counterparts), which would serve as the basis for further reforms of U.S. defense trade regulations and their implementation.

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