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Global Economy

Japan, France to join forces against US 'hyperpower'
STRATFOR.COM
Global Intelligence Update
December 17, 1999

Summary:

After the disastrous World Trade Organization (WTO) meeting in Seattle, France has renewed its determination to end US dominance of the global trade environment. Believing that Washington monopolizes organizations like the WTO and the International Monetary Fund (IMF), the Chirac government is attempting to join forces with Japan. Ultimately, efforts to change the balance of power from within these organizations are likely to falter. France, Japan and others will eventually consider abandoning these institutions and creating their own.

Analysis:

Prime Minister Lionel Jospin met with Japanese counterpart Keizo Obuchi in Tokyo this week to discuss reforming the World Trade Organization (WTO). The two men issued a joint declaration stating the two nations' intent to cooperate in making the WTO ''more open and more transparent'' as well as a desire to see it ''develop towards a multilateral system.'' At the meeting, Jospin implicitly blamed the United States for the debacle in Seattle. ''It was not the fault of Japan, France or Europe,'' he said, according to Agence France-Presse.

France and Japan share a common interest in undercutting U.S. control of global trade policy - and international affairs at large. Now, Paris has seized upon this common ground to strengthen ties with Tokyo, in the hope of satisfying a mutual desire: a more balanced agenda in the WTO as well as the Bretton Woods institutions of the IMF and the World Bank.

The unbridled nature of US power has rankled France more than any other nation. Once a world power, French influence is overshadowed by Hollywood, McDonalds, the US economy - and Washington's military muscle. Jospin, President Jacques Chirac and Foreign Minister Hubert Vedrine have in the last month repeatedly condemned US ''hyperpower'' and stressed the importance of a multi-polar world.

The Chirac government appears to believe that the WTO turns US advocacy of free trade directly into policy - at the expense of other countries' markets. French farmers are particularly threatened by US competition. Small farms are the backbone French agriculture and have difficulty competing with the behemoth of US agribusiness. Earlier this year, the United States deepened French antagonism by imposing sanctions on Roquefort cheese, Dijon mustard and goose liver pate, because the European Union refused to buy American hormone-treated beef.

Jospin's meeting with Obuchi is only the latest effort to forge closer ties between Paris and Tokyo. In the first six months of 1999, France poured more investment into Japan than any other country. In March, France's Renault car company bought a controlling stake in Nissan Motor Company.

Japan has similar interests in balancing out the global economic system. Japan does not support US-style free market capitalism. The country also shared France's disapproval of US Treasury Secretary Lawrence Summer's proposal at the G-20 group meeting to transform the IMF into a short-term lending institution. The Obuchi government recently fielded its former vice finance minister for international affairs as a candidate to replace outgoing IMF managing director Michel Camdessus and Tokyo has also led a campaign to create an alternative Asian Monetary Fund.

But the effort to supplant US dominance in organizations like the IMF and WTO will eventually run into an obstacle: the United States itself. The United States supplies more than 17 percent of IMF funds. In stark contrast, Japan and France combined provide less than 12 percent.

Across the board, Washington's financial stake trumps other nations' interests. Efforts to change the dynamic of the World Trade Organization also face difficulties. The organization's mandate is ''trade liberalization''. As long as the United States remains the world's chief economic power, that mandate will continue serve its interests.

Eventually, the inability to take control of these organizations may lead these countries to abandon them and establish institutions independent of the United States. The increasing discussion in Asia of a regional monetary fund is a good example. However, such an institution will be economically and politically weaker than the international organizations that exist today.

For this reason, French strategy is keyed to reforming existing institutions from the inside. While in Tokyo, Jospin stressed that the central role of the IMF and World Bank should not be weakened ''through the multiplication of forums''. The strategies of the French and Japanese governments are divided. While Paris wants to work within the system, Tokyo sees a need for an immediate alternative: the Asian Monetary Fund.

Ultimately, France will find that jostling with the United States within the framework of existing international institutions is fruitless. At that point, it will have to consider the option of working outside the system to build a new one.

(c) 1999, Stratfor, Inc. http://www.stratfor.com/
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