Deepening EU-Japan-US Cooperation on Critical and Emerging Technologies

May 2024

International cooperation to strengthen research and economic competitiveness in critical technologies while promoting resilient supply chains is perhaps one of the greatest challenges currently facing the European Union, the United States, and Japan today. This message was most recently underlined by Tokyo at the May 2024 OECD ministerial meeting in Paris where Japan unveiled a framework for the global regulation of generative artificial intelligence alongside convening a Japan-EU High Level Economic Dialogue where a Transparent, Resilient and Sustainable Supply Chains Initiative was agreed.

The Dialogue also saw agreement on the sharing of risk assessment analysis and preventing leakage of critical and emerging technologies. Critical and emerging technologies refer to a vast and fluid range of technologies including, but not limited to, artificial intelligence (AI) that share an insatiable demand for computational power and are considered transformative to societal, economic, and military competitiveness. Losing a competitive edge in these fields would have crosscutting ramifications in military, economic, and social domains.

Supply Chains and the Political Economy of AI

Artificial intelligence harnesses algorithms to analyze big data with a dizzying array of real world impacts. Large Language Models (LLMs) offer a potentially powerful new tool for transforming business, education, politics, and entertainment. Yet, supply chains fueling AI are fragile. Training AI models requires powerful computational hardware, such as Nvidia’s H100 GPUs. The global semiconductor market is projected to grow in 2024 to US$588 billion with Taiwan’s TSMC accounting for almost 60 percent of the global third party chip manufacturing market. TSMC also fabricates some of Nvidia and AMD’s most powerful chips.

With heightened concerns over economic security and supply chains, Japan should continue to leverage Tokyo’s experience on the frontlines of economic coercion to better understand the scope of EU and US vulnerabilities. Rare earths are just one example of how Beijing sought to engage in economic coercion in its relations with Tokyo, and Japan’s response offers valuable lessons in how to mitigate such attempts with cooperative arrangements with key long-standing partners playing a critical role. Just last year, with China’s dominance in the electric vehicle battery market growing, the US and Japan concluded an agreement aimed at diversifying lithium battery supply chains and reducing dependence on China.

In 2023, Japan also, with the EU in the context of the EU-Japan Summit, explored methods focused on bolstering technological cooperation while enhancing supply chain distributions. The President of the European Commission Ursula von der Leyen underlined the similar challenges facing both Tokyo and Brussels:

"Economic security is a common concern for Japan and the EU. We share similar dependencies, and we both need to de-risk our supply chains. One of our objectives is to reduce overreliance for products that are vital for our economies, like critical raw materials and semiconductors on a handful of suppliers – many of them based in China".

Moreover, Washington and Tokyo also released a joint statement in the context of Japan’s Prime Minister Kishida’s April 2024 visit to Washington that reaffirmed a shared commitment to building a prosperous future together. This also included reference to securing supply lines, fostering innovation competitiveness, and promoting security on land, sea, and air.

With Brussels, Tokyo, and Washington moving closer together in working to counter economic coercion, Tokyo should harness its know-how in addressing past attempts at economic coercion and its relationships in both Brussels and Washington to promote greater coordination in efforts to both promote critical technologies and supply chain resilience.

A New Critical Tech Trilateral? The EU, Japan, and United States

Over the past decade Tokyo has sought to deepen cooperative frameworks on critical technology and economic security with both the EU and the US. The May 2024 OECD Ministerial Meeting in Paris is a further step in the right direction, but greater coordination is required among key partners to make efforts to counter economic coercion effective. With presidential elections later this year in Washington, there is significant uncertainty as to the impact a change in the White House will have on EU-US relations; however, a focus on enhanced economic security in a Brussels-Tokyo-Washington format could provide a framework through which the ongoing challenges of competitiveness in critical technologies and supply chain resilience can continue to be addressed.

Brussels, Tokyo, and Washington are confronted with an uncertain geopolitical environment, which necessitates closer cooperation across multiple sectors to minimize the negative effects of AI on domestic inequalities while maintaining economic and political security abroad. The urgency resulting from this evolving global landscape necessitates enhanced cooperation. Diversification of supply chains requires a rethinking of international trade in a manner that considers security and efficiency. In the context of promoting resilient supply chains and free flow of data that Brussels, Tokyo and Washington should continue to incubate a long-standing trust which has been enjoyed through an augmented “information exchange pipeline” between business, scholars, and engineers.

Likewise, the conclusion of the EU’s Strategic and Economic Partnership agreements with Tokyo provides a solid foundation for deepening initiatives in the field of critical technologies, secured by commitments agreed to during the Japan-EU Digital Partnership Council. Moreover, Japan’s proposed Institutional Arrangement for Partnership (IAP), endorsed by the G7, could serve, under the auspices of the OECD, to promote international coordination on cross-border data governance. To be sure, the extent to which cooperation between Brussels, Tokyo, and Washington can be sustained on critical and emerging technologies in the coming years will likely be decisive for the future economic competitiveness of these global economies.

Steven Regalo is an MA in International Relations student at Tokyo International University currently writing a dissertation on Japan-US cooperation on critical technologies.

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