How the US Could Use Trade Agreements to Boost the Silver Economy
Life + Money

How the US Could Use Trade Agreements to Boost the Silver Economy

Toru Hanai

When Japanese Prime Minister Shinzo Abe met with President Trump last week, the two may have discussed how population aging is transforming their nations’ societies and economies – and the need for creative solutions. The issue should be top-of-mind: Prime Minster Abe heads the world’s foremost “super-aging” society, and Trump, the oldest president upon assuming office in American history, leads a country where the population over 65 will almost double by 2050.

A particularly productive conversation might have uncovered a step that’s simple, cost-efficient and innovative: including aging in any potential bilateral U.S.-Japan trade agreement.

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Aging and trade policy may seem unconnected. But trade agreements that include language about domestic economic issues have become commonplace, and few issues match aging’s workforce, market and budgetary impacts. Indeed, in the coming decades, the economic vitality of Japan and the U.S. will be determined at least as much by the aging of society as by traditional trade policy areas such as tariffs and investment. So why shouldn’t a U.S.-Japan trade agreement address this most critical trend of population aging?   

Moreover, trade agreements are useful tools to set out language and goals that are difficult to pass through the ringer of national politics. A U.S.-Japan trade agreement could establish a framework for policy innovation through the strategic screen of population aging, which would help to guide and enable lasting change.

To use a trade agreement to connect economic growth with the fact of an aging population, focus on three areas:

First, such a trade agreement could drive progress on changing the retirement age, a relic of the 20th century that makes no sense when both Americans and Japanese are increasingly living to 100. The fiscal unsustainability of more retirees than workers must be addressed. Potential solutions include eliminating mandatory retirement rules, creating policies that enable later-life work, and providing flexibility to older employees. These changes could boost both nation’s productivity, while also deepening a relationship between prosperous trading partners. And as the rest of the world also ages, government after government would look to the U.S. and Japan as leaders on what many regard as a difficult change from 20th century standards.

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Second, the agreement could prompt the U.S. and Japan to accelerate their response to the health needs of their aging populations, including the health and fiscal nightmare of our time, Alzheimer’s disease and other dementias. Without policies to encourage healthy, active aging and to manage chronic, non-communicable diseases, the medical and economic burdens faced by older adults will overwhelm both nations. The ongoing tragedy of Alzheimer’s and dementia is turning from a health crisis to a fiscal nightmare. In the U.S. and Japan, tens of millions are already affected, the combined costs already total hundreds of billions, and few effective treatments are available. And with prevalence set to nearly triple by 2050, dementia’s costs and human suffering will rapidly escalate.

A trade agreement could also provide the incentives through common labor and tax policies for the growth of innovative care models; one example is home care, which is already saving U.S. hospitals tens of billions. Home care enables those with chronic conditions and their families to afford professional caregiving at roughly half the rate of an assisted living facility, while also serving as a preferred option for the 90 percent of older adults who want to remain at home. Additionally, a trade agreement could designate diseases like dementia as key therapeutic targets, and enable common policy agreements to speed pharmaceutical regulatory pathways so that breakthroughs quickly reach those that need them most.

Third, America and Japan could use the trade agreement to capitalize on their silver economies as a principal driver of growth and job creation. Though older consumers control an increasing share of discretionary income – as much as 70 percent in the U.S. – many businesses continue to design and market products primarily for younger individuals. A trade agreement could provide incentives for products that meet the consumer demands of older adults, triggering consumer spending and economic growth across industries as diverse as healthcare, technology, financial services, retail and fashion.

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The Trump-Abe handshake has had its fifteen minutes of online fame, but the potential benefits could last much longer. Ideally, the handshake could mark both nations preparing to take the leap from conventional 20th century trade policy to a 21st century version that includes a chapter on population aging. If the hundreds of pages of a trade agreement included just a few on aging, it would give the nations a platform to shift economic, healthcare and pension policy for the new realities that they face. Trump and Abe would also be leading the world, which is growing older each year and needs to reimagine its public policy models to match the challenges and opportunities of this demographic megatrend.