Asia Times: That Japan-China trade row nonsense


	June 22, 2001	atimes.com

Editorials

That Japan-China trade row nonsense

China has decided to impose new tariffs on Japanese autos, cellular phones and air conditioners in retaliation for Japanese limits on imports of Chinese farm products, including leeks, shiitake mushrooms and raw materials for tatami mats. The total value of the affected traded goods remains quite small and Japanese Economy, Trade and Industry Minister Takeo Hiranuma has promised early resolution of the dispute through talks. But the very fact that the trade row developed at all also indicates the possibility of an escalating cycle of mutual reprisals.

This is absurd. After years of negotiations, final hurdles for China's entry into the World Trade Organization (WTO) have just been cleared. With that, all of Asia should now be looking forward to more liberal trade regimes, not sets of new restrictions. Putting up barriers to surging imports that threaten domestic industries is a practice allowed by the WTO. But for Japan to exercise such safeguards is utterly inconsistent with its newly discovered, self-proclaimed role as a champion of free trade in Asia and between Asia and the rest of the world as well, as with the new Koizumi government's loudly trumpeted commitment to reform and deregulation of the long-protected and inefficient sectors of the domestic economy. Japan's latest protectionist actions are petty and stupid, fully deserve China's ire and retaliation, and put a huge question mark behind the political viability of Koizumi's reform drive just when the world was beginning to believe that this time it was for real.

Over the past several years, China has become an increasingly important trading partner for Japan and destination for Japanese investments. This is quite obviously in the best mutual interest of both countries, with Japan a large market for lower-technology manufactured Chinese goods and China the recipient of investment and technology transfers from Japan. Only the most short-sighted of political concerns can explain the erection of Japanese import barriers. Do Prime Minister Junichiro Koizumi and his Liberal Democratic Party so badly need farm votes in the upcoming Upper House of Parliament elections as to jeopardize hard-won trade liberalization signaled by China's WTO accession?

The irony of it all is that these moves will impact much more negatively on Japan than China - not because there will now be restrictions on the less than 1 percent of its automobile production Japan sends to China, but because of the political signals Japanese protectionist measures send out domestically.

Japan is talking with various countries in the region as well as with Mexico about free trade agreements above and beyond what's mandated by the WTO. There has even been talk about a US-Japan free trade agreement that would remove all barriers to bilateral trade and investment. If there is any one thing that could quickly force reform of Japan's domestically-oriented industries, impel them to improve their efficiencies or go out of existence, it's these type of trade agreements that foster do-or-die competition. If Japan's economy is to be saved, that's what's required. Protecting shiitake farmers, however small the amounts of money involved, is a very big step in the wrong direction.

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