Cancun ministerial trade talks need active input from Japan

By Howard H. Baker, Jr.

Japan is one of the greatest trading nations in history. No nation has ever had trading companies with as many traders in every corner of the world supported by modern telecommunications, as Japan has today. No nation has been more successful in manufacturing such a wide range of products including automobiles, consumer electronics, machine tools, specialty steel, computer game software and animated movies, to meet the needs of customers throughout the world. And no nation has been more successful in using the world trading system to improve the quality of life of its people.

The world is filled with countries that want to more fully participate in the global trading system. They want to follow the example Japan has set by exporting products where they are competitive in order to earn the foreign exchange they need to buy cars, electronics, food and wine from Japan and other countries. These countries have seen how Japan benefited from the willingness of its trading partners to open their markets and purchase the products that Japan so efficiently produced. They have seen how Japanese wages increased as exports rose. And these nations have struggled, with varying degrees of success, to apply the lessons of Japan to improve the quality of life of their people.

To these countries, the Doha Round of World Trade Organization negotiations is critically important. That is why they were so pleased when Japan, the United States and others agreed to focus on development issues in this new round of trade liberalization talks. They see the Doha Development Agenda as an opportunity to improve the world trading system, an opportunity that comes just once in a generation.

However, there is growing fear that this generation might squander this chance to further expand opportunities for developing countries to participate in the world trading system. The ministerial meeting in Cancun in mid-September represents a critical juncture in these negotiations. This is the meeting where the world's ministers of trade will take stock of progress at the half way point of the Doha negotiations. Measured in months and years, we may be halfway to our negotiating deadline of January 2005, but the majority of real work remains unfinished. To move forward, the world's major trading nations, including the United States and Japan, share a special responsibility to make some tough decisions. These decisions may have painful consequences in the short term. Far too much is at stake, however, for us to allow this historic opportunity to slip away.

Benefits flow both ways
As we consider our options, we must carefully weigh the advantages of freer trade against the costs of maintaining the status quo. There is no better example of the benefits of robust trade than the strong U.S.-Japan trading relationship. Trade has:

  • Supported vibrant industries and job creation, as both countries have exploited their comparative advantages in different sectors. Indeed one of the largest employers in my hometown in Tennessee is a Japanese autoparts company that would never have come to the United States if Japanese manufacturers had not initially established their presence in the U.S. market by exporting cars from Japan.
  • Provided our consumers with a broader range of product choices at better prices than each country's industries could provide on their own.
  • Increased our industries' international competitiveness as competition from imports stimulated them to produce better quality products at lower prices.
  • Enabled companies to take advantage of economies of scale and provided them the bigger markets needed to support product-development research.

Trade has also enriched our lives by enabling Americans to learn the joy of sushi and anime, while Japanese now enjoy California wine and Alaskan seafood while listening to jazz on Bose speakers. American and Japanese companies have worked hard to understand each other as they have struggled to tailor consumer products for each other's markets. These companies are often also leaders in working to increase international understanding, as witnessed by Toyota's program that brings American high school teachers to Japan to learn more about Japanese society and culture. Efforts of American and Japanese traders have helped our two nations move beyond trade friction to strengthen our political and economic relationship. Our trading partnership has developed a web of individual relationships of trust and friendship as businesses have worked together, solved problems, and taken advantage of new opportunities.

Because of the extensive trade and investment between Japan and the United States, we share common interests. When problems arise, like the threat of terrorism, we work together to solve them, because businesses in both countries depend on our solutions. In short, the United States and Japan enjoy a much stronger relationship, and understand each other better, because trade has brought us together.

The Doha negotiations represent a unique opportunity to work together to create a world where all countries will have the opportunity to develop their economies through trade, and where consumers in all countries will benefit from the expanded choice that increased trade affords. As the two largest economies in the world, the United States and Japan must show the leadership needed to build momentum as we move toward Cancun. Japan often underestimates its influence in the world. Japan is such an important part of the global trading economy that emerging from the Doha Round with a vibrant, growing global trading system without Japan's leadership is inconceivable.

Over the past decade slowing economic growth has plagued many parts of the world. The Doha negotiations are critically important because they establish a clear and ambitious mandate that will stimulate trade and economic growth throughout the world. If the Doha negotiations succeed, WTO members will cut tariffs in manufactured products such as processed food and textiles. These tariff cuts will create new export markets for developing countries and support rising incomes. With higher incomes, consumers in developing countries will be able to buy more products produced in the developed world, like Japanese electronics and American software. As trade grows, all will benefit.

However, there is more at stake than just trade. The new round seeks to level the playing field between developed and developing countries by reducing farm subsidies and export subsidies that make if difficult for farmers in poor countries to compete with farmers in rich countries. It seeks to increase protection for intellectual property, thereby enhancing the ability of inventors and artists to benefit from their work. It also seeks to strengthen rules in trade in services, one of the fastest growing sectors in both Japan and the United States. Progress in many of these areas would bring significant benefits for Japan.

Bridging the differences
As we move toward the mid-point in the Doha Round it will be important for each nation to consider the cost of a possible failure in the Round, as well as the benefits from success. If we cannot bridge our differences, we will lose an important opportunity to narrow the gap between the rich and poor. A failure to open markets globally could stimulate more interest in opening markets regionally, creating trading blocs, rather than an open global trading system. Finally, financial analysts around the world are following the negotiations carefully, because a failed round would undermine the foundation of an already fragile world economy.

The Doha negotiations bring together over 140 nations struggling to make full use of this opportunity to create a world where freer, fairer trade will support economic growth and stability for all. In fact, responding to the requests of WTO members, the U.S. and EU have developed and recently released a framework that could serve as a vehicle for moving the agricultural negotiations.

The community of trading nations now looks to Japan for leadership as we move toward Cancun. Now is the time to seek the greater good. We must have a clear vision of the world we want to shape, and the courage and leadership to mold it. I am confident Japan will do its part to get the Doha negotiations successfully concluded, which will expand prosperity worldwide through greater trade. And I am confident that our two nations can work together to reach this virtuous goal.

This article, originally published in the Nikkei Weekly on Aug. 25, 2003, is reproduced here with the Nihon Keizai Shimbunfs permission.