China in Transition

Can Japan be a Free Trader and a Protectionist at the Same Time?

Chi Hung KWAN
Consulting Fellow, RIETI

Following last year's imposition by Japan of provisional safeguard measures on three agricultural products, safeguards were imposed by the United States this year on steel imports. With Japan's position changing from safeguard "imposer" to "imposee," can it find a consistent logic to argue for protectionism and free trade at the same time?

President George W. Bush described the U.S.' imposition of safeguard measures on steel products of foreign countries in the following way. Surges in foreign steel imports to the U.S. have resulted in bankruptcies and increased unemployment. The U.S. decided to take this action as a temporary measure to facilitate the sharp adjustment for U.S. steel manufacturers and workers. He described the safeguards as expressly sanctioned by the rules of the World Trade Organization.

At the same time, the U.S. government announced its policy to consolidate global excess capacity and to correct the distortion in the steel market brought about by subsidies and other means. It claimed that this imposition of temporary safeguard measures would not hinder free trade over the long-term.

Japan counters with, "The Government of Japan is convinced that the U.S. safeguard measures do not satisfy the requirements specified by the WTO rules. In light of the negative impact on other countries and the importance of upholding and strengthening the WTO system, it would be difficult for us simply to overlook the U.S. measures. It is our understanding that the real problems facing the U.S. steel industry are largely attributable to its lack of international competitiveness, arising from such factors as huge legacy costs and inefficient production capacity. Simply resorting to import safeguard measures without addressing these underlying issues will fail to bring about a substantive solution for the industry."

Japan, which clearly opposes safeguard measures, actually imposed these measures itself in recent memory. These are the provisional safeguard measures on Welsh onions and other agricultural products of April 2001. At the time, Japan held that commercial farmers were being hit by falling prices due to the sharp increase in imports of three agricultural products (Welsh onions, fresh shiitake mushrooms and rushes used for making tatami mats), and that rationalization of production and management would be advanced in the agriculture industry in the meantime. It claimed that the measures were in accordance with the WTO Agreement.

China responded that the measures had no basis in fact and violated WTO rules. It held that production of the three agricultural products was slumping due to Japan's production structure itself, which is uneconomical and lacks competitiveness, and that this is the inevitable result of the lack of comparative advantage of Japan's industries, and by no means the result of a short-term increase in imports. Therefore, it deemed the measures inappropriate to resolve the problem. The imposition of these measures do not only hurt Chinese exporters, producers and farmers, but also harm Japan's related industries and many Japanese consumers. Moreover, it will foster protectionism in opposition to the WTO system.

Thus, despite differences in the countries and industries concerned, the arguments of the "imposers" are always consistent, and the "imposees" always have a common counterargument. The general pattern is as follows. On one hand, when a country finds it necessary to protect its own interests (or a domestic interest group with political clout), it imposes safeguards as a right authorized by the WTO, hoping that domestic producers will regain they competitiveness. On the other hand, when a country becomes the target of safeguards, it responds by insisting that the "imposer" has violated WTO rules and cannot resolve its problems by protectionist means. It is unfortunate that Japan, which has fully enjoyed the benefits of free trade, also practices this double standard when dealing with its trading partners.

April 5, 2002

April 5, 2002