Bigger trade picture far outweighs targeted protectionism: Japanese experts

Updated 2018-03-29 15:40:05 Xinhua

A bigger trade picture is far more beneficial than trying to overly-protect a single sector and protectionism is raising risks of setting back global trade, Japan-based experts said Wednesday.

Japan has learned through the exhaustive and now defunct Trans-Pacific Partnership (TPP) that not playing by the rules while expecting everyone else to not only obstructed the huge potential for direct domestic economic growth, but also stifled a broad consensus on trade deals that would have had wide-reaching benefits, which Japan also stood to gain from, experts maintained.

"It was never going to be one rule for us and another rule for them and that's partly why the TPP deal, which has now been replaced by the lesser Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), was more than five years at loggerheads," Akihiro Hoshino, a senior quantitative strategist at Nomura Holdings Inc. told Xinhua.

"But perhaps it was through that dragged out and finally unsuccessful process that Japan conceded that the bigger trade picture was far more beneficial than trying to overly-protect a single sector," Hoshino said.

He went on to explain that during that time, Japanese trade negotiators had the tough job of trying to persuade the politically powerful Central Union of Agricultural Cooperatives, who advocated tariffs of more than 700 percent being slapped on foreign imports of rice, to vastly lower the bar, for the sake of the broader deal.

"Regional trade pacts, Free Trade Agreements (FTAs) and bi and multilateral deals are the way forward for the global economy and, in my opinion, the recent protectionist moves by some countries really go against the grain," Hoshino continued.

Generally speaking, in term of expertise and labor, intellectual property, natural resources and finished goods, many countries are abundant in some areas and scarce in others. And herein lies the fundamentals of trade, he explained.

"We will give you X in exchange for Y. But when Y comes with additional costs there's an imbalance ... And as we're seeing recently, this could have huge ramifications, not just for the exporters but for all concerned," said the expert.

Recent protectionist moves by some countries, as well as being unilateral and potentially not in line with World Trade Organization (WTO) rules, have been founded on the premise of safeguarding industries and protecting jobs as well as addressing perceived trade imbalances.

But as analysts here have highlighted, such unilateral moves and related discourse, not only send international stock markets haywire as globally risk averse moods lead to equities routs, but also threaten to severely disrupt global supply chains, and ultimately end up damaging the very industries in the country the move is purportedly trying to protect.

And, of course, there are other repercussions which could be equally devastating, such as "targeted" countries refusing to rollover and deciding to retaliate, as is their inalienable right.

Makoto Sengoku, a market analyst at the Tokai Tokyo Research Institute, said of recent moves towards protectionism that the impact may not have been fully calculated and that "protectionism is raising risks of setting back global trade."

Other market strategists here have concurred, pointing out that no country exists in a bubble and global trade in the developed world is all interconnected and countries advocating rigid protectionism or using wheeler-dealer-type tactics to bully a competitor would, rather than helping said country's economy, negatively impact the global economy to which said country is inextricably linked.

Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities suggested recently that if such a scenario were to occur between two major economies, then there would certainly be a negative impact on the global economy.

"...who is not worried about the impact on the real economy?" he quizzed.

Japan, a reformed wielder of the "exponentially high import tariff baton," would itself as a major economy become ensnared in the fallout of targeted protectionism in myriad ways beyond those of mere economics, as its government seniors have pointed out.

Japanese Foreign Minister Taro Kono on the subject said that such "regrettable" protectionist maneuvers by some countries could have a major influence on their economic and cooperative relations with Japan ... both in alliance and even the world economy.

Japan's top government spokesperson Chief Cabinet Secretary Yoshihide Suga, for his part, speaking on the matter said recently that certain exports from Japan, far from posing any risks, had actually and quantifiably helped boost industry and employment in the recipient country.

Many other countries have voiced similar and valid arguments amid a potentially turbulent time of protectionism, tariffs and reprisals.

Suffice to say such a scenario would "affect a lot of countries, including Japan," Masakazu Satou, a senior analyst at Gaitame Online, said of the thorny issue.

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