Proposals for Japan''s New Strategies

ECONOMIC GLOBALIZATION: Face adverse effects to skillfully increase benefits

05/23/2007

・While increasing overall wealth, establish measures to prevent a further widening of disparities.

・Respect the WTO and share free-trade benefits with developing nations.

・Japan should push structural reform to open up its market for agricultural produce.

The world has become smaller. People manufacture products, move funds and work all across national boarders. Human economic activities have become broader and faster.

Competition among businesses and countries has intensified in a global market. Mutual economic reliance has deepened, and a crisis in one country has instant repercussions on other nations. National security and national interests can no longer be discussed without taking into account the increasingly global nature of the economy.

Japanese companies are playing a major role in advancing the global economy. Toyota Motor Corp. began full-scale overseas production in 1984. In only a little over 20 years since opening its first factory in the United States, Toyota now has 52 plants overseas in 27 countries and regions.

Direct investment in Southeast Asia, China, and other Asian countries has been growing rapidly in recent years. Integrated systems of production have been spreading in Asia. For example, engines and other individual components are manufactured in different countries and are then brought together to be assembled into complete vehicles. Sales companies and research and development centers follow wherever automakers go.

Initially, the opening of factories in the United States and Europe was intended to avoid trade disputes. But the situation is different in Asia. Automakers began focusing on developing nations with low labor costs following the yen's sharp appreciation in the mid-1980s. Once production takes off, employment increases and technologies are transferred.

If all goes well, global economic activities bring countless benefits.

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The period from the late 19th century to the beginning of the 20th century was also one of great dynamism. But in that instance, the geographical area was limited to Europe, where the industrial revolution got started, and the United States, then regarded as the New World.

The main characteristic of the modern version that began in the 1980s was the rise of Asia.

During the 1980s, the U.S. and British governments pursued a neo-liberalism policy, calling on other countries to open their markets in accordance with market forces. Pretty soon, this movement spread around the world amid the first rumblings of the crumbling of socialism, thereby stimulating the operations of multinational corporations and accelerating globalization.

Yet, the global economy that is supposed to deliver economic growth and affluent lifestyles to people everywhere also has its weaknesses.

A report compiled by the World Bank in 2002 states that developing nations are divided between ones that are globalizing and quickly reducing poverty, and the others that have not done so and where poverty has become worse.

The nearly 3 billion people in China and the Indian Subcontinent have successfully caught the wave, while 2 billion people in Africa and South America have not. The countries that are lagging do not have any real hopes regarding their futures.

Disparities between countries are not the only problem as many people believe that widening income gaps within nations are exacerbated precisely because of the global economy.

Not only that, anti-globalization sentiment is growing in the United States, even though it regards itself as a leader of free trade. Critics complain that products manufactured in developing nations with low wages are flooding the U.S. market, undermining wages and cutting jobs.

In Europe, rising flows of immigrants from Africa and the Middle East are a growing problem. Meantime, China is trying to break away from poverty by integrating itself with the global economy. Yet, rectifying internal disparities has become a major hurdle for Beijing.

Global market competition creates clear divisions between winners and losers. People also tend to ignore the global environment, traditional cultures, and other values that cannot easily be measured with economic yardsticks. The assumption that all such problems will disappear once market principles have been thoroughly spread throughout the world is not very convincing.

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Nonetheless, what will happen if we try to stop globalization? Previous globalization trends were disrupted by world wars and the Great Depression, with nations reverting to bloc economies and financial controls that allowed governments to heavily intervene in markets. But now industrialized nations cannot be allowed to shut their doors to developing countries just to protect their wealth.

A free market economy is very powerful, and sometimes it spins out of control. A global economy will bear rich fruit only with proper governance to oversee it. The touchstone will be revived trade negotiations that the World Trade Organization is pushing for.

Countries must humbly consider not only their own interests but also how to benefit others when establishing new rules for a global economy. Such efforts will help solidify the foundations for peace and stability that are essential elements in global politics.

The worst scenario would be for advanced nations to succumb to further protectionism. If they continue protecting their agricultural produce, developing countries that have nothing but primary products to export will not be able to benefit from free trade.

Criticism that Japan is not opening up agricultural markets is spreading in Asia and other developing countries.

The Japanese government began shifting toward policies to supplement income for financially struggling farmers, rather than protecting them with high tariffs. Japan has no chance against the United States and other countries with vast areas under cultivation. A calm discussion is required as to what degree the Japanese agricultural sector can be protected with financial assistance while promoting reform to lower costs and improve competitiveness.

It is also essential for Japan to bring in more foreign workers. The government must quickly work out policy measures to open up the job market for foreign workers and prepare to receive not only specialists but also a wide range of people. Acceptance of foreign capital is far too small compared with other advanced countries.

Japan's population is declining and its society is aging at the fastest pace in the world. There is no recourse save making the most of the energy of the global economy and growing along with other countries. Japan should venture to change its current inward-looking attitude.

At the same time, it must tackle widening internal disparities. In particular, unemployment remains high among young people, and income gaps are widening.

The government must focus on preventing wealth from becoming overly concentrated and on redistributing it, while providing education and training so that Japanese can perform at higher levels than people in developing nations.

The general public is becoming more sensitive to disparities, and this is a sign that vested interests have begun to be undermined through structural reform.

The government must remember that accelerated reform is the path to a brighter future.(IHT/Asahi: May 23,2007)