The global financial crisis triggered by the subprime mortgage fiasco in the United States has not only caused the credit crunch but it has also shrunk demand, thus greatly harming the real economy. At a time when major economies face the danger of simultaneous recessions, leaders from the Asia-Pacific Economic Cooperation (APEC) forum, in Lima, issued a special statement that said partly: “We are committed to reach agreement on modalities next month on the basis of progress made to date” on the seven-year-old trade liberalization talks under the World Trade Organization.
The leaders agreed that they would “direct our ministers to meet in Geneva in December to achieve that objective.” Prime Minister Taro Aso should be aware of Japan’s responsibility in the trade talks as the world’s No. 2 economy.
The statement is a timely and welcome commitment from the leaders of the 21 APEC economies, which account for half of the world’s economic output. It shows their awareness of the bitter lesson of the 1930s. Each country set up high trade barriers to protect its industries, leading to a sharp decrease in world trade, which in turn deepened the Great Depression.
The Doha round of trade talks collapsed in July due to a conflict between the United States, and China and India, over safeguard measures for restricting agricultural imports. APEC leaders’ leadership will be especially important in striking a framework for a deal in the trade talks by yearend.
Although Japan needs to solve issues related to the agricultural sector, Mr. Aso should take necessary actions immediately so that the talks will come to a successful conclusion. He needs to issue a clear signal that Japan is truly serious about the WTO talks.
Japan will have to accept large cuts in its tariffs on agricultural imports against strong resistance from domestic farmers. The government needs to consider how to overcome pains caused by the trade talks while strengthening Japan’s farm sector. These cannot be achieved without strong political will and ingenuity.