The World Cup of soccer wrapped up last month on an uncertain note. The unfortunate incident between French star Zinedine Zidane and Italian Marco Materazzi left an unsavory taste in the mouths of spectators worldwide.
But there was probably a more significant though less closely watched international competition going on that month which may have resulted in all nations losing out.
On July 24th, Pascal Lamy, director general of the World Trade Organization, announced that the Doha Development Agenda talks were being suspended because differences between the participating parties could not be resolved. In his statement to the press, Mr. Lamy said “today there are only losers,” an ominous pronouncement.
Furthermore, an invitation by Australian Trade Minister Mark Vaile on Aug. 2 to resume talks as early as next month was flatly rejected by EU Agriculture Commission head Mariann Fischer Boel, who said, “I do not expect to see such an opportunity in the near future.”
One of the key obstacles has been agricultural subsidies in industrial nations. Like other industrial nations, Japan has steadfastly barred access to certain parts of its food market, especially rice, which is protected by a tariff of over 700 percent.
However, in the summit, the EU proposed that it reduce tariffs on agricultural products by 46 percent and promised their elimination by 2013. The concessions, however, did not meet the demands of developing nations.
Although tariff reductions like these would no doubt have an impact on farmers, some nations stand to be less affected than others.
France for example has a food self-sufficiency ratio of 130 percent. Likewise, the U.S. produces 120 percent of what it needs to feed the population. The subsidies both nations offer their producers no doubt helped achieve this state of plentifulness.
In Japan’s case, however, the self-sufficiency rate is only 40 percent, according to the Agriculture, Forestry and Fisheries Ministry. Since Japan is at the mercy of international trade, opening markets to imports would wreak havoc on its farmers, who are already under pressure from a diminishing workforce and steady depopulation in the hinterland.
The failure of the talks then produces a rather difficult economic paradox for Japan: Without access to markets for finished goods, it will suffer losses in the long run. But to get that access, it must make concessions that will likely lead to the implosion of domestic agriculture.
The agricultural lobby in Japan is a fiercely nationalistic one, and politicians who put rice on the bargaining table do so at their own peril.
In the meantime, Japan has pursued bilateral free-trade agreements as a means to get the market access it needs. So far, there are only three major deals to speak of: Singapore, Mexico and Malaysia.
An agreement with Thailand was signed last year, but the two nations had trouble agreeing (perhaps predictably) on agricultural subsidies. As a result, Thailand offered only small concessions on automotive imports, which was a key aspect for Japan.
But one-on-one deals like these pale in comparison to huge trade zones like NAFTA or the EU. The value generated by these two zones alone represents 60 percent of the world economy.
Political aspects aside, the EU exemplifies the economic success of multilateralism.
Jacques Desponts, Chairman of the WTO Committee at the French Enterprises Association, said that multilateral negotiations create laws that are “stable, predictable, understandable and nondiscriminatory.” By creating mutually agreed upon frameworks, countries gain not only options for trade and industry, but also a forum and a method for resolving future disputes.
Similarly, Japan must look for the next-best solution following the demise of the Doha talks — a multilateral Asian free-trade agreement.
Prime Minister Junichiro Koizumi has said he “extremely regrets” the failure of the WTO talks and promised to make efforts to get them back on track. And Chief Cabinet Secretary Shinzo Abe, Koizumi’s likely successor, has promised to work on promoting a broader Asian free-trade plan that would also include Australia, New Zealand and India.
New Zealand has said it backs the idea of an Asian free-trade zone, which is tentatively set to be discussed at the next meeting of ASEAN ministers in Kuala Lumpur in September. But New Zealand also made its free-trade objectives clear last month in Geneva: They want reductions in agricultural tariffs — especially in Japan.
Regardless of the direction Japan decides to take, one thing is clear: The trends in globalization have gone too far to be averted. Whether through a series of bilateral deals or a multilateral agreement, it is paramount for Japan to get a trading framework within this trend in place that can help it remain competitive.
Unlike the World Cup where only one team comes out on top, multilateral agreements have the potential to benefit all players.
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