The lengthy communique issued at the end of the recent Group of 20 summit in Cannes has been largely overlooked in the media, which have understandably focused on the financial crisis facing the eurozone. It is probable that many leaders did not even read the full text that had been prepared in advance by officials, but they endorsed it and must therefore be considered to have agreed on its contents.

The sections on agriculture and food, economic development, and climate change deserve the particular attention of governments. But in the context of economic growth, which must surely be the number one priority, the section headed “Avoiding Protectionism and Reinforcing the Multilateral Trading System” should be given publicity. The G-20 leaders reaffirmed their standstill commitments until the end of 2013 and their undertaking to “roll back any new protectionist measures that may have arisen including new export restrictions.” This commitment should be noted by parliaments including the U.S. Congress as well as by officials and ministers involved with trade issues.

The next paragraph declares that the leaders “stand by the Doha Development Agenda” but recognize that “to contribute to confidence, we need to pursue in 2012 fresh, credible approaches to furthering negotiations.” The G-20 also expressed support for “strengthening the World Trade Organization.”

We need to ensure that these pious words are followed up by real action.

In Europe, the single market has been the most important effective instrument in promoting trade not only between European countries but also with the rest of the world. It has greatly benefited the British economy by opening up European markets to our exports. If Britain were not part of the single market it would be a much poorer country. It has greatly benefited the other EU countries as well. A Greek default should not lead to changes in the single market, but if Greece had to leave the eurozone or, even worse, the EU it would inevitably have knock-on effects on the single market.

Unemployment in EU countries, especially in Spain, is too high. Unemployment always leads to pressures for protectionist measures, but even if these are announced as temporary they frequently become semi-permanent. The overall result is a loss of competitiveness and a decline in overall trade that reduces opportunities for economic growth.

Protectionist pressures in the United States are stronger than in Europe. In the past these were directed at Japan. Now China is the target and the focus is on the exchange rate. China’s gigantic reserves inevitably arouse jealousy and fear, but American protectionist steps against Chinese exports would be counter productive. The size of these reserves is, however, a reminder that in order to avoid a protectionist spiral surplus countries as well as deficit countries have an obligation to the international community to reduce their surpluses. One way is to expand investments abroad; another is to stimulate domestic demand. China needs to do both.

Growth in the Japanese economy has been hard to discern for many years. Meanwhile, Japan’s population is graying and will soon decline. South Korea, which has concluded a trade treaty with the U.S., seems to be forging ahead and South Korean firms such as Samsung are gaining quickly in world markets.

Prime Minister Yoshihiko Noda has rightly seen that one step that would help to stimulate growth and trade would be for Japan to join negotiations for the Trans-Pacific Partnership (TPP). But he faces obstinate opposition from within his own party. Some members apparently fear that if they stand up to the farm lobby, which is opposed to Japan joining the TPP because it would mean reductions in the protectionist barriers that protect their earnings, the members may lose their seats.

From abroad it looks as though the farmers who control the tail are wagging the big dog of Japanese industry. The farmers no doubt need help, but it should not be beyond Japan’s resources and ingenuity to find ways of ensuring their livelihood. The emotional tie with the land is not unique to Japan. Agriculture has had to decline just as much, if not more, in parts of Europe, including the United Kingdom.

If Japan is to achieve growth and play a positive role in trade negotiations it will have to do more to demonstrate that Japanese industry and services are capable of adapting to changes in the world outside Japan. Japan needs to become more open to foreign investment and Japanese industry and services have to become more internationally integrated than they are at present. Japanese firms must become less inward looking and the old guard in companies needs to accept that Japan is no more or less unique than any other country.

The old ways of doing business need to change more radically than they have done in recent years. Japan does not have to adopt all the features of so-called Anglo-Saxon capitalism but there must be greater transparency in Japanese corporate governance and greater rigor in accounting practices.

Reports from Japan suggest that the Olympus scandal is not unique and that there have been some fairly dubious goings on in a number of other companies. Rumors about yakuza involvement may be exaggerated, but they need to be scotched soon if the reputation of Japanese business is to be upheld.

Without radical changes such as these, the Japanese economy will be unable to expand in the way it should. Nor will it be able to play its part in the further development of international trade which is so essential for growth in our economies and for reducing the social instability that stems from unemployment.

Hugh Cortazzi served as Britain’s ambassador to Japan from 1980-1984.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.