PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | SPEECHES & EDITORIALS | 1999 | PROTECTIONISM IN THE 21ST CENTURY

Can protectionism be eliminated in the 21st century? Hisamitsu Arai Vice-Minister for International Affairs, Ministry of International Trade and Industry, Japan Monday, May 17, 1999 Protectionism and the market economy History tells that protectionism does not disappear lightly. Whatever the ideology, the reality is that protectionism is not likely to disappear. In fact, if I asked you if you were a protectionist, 99 out of 100 of you would probably tell me that you were not, yet while free trade as an ideology receives wide support, in the real world, protectionism will indeed live on into the future. History has told of the ongoing comparable strength of protectionism and free trade. Protectionism flourished in the 19th century, while the United Kingdom established the most liberal trade system in the world through the introduction of voluntary liberalization, enjoying its prosperity to the full. The antagonism between protectionism and free trade has continued into the 20th century. After World War I, the Great Depression caused countries to impose high tariffs to protect their industries and the bloc economies. Reflecting on this, the Bretton Woods structure was created in the postwar period, but following the relative fall in status of the United States, which supported the structure, a tendency of frequent use of protectionist measures, such as voluntary export restrictions, was developed. The eight Rounds we have had since the war have put a stop to such trends in protectionism. The global economy in the 21st century Firstly, in the 21st century, different kind of the market economy will appear. As a result, protectionism will be insignificant. In the 21st century, we will probably witness more progress in information technology, the further advancement of globalization and the appearance of a different economic environment than we have experienced until now. The progress in information technology will change the nature of economic activities and eliminate national borders. Nations will consequently lose the significance of adhering to national borders and will have no choice but to accept that information will freely transcend borders. The globalization of business will reach its limit in the 21st century, and the market will become more integrated, perhaps even becoming one whole. In a borderless market, unrelated to national contributions, the search for optimal economic activities will commence. Under such circumstances, the meaning of protectionism-preventing the influx of manufactured goods at the borders-will be lost and cease to function. And the majority of businesspersons with keen foresight will probably lose confidence in ineffective governments which invest limited capital resources due to protectionism-a policy which does not sufficiently function. Realizing the value of global citizens Secondly, the value of the "global citizen", which is the environment and human rights etc., will manifest itself more globally, and direct democracy will expand. It is certain that the traditional role of protectionism has come to an end, but this does not mean that we have lost the need for border restrictions. As globalization progresses, a different value, which is the environment and human rights, will manifest itself, a value that cannot be obtained by pursuing profit through markets-the value of global awareness. The 21st century will be an era in which individual awareness and opinion transcends national borders. Forward, this concept of the "global citizen" and the pursuit of economic rationality often conflict with one another. The present WTO system does not, in the name of economic rationality, deny activities to protect the values of the environment and human rights, culture and religion. We will allow trade restrictions because of these values. Integrating developing countries into a global economy Thirdly, the development form of developing countries will change. When it comes to issues involving developing countries, the thinking that we should protect infant industries will remain. However even in cases where we consider integrating developing countries into a global economy, under the circumstances of advancing globalization, we must be aware that the traditional methods for protectionism do not function and may therefore have a negative impact on the economy.