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The Honolulu Advertiser

Posted on: Sunday, April 15, 2001


Don't mess with U.S.-Asia marketplace

By Thomas Plate
UCLA professor and columnist for The Honolulu Advertiser and the South China Morning Post

In some respects, the scallion war between Japan and China — not to mention the steel war between the United States and Asia — is every bit as tense as the Sino-U.S. tension over the American spy plane.

Indeed, these clashes serve as a reminder that the region is not always ruled by the logic of money, as economists too often suggest, but by factors more disruptive, frightening and unpredictable.

In Japan right now, powerful interests are pulling strings behind the scenes to compel their government to stop imported Chinese vegetables from being sold to consumers at prices lower than those of Japanese vegetable products. These farmer-led agricultural groups have great sway over that kingmaker of prime ministers: the Liberal Democratic Party.

More than ever these days, the LDP, increasingly shaky, is bending over backward to appease its constituencies. Before long, heretofore inexpensive Chinese-grown vegetables, notably scallions and mushrooms, could wind up costing Japanese consumers as much as home-grown products.

Chinese government protests will probably be ineffective, even though not many economists anywhere endorse protectionism. And it's particularly illogical for the Japanese to want prices to rise on consumer goods at a time when their economy is in such difficulty. But Tokyo cowers in the face of the 8 million-member Japan Agricultural Cooperatives group.

Indeed, other lobbies — from eel farmers to towel manufacturers — are petitioning for similar import protection.

Let's not bash just Japan: Even in America, where the world's foremost proponents of free trade and open markets lecture daily to the rest of the world, the dreary domestic politics of protectionism rears its ugly head.

Japan and Korea know this well: For the U.S. steel industry and the steel unions are now locked in efforts to thwart the sale of lower-cost Asian steel. Since they don't have the mettle to handle the lower prices of the competition, they make the argument that foreigners are shoveling outrageous and illegal amounts of product on the market to break the back of U.S. industry and to cost American workers jobs.

This emotionally loaded economic issue has captured the attention of U.S. Federal Reserve Chairman Alan Greenspan. He has openly attacked his own country's anti-dumping laws (used to restrict the import of lower-priced products like Asian steel) as little more than smoke-screens for fighting off foreign competition. So-called anti-dumping laws are aimed at protecting industries from unfair competition, he bluntly told a U.S. Senate hearing recently, and are often no more than political crutches for sectors that can't handle the heat.

"The protectionist propensity ... is unwise and surely self-defeating," he said.

But economic logic is not always as powerful as domestic emotion. That's the link between the brewing scallion and steel crises — and the spy plane crisis. While the successful return of the U.S. crew was a tribute to calmer heads in both China and America, what was even more extraordinary was that important constituencies and interests on both sides of the Pacific are inclined to push this crisis further. This is the case even though everyone involved understood that a prolonged impasse could have seriously damaged both countries economically.

The American Congress would have angrily voted new import taxes to hike the cost of Chinese goods to cut their sales. Citizens angry at China for holding the U.S. crew in detention wanted to organize consumer boycotts of Chinese-produced goods at stores such as Kmart and Wal-Mart. This would have hurt not only the Chinese exporter but the American consumer as well, even as it sated public anger: Higher consumer prices on a whole slew of formerly low-priced Chinese imports would have ensued, fueling inflation.

It's even possible that Congress would have moved to block China's admission to the World Trade Organization or raise anew the Permanent Normal Trade Relations issue, retarding not only China's progress but Asia's as well.

Economists revel in the cold logic of mathematics, but domestic politics is a hothouse of emotion that can scramble minds, unbalance equations and set off whirlwinds of trouble. Large-scale protectionism, it should be noted, helped trigger the Great World Depression of the 1930s.

It was a very emotional time then — just as it seems to be now.