Consensus against protectionism

Press, 22 June 1984, Page 16

Consensus against protectionism

From

MARK FRYER,

in Vancouver

The removal of trade barriers and a solution to the debt crisis facing many developing nations were the main requirements for economic recovery to emerge from a meeting of some 500 of the Pacific region’s most senior businessmen in Vancouver recently. The businessmen, from 15 countries, gave an enthusiastic response to a speech by the Prime Minister, Sir Robert Muldoon, calling for a new international political accord that would form the basis for an overhaul of the world’s trade and economic system. The occasion was the annual meeting of the Pacific Basin Economic Council (P.8.E.C.), a business group devoted to increasing Pacific trade and co-operation. The organisation will hold its 1985 annual meeting in Auckland. Among the P.B.E.C. members at the Vancouver conference were executives from many of the region’s major companies, including Mitsubishi of Japan, Canada’s Alcan, Chase Manhattan from the United States, and New Zealand’s Fletcher Challenge Corporation. While P.B.E.C. has no power to change government policies, it does have a lot of influence, and P.B.E.C. member committees in many countries have close advisory relationships with their governments.

One of the strongest messages the P.B.E.C. members took home with them was the need to turn back the advancing tide of protectionism in many countries. “All governments must bear in

mind that when we protect uncompetitive industries, or try to give an artificial edge to our own firms, we damage the international trade and payments system on which we all depend,” the Canadian Deputy Prime Minister and Secretary of State for External Affairs, Mr A. J. MacEachen, told the conference. Mr N. Ushiba, the Japanese former Minister of State for External Affairs, said that protectionism had seriously harmed the General Agreement on Tariffs and Trade (G.A.T.T.) — “the Internationa agreement that has sustained postwar prosperity. “Many countries had set up bilateral agreements that bypass or violate G.A.T.T. rules, said Mr Ushiba, and an estimated 40 per cent of world trade now took place under such agreements. He criticised the United States and the European Economic Community for recent protectionist moves, while admitting that “Japan is not yet fully open, particularly for farm products.” Lowering agricultural trade barriers is a particularly urgent issue, according to a Canadian industrialist who is the P.B.E.C. president, Mr J. H. Stevens, who pointed to the importance of agricultural exports for many developing countries. He said that reducing protectionism meant supporting G.A.T.T.

and a new round of G.A.T.T. talks, something suggested recently by the Japanese Prime Minister, Mr Nakasone. At a recent conference on protectionism held in South Korea,

everyone nad agreed that the international trading system must be opened up, said Mr Stevens. However, he said, “almost all (those at the conference) agreed that the political will is lacking to make a concerted attack on protectionist barriers that have been erected over the last decade.” While everyone’s expectations of success were limited, said Mr Stevens, “all agreed that the process was too important to ignore.” While protectionism is an international problem requiring an international solution, Sir Robert said that Pacific countries could “move a little faster than the rest of the world.” The C.E.R. agreement with Australia was an example of such a step, he said, but he warned that any such moves must be “outward-looking.” “Any regional initiative which had an exclusive or inward-looking direction would be positively dangerous to the region’s well-being,” he said.

Smaller countries need to play a big part in rebuilding the international trade system, said Canada’s Mr R. E. Latimer, Assistant Deputy Minister for economic and trade policy in the Department of External Affairs. “Don’t lie back and wait for the super Powers, they can get by better outside the rules,” he warned.

Businessmen were also told to reduce their own demands for protection from overseas competition, and to get out and publicise the virtues of free trade.

Although protectionism was a serious threat to the world economy, said Mr Stevens, the debt crisis among many developing nations was “the most important

economic problem needing attention today.” With the 25 main developing countries expected to owe a total of about SUSBSO billion by the end of this year, some way had to be found to reduce the burden of servicing such huge debts, he said. At the same time, the developing countries themselves had to attract more overseas investment, he said.

“What happens to the international banking system, as a result of developments in Latin America and elsewhere, has significant implications for the Pacific economies which need additional financing to continue the orderly expansion of imports and exports,” said Mr Stevens. “If you reduce the economies of the less developed countries you reduce the markets for the developed countries.”

Sir Robert’s plan for tackling trade and economic problems was “a practical way of breaking out of the deadlock,” said Mr Stevens.

According to Mr Ushiba, free trade was also the key to solving the debt crisis. “The nations concerned will have to take farreaching steps to restore order to their economic management, but the single most important thing for them is to ensure adequate cash resources by expanding exports,” he said. The conference also heard about some of the other problems facing the Pacific region, including high interest rates and an overvalued United States dollar — much the same problems that would have featured in a similar conference held anywhere else in the world. While most of the delegates would probably have agreed with

Mr Ushiba’s assessment of the Pacific as “the most dynamic region in the world,” the mood of the conference was a long way from unbridled optimism. “Although growth has resumed, it will not match the growth of the past two decades,” said Mr Stevens. “The global recovery is well under way, but it is still too dependent on the performance of the United States economy.”

Although the spectacular growth rates achieved by many Pacific countries in the 1970 s may not be experienced again in the near future, Mr MacEachen said that “projected rates of growth for the rest of the decade still exceed even the most optimistic predictions for Europe and North America.”

Speeches extolling the growing importance of the Pacific region have become almost a cliche among Canadian politicians in recent years, but the rhetoric is backed up by a substantive change in the country’s trading patterns.

Canadian trade across the Atlantic has been shrinking while trade across the Pacific has been growing. Last year, for the first time, Asian countries bought more Canadian exports than did Western Europe.

“Relations with Pacific nations will be a priority on our international agenda,” said Mr MacEachen.

To emphasise the priority, Canada will soon set up an AsiaPacific Foundation to improve links between Canada and the Pacific region, to carry out development projects, and to advise the Canadian Government on policies appropriate to the region.