Japan in Their Own Words (JITOW)/日本からの意見

Free Trade vs. Protectionism: A Futile Debate
ONO Goro / Emritus Professor, Saitama University

August 16, 2018
In the recent G20 meeting, the frustration of a number of countries against the “America First” policy of President Trump was vented in the expression of concern about the rise of protectionism. The bitter irony is that China, known for its even more aggressive nationalism than Trump’s America, was speaking as if she were a champion of free trade.

In such a process, it is often assumed as given that, in this age of globalization, not only physical products (goods) but also money (capital) and manpower (labor and immigrants) can move about freely.

But, is it really so? Aren’t the criticisms against Trump one-sided? Are they justified?

When “liberalization” of trade in goods came to be advocated, it was justified by the theory of “comparative advantage”. Its reasoning was that “all actors can mutually benefit without damaging anyone’s interests”. Then it would follow then that free trade is the right option.

The pre-requisite assumption for this classic theory of trade is that “the relative relationships among the primary factors of production (land, capital and labor) remain unchanged”. This theory would not apply to cases where there are “movements of money and manpower” that will change the relative relationships.

Without delving into these questions, the advocacy moved on from “trade liberalization” to “capital liberalization”, then to “liberalization of the movement of labor” and finally to “liberalization of the movements of all factors of production, i.e. goods, money and manpower”. This transition has taken place because of a deliberate design on the part of the advanced countries. Having drawn great benefits initially from the “liberalization of trade in goods” and then lost the advantages due to the challenge from the emerging countries, they tried to steer the debate in a direction of their choosing. That is why, while everything else is moving towards liberalization, the approach to intellectual property has become increasingly protectionist. Seen in this light, there does not seem to be much difference between the advocacies of “liberalization” in the past and President Trump’s cry of “America First” in that they are both self-serving.

As is evident from the above, when you look at the movements of all factors, that is, goods, money and manpower, it does not follow, as it did in the case of the liberalization of trade in goods alone, that “all actors can mutually benefit without damaging anyone’s interests of ”. Little wonder, then, if people complain one after another that their interests are damaged.

There will inevitably those who present the counter-argument that “Statistically speaking, free economies yield significant results for world economic growth”. But what’s the point of fretting about all this? After all, it is only the macro-economic indicators that are statistically significant, and there is nothing strange if micro-economic analyses contradict the macro results. Besides, what can be statistically analyzed will necessarily be limited to measurable economic effects, namely, those measurable in monetary terms, which will be only a small part of the total picture.

The advocates of unilateralism or globalization alike cite “the greater happiness of the people” to back up their cause. What, then, does happiness mean in economic terms?

Given that “utility is by nature un-measurable”, the so-called econometrics would be incapable of dealing with the real world that consists of the visceral feelings of the people, though it might be able to deal with a conceptual world consisting of prices that are measureable in monetary terms. Notwithstanding this, the tendency in recent years has been to equate price with utility or value and to rely on money econometrics even in the formulation of policies designed to improve people’s quality of life.

This, too, is only an offshoot of the domestic circumstances in America of today. In the quest for nationally unifying values in the ethnic melting pot of America, they found it convenient to adopt the economic value system represented by prices. In American-style societies where even values are controlled by policy, statistical analyses of policies are bound to yield significant results. It is as simple as that. However, today’s economists, including some Nobel Economics Laureates, misrepresent it as if it were a scientific truth and have thus given universal legitimacy to econometrics.

The two credos of “free economy” and “supremacy of the economy” did not originally have a strong foundation. The U.S. as the hegemon took the lead in spreading the gospels around the globe, and they have somehow come to dominate the scene as authoritative ideologies. However, if they were found to work to the detriment of the U.S., the U.S. would have no qualms about quashing them unconditionally by force. Should that happen, the world economy, which seems to have enjoyed relative stability, could suddenly be plunged into uncertainty.

In other words, such ideologies as free economy and democracy, upheld thus far as if they were absolute truths, can end up like dogmatism or cult worship, unless their inherent shortcomings and weaknesses are recognized and corrected.
For the benefit of future mankind, we should start rebuilding from square one, shunning groundless ideologies of dubious authority.

Goro Ono is Emeritus Professor of Saitama University.
The English-Speaking Union of Japan

小野 五郎 / 埼玉大学名誉教授

2018年 8月 16日


しかし、本当にそうなのだろうか? 本当に一方的なトランプ批判は正しいのだろうか?そもそも「自由化」が叫ばれるようになった財貿易では「比較優位」という理屈づけが為された。また、それによれば、「誰もが損することなく全体の利益を向上させることが可能」であり、したがって、自由貿易は正しいことになる。










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English Speaking Union of Japan > Japan in Their Own Words (JITOW) > Free Trade vs. Protectionism: A Futile Debate