Financial Post, Weekly edition, Wed 14 Jul 93, page 10. Editorial.

Open markets good for all

Mixed signals on trade came out of last week's G-7 summit meeting. The summiteers issued a strong declaration in support of a ''multilateral, open trading system.'' But at the same time, the U.S. and Japan struck their own separate deal to work out bilateral trade irritants.

These two big summit players can't have it both ways. Full support for the multilateral trading system and a commitment to the General Agreement on Tariffs and Trade does not contemplate two partners working out special conditions for trade in designated products and services that are not available to other trading partners.

U.S. President Bill Clinton was under strong domestic pressure to get the Japanese to ''do something'' about its large trade surplus with the U.S. In response, Japan already has introduced measures to stimulate its domestic economy and to lower certain barriers to U.S. imports.

The Japanese can be frustrating trade partners, but Japan's trade surplus with the U.S. is less due to its barriers against imports than it is to its success as an exporter. Quality, on-time delivery and good service should be rewarded, not penalized.

The U.S. pressure on Japan is also based on the faulty notion that trade between the two countries must be in ''balance.'' This view ignores that the proceeds from Japan's export surplus may be used to buy goods from other countries, including the U.S., or invested abroad. Either way, the surplus is productive.

Furthermore, other countries have a proportionately higher trade deficit with Japan than does the U.S; they just happen to lack the clout to cut a special deal with Japan. But such special deals that shut the door in the face of other trading partners is what liberalization of world trade in the GATT negotiations is trying to rule out. And a more open trading system is what the G-7 leaders said they are committed to.

Indeed, in a report to the G-7 leaders last week the trade ministers from Canada, the U.S., Japan and the European Community said a new GATT agreement that will further liberalize trade in goods and services is ''within reach,'' and could still be concluded this year.

''The realization of this objective will require a fair and equitable sharing of commitments by each of us,'' the report said. ''Our efforts must be matched by binding market-opening measures by other participants.''

But the U.S.-Japan accord runs counter to that sentiment. It may be basically political window-dresssing, but these two economic superpowers should guard against actions that could undermine progress toward a new GATT agreement. As Canadian Trade Minister Tom Hockin noted yesterday, opening up markets ''will stimulate economic growth in Canada and worldwide, and help strengthen the fight against protectionism.''

	This information is provided by the Financial Post.
	Please send comments to: g8@utoronto.ca Revised: June 3, 1995

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