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The semiconductor fray, predicts Clyde Prestowitz, an expert on Japan at Washington's Woodrow Wilson International Center for Scholars, "is probably just the beginning of much more rocky times between the U.S. and Japan." Or between Japan and just about everybody else. In London last week the Conservative Cabinet of British Prime Minister Margaret Thatcher closeted itself to discuss economic measures against the Pacific island power. After the hour-long session at 10 Downing Street, Thatcher dispatched one of her trade ministers to Japan with the threat that Britain might soon take retaliatory action to keep additional Japanese banks and securities firms from operating in London. The aim was to pressure Tokyo into ending its stonewalling of British firms that want access to highly protected Japanese financial markets.
The British have urged their eleven fellow members of the European Community to take part in the Japanese sanctions campaign, and several E.C. members seem inclined to join in. Said European Community Industrial Commissioner Karl-Heinz Narjes: "Our patience has snapped. We have had enough of giving the Japanese the benefit of the doubt." At a meeting of Community foreign ministers scheduled to take place last weekend, the Netherlands and West Germany were expected to support the British proposal. Last month in Brussels the European Commission urged Community members to get tough with Japan. The commission had earlier slapped a 20% retaliatory tariff on Japanese photocopying machines, which take up 75% of the $1 billion European market.
Behind the sound and fury aimed at Japan were profound alterations in the familiar international economic landscape that will continue to shake trading relationships for years to come. An unwholesome tide of global protectionism has been slowly rising for several years, but now it seems to be heading toward flood levels. That unsettling prospect comes despite the avowed intention of most of the world's trading nations to broaden free trade through a new round of negotiations involving the 96-member General Agreement on Tariffs and Trade. Even though talks for that round began in Uruguay last September, the Geneva-based staff of GATT is deeply concerned about the outcome. In its latest annual report, issued last December, the organization declared that economic policies being introduced around the world might not lead to open trade warfare but could produce a "prolonged stagnation."
Free trade has been a central tenet of the postwar economic order. The system that was put in place with U.S. leadership took as a cardinal principle the belief that "beggar-thy-neighbor" protectionism in the prewar years had helped cause the Depression-era misery and social turbulence that eventually led to World War II. In economic terms, protectionist barriers largely benefit inefficient companies and hurt consumers by forcing them to pay more for products. Even though the competition engendered by free trade can cause temporary pain by destroying obsolete industry and generating unemployment, the final result is more jobs, more income and more opportunity if every manufacturer is allowed to produce and export what it makes best. The value of free trade has been spectacularly displayed in the tremendous expansion of postwar Western wealth.