There already are indications that the commercial dispute between Japan and China will be contained, preventing a wider trade war which could damage economies across Asia. The items now being argued about, though hardly trivial, represent only a minor portion of their mutual business, while such other protection-seekers as Japanese necktie makers are delaying their own quest for tariff help. It is clear that neither Tokyo nor Beijing wants this dispute, which began when Japan restricted imports of such esoteric Chinese goods as tatami straw, to escalate into a serious and costly row. But even if the dispute is settled, there will be many more to come - involving many other nations - once China joins the World Trade Organisation (WTO). It will then begin using WTO rules to protect its own perceived interests, just as most other industrial nations already do. For example, Beijing is studying how to apply such legal protectionist devices as anti-dumping laws to help certain industries which fear foreign competition. America and the European Union often erect these permitted trade barriers in response to domestic political pressures; US President George W. Bush is doing so on behalf of America's uncompetitive steel industry. The Chinese see no reason why they should not be able to do the same, however much this violates the spirit of free trade. The current Japan-China squabble is one example. Responding to complaints from domestic producers, Tokyo imposed high tariffs on cheap Chinese exports of tatami straw, shitake mushrooms and leeks. China responded with new duties on some US$500 million worth of annual Japanese exports of cars, air conditioners and mobile phones. Fortunately, this tough response has brought a pause rather than an escalation. But the row is a harbinger of things to come. WTO rules permit a wide variety of protection under certain circumstances, most of which are vague enough to guarantee arguments. Americans and Europeans are experts at applying them when domestic pressures mount; it's certain China will do the same. And free trade will pay the price.
