World leaders have gathered in the Swiss ski resort of Davos for the annual World Economic Forum meeting. Some 3,000-plus people, from heads of state to business leaders, investors and scholars, will take part in the forum, freely exchanging opinions on global issues.
The reported theme of the Davos meeting this year is "Creating a Shared Future in a Fractured World." Ironically, Donald Trump, the main figure in fractures across the world, is taking part in the gathering for the first time for a U.S. President in 18 years. Attention on a scale not seen in recent years is converging on the meeting as he is set to give a speech on the forum's final day.
As if to issue a challenge, shortly before the meeting opened President Trump announced the U.S. would impose emergency import tariffs lasting three to four years on solar panels and washing machines. Trump apparently has China in mind when it comes to solar panels, and South Korea for washing machines. Emergency import restrictions do not automatically constitute protectionism, and there are times when the World Trade Organization (WTO) allows them, but if their purpose is to create domestic jobs or gain popularity, then that's a problem.
At the same time, even if such tariffs do not violate WTO rules, they can lead to a chain of protectionism. Importantly, despite Trump's "America First" rhetoric, the tariffs won't necessarily benefit America. The surge in prices that comes with increased tariffs will be passed on to U.S. consumers.
Separately, U.S. Treasury Secretary Steven Mnuchin, who arrived in Davos ahead of Trump, commented that a weak dollar benefits American trade. Mnuchin aims to enhance the export competitiveness of U.S. products, but this policy will result in higher costs for imports, which will likely put consumers at a disadvantage.
As if to hold Trump's "America First" policy in check, a succession of leaders gathered in Davos have released statements rejecting protectionism and nationalism.
"Isolating ourselves will not lead us into a good future. Protectionism is not the answer," German Chancellor Angela Merkel said. Her comments were echoed in statements by Indian Prime Minister Narendra Modi, Canadian Prime Minister Justin Trudeau and French President Emmanuel Macron.
The world economy is currently healthy, but if a policy of putting one's own country first runs rampant and fractures appear in the global economy, then growth will stop and jobs will be lost. This could even threaten peace and stability.
Japan has enjoyed the benefits of free trade to the fullest. As the nation's population declines its reliance on overseas markets will increase. Japan must join with other countries in raising a voice against protectionism.