For Isolationists, A Kodak Moment

The backlash against globalization that is gaining momentum in the U.S. can only be helped by the World Trade Organization's ruling in favor of Fuji Photo against Eastman Kodak. To isolationists in Congress, the WTO ruling shows that globalization and global organizations are harmful to America's health. It justifies their defeat of fast track and their vote against more money for the International Monetary Fund.

Too bad the Kodak case doesn't merit their fulminations. The truth is that even U.S. government officials believe that Kodak had a weak case. Out of 14 previous trade disputes before the WTO, the U.S. has won 7 and settled the rest to its satisfaction. Of the two specific disputes with Japan, the WTO decided in favor of Washington. To date, the U.S. has brought more quarrels before the WTO than any other country and has won more of them than anyone else.

But who's listening to the facts these days? The Asian model of authoritarian capitalism is in full retreat. The American model of market democracy is proving superior. Yet American populists on the left and the right prefer to act as victims rather than victors. To them, globalization has only meant weak job growth and stagnant wages. While this may have been true in the past, it certainly isn't happening today. In fact, with the U.S. more dependent on trade than ever, real wages are surging and unemployment is at a 24-year low.

Japanese protectionists are, if anything, even more tone-deaf than their U.S. counterparts. They see Fuji's victory as proof that they don't have to abandon traditional mercantilism. Already, members of the ruling Liberal Democratic Party are backtracking on its pledge to deregulate the financial industry. After seven years of stagnation and bad bank loans, Tokyo was expected to let market forces cull out losers. Now, LDP legislators are proposing a $77 billion bailout of the banks, the opposite of the market purge they promised.

Japan should be cutting taxes on consumers and deregulating its industries to get the economy growing again. The alternative is many more years of little growth. America, for its part, should build on the success of market capitalism. This is not the time for Americans to be acting as victims. Nor is it the time to be sounding a retreat from free trade.

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