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Trade Policy
Japan's history of problematic trade relations with the rest of the world goes back at least as far as to its forced opening to trade by the United States in 1854. The fifty years, which followed the Meiji Restoration in 1868, were a remarkable period of modernization in which Japan adapted a myriad of foreign social and technological innovations to its own ends.1 The Japanese leadership of the late 19th century was driven by the exigency of preserving national sovereignty, and indeed, Japan was one of the few non-Western nations to escape colonization. Economic liberalism, which would become the dominant ideology of the world system, never really took hold in Japan. Rather, Japan conformed to the practices and procedures embodied in the international system when it was compelled to do so, and deviated when it had the opportunity.2 The densely-populated country with a relatively high level of education and social capacity quickly developed a comparative advantage in labor-intensive manufactures.
In the first instance of a recurrent pattern, Japanese exports were met by discriminatory trade restrictions imposed by trade partners fearing 'import surges.' Japan began raising its tariffs significantly during the worldwide slump, which followed the conclusion of the First World War. In the wake of the 1923 Great Kanto Earthquake, Japan raised tariffs to 100 percent on a number of 'luxury' items. Instead of reducing tariffs back to their earlier levels after the immediate crisis was surmounted, Japan continued to raise its tariffs through the 1920s, and, like others, played the 'beggar-thy-neighbor' game once the Great Depression began in the late 1920s.
Japan moved decisively away from economic liberalism with the installation of the Inukai Tsuyoshi cabinet in 1931. Under finance minister Takahashi Korekiyo, it began a policy of 'regulated reflation,' similar to that undertaken contemporaneously in Germany by Hitler's economics minister, Hjalmar H.G. Schacht.3 As the international economic system literally disintegrated, Japan launched the Pacific War with the aim of creating a Greater East Asian Co-Prosperity Sphere.
The war ended in ruin, defeat, and occupation by US military forces. US occupation authorities installed a set of institutions modeled on the New Deal experience in the United States, but sided with Japanese conservatives in Japanese economic affairs as the Cold War with the Soviet Union deepened. Again, Japan focused on catch-up, and again, economic liberalism failed to establish itself as the dominant intellectual tendency.4
After the occupation ended in 1952, Japan applied to join the GATT. This trade organization initially had developed out of US Secretary of State Cordell Hull's attempt to reconstruct the liberal international order during the Roosevelt Administration, and became the fallback option when the Republican-controlled US Congress rejected the International Trade Organization, which had been envisioned as the third leg of the Bretton Woods triad. The Japanese GATT application was initially opposed by a number of countries, but the United States strongly supported the application, and Japan was granted provisional membership in 1953 and full membership in the GATT in 1955.5
Once in the GATT, Japan participated in successive rounds of multilateral negotiations (including the 'Tokyo Round' of the 1970s). Japan was relatively passive however in its use of the GATT's admittedly-weak dispute settlement mechanism. In the cases ruled against Japan (for example, the case of some agricultural quotas), the country had a good track record of complying with GATT panel decisions (though in some cases removal of trade restrictions was accompanied by the introduction of more direct forms of support). Adverse panel rulings were arguably a constructive form of gaiatsu (foreign pressure) from a multilateral organization, which Japan had voluntarily joined and supported.
However, due to the GATT's dysfunctional dispute settlement procedure, many trade conflicts continued to be resolved bilaterally, often in a discriminatory fashion. In addition to GATT-consistent forms of protection such as antidumping measures, Japanese exports were subject to grey area measures such as the orderly marketing arrangements (OMAs) invented by Japan and the United States in the 1950s and applied to textile trade, the forerunner of the so-called voluntary restraint agreements (VRAs) or voluntary export restraints (VERs), which the United States and EU applied with gusto to Japanese steel and automobile exports in the 1980s.6 In the 1990s, Japan and the United States would pioneer the use of voluntary import expansions (VIEs).
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