Policy Analysis No. 252

Market Opening or Corporate Welfare? “Results-Oriented” Trade Policy Toward Japan

By Scott Latham
April 15, 1996

Executive Summary

For decades the U.S. government has singled out Japan as a country guilty of particularly grievous protectionist policies and has forced on it special trade arrangements. But trade disputes are often simply the result of American firms’ enlisting government help to make up for their earlier neglect of Japan’s market. They seek managed trade, not free trade. Three cases are examined:

  • U.S. claims that the Japanese government unfairly limits American auto and auto parts imports are based on phony statistics that purport to define America’s “correct” share of Japan’s market. But U.S. automakers offer only four right-hand steering wheel models in Japan, compared to more than 100 from European manufacturers who have managed to crack that supposedly closed market.
  • With the 1986 semiconductor agreement, up for renewal this summer, U.S. officials tried to guarantee a share of Japan’s market for American manufacturers and to restrict exports of Japanese-made chips to the United States and third markets. But Japan’s “closed” market was an illusion created by America’s selective use of trade and production numbers. With 1995 global sales of some $150 billion, American producers hardly need protection.
  • Kodak’s current complaint that Fuji Photo Film unfairly blocks its access to Japanese retail outlets is particularly ironic since Kodak repeatedly ignored advise to establish major offices in Japan, which it finally did only in the mid-1980s.

Results-based trade policy is not about opening markets at all; it is about granting special favors to prominent and politically powerful U.S. industries.

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Scott Latham is a Philadelphia-based international trade consultant.