Chapter 7: Issue-dimensional politics for trade liberalization
Trade liberalization is an extremely effective instrument to promote economic growth through competition and efficiency improvements. Despite limited natural resources, Japan was able to build world-class manufacturing industries by importing natural resources from overseas, processing them into intermediary and finished products through industrial fine-tuning associated with its coordinated market economy (CME), and exporting them to markets abroad. Unrestricted cross-border transactions have been the key to Japan’s economic success. The post–World War II trade regime of the General Agreement on Tariffs and Trade (GATT) helped Japan achieve postwar reconstruction and phenomenal growth. Nonetheless, the liberal trade order provided the country with a potential dilemma: it had to open its markets to stay firmly within the order in pursuit of overseas markets, while preserving the Japanese-style CME in pursuit of long-term employment and social stability. Japanese trade policies had to achieve multiple purposes at once through careful planning and collaboration among government, management, and labor officials. Such a multipurpose policy proved possible under the GATT order of embedded liberalism in which contracting states still could implement incremental or sector-specific liberalization. In addition, the states could reduce import-related injuries to domestic industries through safeguards or trade adjustment subsidies or both.
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