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Is Japanese Trade Policy Really "Unfair"?

The Free Market

Tags Free MarketsGlobal Economy

10/01/1984Steve H. Hanke

Bashing the Japanese has become a popular American, if not international, sport. The objective is to fabricate "facts" and use them to demonstrate how Japan's international trade policies create economic disruption that warrants retaliation.

Although accomplished players employ a variety of techniques to score game"winning points, one that usually secures victory involves a heralding of the following "facts": claim that Japan's markets are closed to American exports and that ours are open to imports from Japan; then state that this unfair asymmetry steals business and jobs from Americans; and conclude that this theft can only be stopped by erecting trade barriers to protect American markets and jobs.

To unveil the real nature of this game, let's consider the claim that Japan's markets are protected and closed to American exports.

Tariffs are a popular method used to protect home markets from foreign competition. However, contrary to the '''Jap' bashers" claims, Japan's tariffs are among the lowest in the world along with Sweden's and Switzerland's. For all non-agricultural industries, Japan's average tariff rate is 36 percent lower than the average for the same industries in the United States. Japan's highest tariff rates are imposed on 20 agricultural products. But even for these goods, the rates are low when measured by international norms. This explains, in part, why Japan continues to be the largest net importer of agricultural produce in the world, and why it ranks as the largest foreign market for American limes, lemons, grain sorghum, beef, grapefruit, pork, chicken and the second largest market for our soybeans and wheat.

Quotas are another means of protecting home markets from foreign competition. But, as is the case for tariffs, an examination of the evidence about quota restrictions reveals that Japan does not, when measured by international standards, use quotas in excess. In fact, Japan has one of the best international records for eliminating quota restrictions on foreign imports.

Since the early 1960s Japan has reduced the number of items covered by restrictive quotas by 85 percent. Furthermore, the Japanese have raised the quota ceilings on the items still covered by quotas, so that these quotas aren't as binding as they once were. This is attested to by the fact that, during the decade of the 1970s, the value of Japanese imports still covered under quotas grew at an annual rate of 21 percent, a rate that almost matched the 22 percent per annum of import growth for items not protected by quotas.

Faced with the fact that Japan has low tariff and quota restrictions on imports, skilled" 'Jap' bashers" will, no doubt, play their last card, the one labeled "other non-tariff barriers." These barriers, when they exist, include a host of restrictions and red tape that make it difficult for foreign exporters to enter protected markets. For example, it is frequently asserted that the Japanese use health and safety standards to keep foreign goods from penetrating Japanese markets. However, Japan is a signatory to the General Agreement on Tariffs and Trade's "Standards Code," and was one of the first to implement it. This code does not allow signatories to use health and safety standards to discriminate against imports. Moreover, it contains well defined procedures to settle complaints about discrirninatory standards. To date, however, no complaints have ever been filed against Japan.

Studies of other alleged no-tariff barriers confirm that Japan generally does not employ these barriers, and when it does, the barriers are less restrictive than those in America and the European Common Market. And, like most games played by special-interest groups and politicians, "'Jap' bashing" has no connection with reality. It is indeed disturbing that the press reports, as facts, what are nothing more than self-serving, emotional arguments. But what is more reprehensible is that some members of the administration, for all of their bluster about free trade, have allowed themselves to participate in such a misleading and destructive activity.


Contact Steve H. Hanke

Steve H. Hanke is a Professor of Applied Economics at the Johns Hopkins University and a columnist at Forbes Magazine. Follow him on Twitter at @steve_hanke

Cite This Article

Hanke, Steve H. "Is Japanese Trade Policy Really "Unfair"?" The Free Market 2, no. 5 (October 1984): 2–3.

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