External Pressures And Internal Reform

Since World Warâ…¡Japan and the United States have been experiencing intensifying and escalating trade frictions. Its development can be summarized into the following tracks: the focus of frictions shifted from U.S. constrains on Japanese imports to the expansion of market access for U.S. goods and service in Japan; trade frictions within a single product (like beef, orange) or a single industry (like textile, telecommunication) escalated into a more comprehensive friction involving political and economic structures as a whole; the industries involving in the frictions developed from labor-intensive and low value-added ones to technology- and capital- intensive and high value-added ones; frictions in commodities and services overflowed to other economic fields in Japan like yen-dollar exchange rate, financial deregulation, and capital market; and the pattern of Japan-U.S. trade negotiations changed from a bilateral "rule-oriented" style to a "result-oriented" style and finally to a "bilateral plus multilateral" "rule-based" style.Whether and how the foreign pressure (gaiatsu) could become a driving force for Japan's domestic reforms is an important perspective for the research of Japan-U.S. trade frictions. The theory of two-level games is a central paradigm for this analysis. Japan was prone to succumb to U.S. gaiatsu when handling its trade frictions with the U.S., and the attitudes and policies of U.S. government maintained as a critical factor in influencing Japan's economic development strategy and trade policy. However, the reality showed that, in dealing with the U.S. gaiatsu, Japan's performance was both reactive and active. Each of these two characteristics played a great role in certain periods and certain cases.The formation and operation of gaiatsu is like the first level game in international negotiations. The U.S. government transferred the domestic protectionist pressure to its Japanese counterpart, and later these two parties managed to reach a preliminary agreement after opinion exchange and interest conflict by means of dialogue, consultation, negotiation and complaint, to name just a few. At the same time, different interest groups, governmental departments, Diet members and bureaucrats within Japan tried to coordinate their positions to decide whether and to what extent they would support the above-mentioned agreement. Due to this consensus, the previous gaiatsu was either mitigated or intensified. This process constitutes the second-level game. In sum, the interaction of gaistsu and naistsu forms a dynamic two-level game between Japan and the United States.The key of gaiatsu' success lies in its ability to accommodate the domestic reformist requirements and potential interest appeals. The history demonstrates that, when foreign pressures could effectively integrate with Japan's existing but hard-to-effect reformist demands, the Japanese government would pursue a more cooperative stance in international negotiations and gradually endeavor to open its market, speed up the domestic deregulation and implement structural adjustments. Therefore, the U.S. gaiatsu played an important role in promoting Japan's domestic changes. Centered on the core national interests, Japan has effectively utilized U.S. gaiatsu to accelerate its domestic reforms.This research argues that, the Japan-U.S. trade friction can be classified as a "strategic trade friction". Japan's rapid rising, as a new power and big trader, begets dramatic changes in international division-of-labor and interest distribution pattern. Moreover, the strategic trade friction ranges over various economic intercourses, within which the trade friction, interest-rate friction, and structural friction develop progressively while the structural revolution serves as the ultimate target.The Japan-U.S. trade frictions since 1960s and the Sino-U.S. trade frictions since 1990s share some similarities in terms of trade strategy, friction partner, and conflict courses. The main causes behind these two cases are the high dependency on the U.S. market, the serious trade unbalance with the U.S., and the general deficit of U.S. current account. However, the Sino-U.S. trade frictions are basically non-confrontational, which means that, if China could properly take advantage of the two-level game with the U.S., it would provide assistance in easing trade frictions and advancing China's domestic reforms.