Market openness and United States-Japan trade conflict

I develop and estimate a model of international trade that allows for a systematic measurement of the relative openness of an economy to foreign trade. The model addresses a key question in the U.S.-Japan trade conflict: how open is the Japanese economy to imports from the United States? The results of this study show that both the U.S. and Japanese economies are open to exports from each other once a number of economic and political factors which determine bilateral trade are taken into consideration. These results stand in contrast to much of the conventional wisdom and anecdotal evidence on the putative closed nature of the Japanese market. Further, a comparison of the pattern of Japanese imports from the United States and the dynamic Pacific Rim economies such as Korea, Hong Kong, and Singapore suggests that the Pacific Rim countries have been rather successful in exporting high-technology manufactures to Japan. These results suggest that the current focus of American foreign economic policy, which links the substantial U.S. trade deficit with Japan to market openness in Japan, is flawed.