The Political Economy Of The Evolution Of U.S. Trade Policy Towards Japan

The mainstream neo-classical trade theory thinks that trade policies may improve economic efficiency and maximize economic welfare, therefore which is regarded by the government as the objectives of their trade policies, the classical trade theories such as the absolute advantage Theory by Adam Smith, the comparative advantage theory by David Ricardo, the Heckscher-Ohlin Factor Endowment Theory, the optimum tariffs theory, the theory of infant industry protection, or the new trade theory under the conditions of imperfect competition and economies of scale, the fundamental aim of all those is to pursuit the economic efficiency. Its main characteristics are the individualism research methodology, the application of maximization, equilibrium, stable preference and other mathematical tools, the model of cost-benefit analysis and through a series of stringent assumptions such as exogenous institution, "economic man", complete information and so on, the complex human economic activities are abstracted and generalized to an extremum problem under the constraints of existing resources. The aim is to maximize efficiency and welfare. Perfect form and rigorous structure underpin the methodology and theories for the international trade, and make the free interpretation on blackboard plausible, which is referred as the "Blackboard Economics". In the neo-classical framework, many economists have been actively exploring and fruitfully rewarded, greatly enriching people's understanding on international trade theory and practice.However, it is rather incomplete if we discuss the trade policy only from the point of economic efficiency. Although one state or government formulates trade policy with an aim of maximizing economic welfare, it involves and influences all aspects of socio-economic life. The factors that determine the trade policy formulation how it is formed, and what kind of target selection mode it will take, etc., also depend on factors other than the economic ones.With the nature of benefit redistribution, the trade policy, involving the allocation of economic costs and benefits between people during its implement and adjustment, will inevitably change the pattern of gains between involving parties, indicating the political nature itself. So the implement of the trade policy is the unification of political and economic processes, and it is only from the perspective of political economy that we can explore and interpret the realities of international trade and policy scientifically and objectively.After World War II, the trade policy of the United States towards Japan has gone through an evolution from free trade policy to strategic trade policy, and back to free trade policy again. As to the evolution of U.S. trade policy, most scholars study the issues from a pure economic point of view or the perspective of trade frictions between the U.S. and Japan. In contrast, literatures from the view of political economy on the trade policy of the United States towards Japan are rather few. Some key issues about the evolution of U.S. trade policy towards Japan are overlooked: what role did the government play in the decision-making process of U.S. trade policy towards Japan? Did the government function independently or eventually was "captured" by interest groups, and be "Mouthpiece" of interest groups to achieve their objective? How the institutional arrangement of the state provided channels for interest groups to have access to the negotiation process, and how it designed the corresponding rules to restrict protectionism? How international forces play an important impact to the domestic politics and economy of U.S.? Therefore, to observe and explain political and economic process underlying the decision-making process of trade policy, is the key to the properly understanding and objectively evaluating timely adjustment of U.S. trade policy towards Japan of several decades.Based on the remarks on the institutional change theory, public choice theory and political economic theory, this paper starts from the political economic analysis of the decision-making process of the trade policy, then proposes the state-social paradigm of U.S. trade policies towards Japan, and applying this paradigm, re-interprets the evolutionary path of U.S. trade policy towards Japan. This paradigm is the theoretical basis of U.S. trade policies towards Japan, as well as the most important research methods. Combining U.S. domestic institutional design, institutional structure, structure changes, and the role of government with domestic political forces, this paradigm explains the decision-making process, incentives and restraints mechanisms of policy decision-makers and how to resolve the policy conflicts. It helps further study the deep-seated reasons for U.S. trade policy towards Japan in a new perspective.This paper combines the positive analysis with normative analysis, also with case study to analyze the evolution of U.S. trade policy towards Japan in the different periods with time spans over decades. This paper tries to clarify some issues, for example, the political institutional reform of United States, the conflicts between Congress and President, different interest groups and the force changes between gaming parties, the institutional constraints that the government is facing, the political and economic performance of trade policy etc., to understand the U.S. trade policy towards Japan comprehensively, in-depth and justly, in an attempt to presenting a reasonable explanation close to the facts on this issues.This paper is organized as follows:Chapter 1 is the introduction, including proposing the main issues, content of trade policy and relevant issues, literature review, research methods and innovations as well as basic content and structure of the arrangement.Chapter 2 is the theoretical part. On the basis of reviewing the limitations of new classical economics in the study of trade policy, this chapter proposes the need for studying trade policy issues in the perspective of the theory of political economy, by summarizing and remarking on the three theories closely related to the trade policy: the institutional economics, the public choice theory and the political economic theory. After reviewing the three research paradigms on the U.S. trade policy, the paper proposes the state-social paradigm of U.S. trade policy towards Japan. At last, the analysis framework of political economy and institutional design of U.S. trade policy is discussed.Chapter 3 discusses that after World Warâ…¡, the starting point of U.S. trade policy toward Japan is free trade policy. Firstly, the paper analyzes that the 1934 scheme of the United States is the traditional institution basis of U.S. free trade; secondly, this paper analyzes the reasons and constraints of U.S. trade policy towards Japan; thirdly, this paper discusses the path choice and policy design of U.S. trade policy towards Japan; and the last, it points out the impact of free trade policy on U.S. and Japan.Chapter 4 argues that the adjustment of U.S. global strategy resulted in the implementation of strategic trade policy of U.S. towards Japan. Firstly, this paper analyzes the reasons of transformation of the U.S. trade policy towards Japan; Secondly, it discusses the contents of U.S. institutional change, domestic source, performance of U.S. trade policy and strengthening of institutional change; thirdly, based on above, it proposes the policy design and economic performance of U.S. trade policy towards Japan; Fourthly, it explores Japan's response and countermeasures against the actions of United States; Finally, taking the semiconductor industry friction as example, it verifies the theory presented in chapter 4 and conclusions.Chapter 5 discusses that U.S. changed its global strategy and implemented trade policy towards Japan under the framework of the "multi-track" trading system. This chapter first points out that, on the new era, US-Japan economic and trade relations have witnessed new changes in the emergence of new features, which poses new challenges to U.S. trade policy towards Japan. Secondly, the U.S. implemented political institutional reform during this period, the establishment of National Economic Committee significantly shifted the distribution pattern of domestic interests; Thirdly, it analyzes the reasons of the shift from "results-oriented" to "process-oriented" of the U.S. trade policy towards Japan. Fourthly, it discusses that the government of the United States re-oriented and designed trade policy towards Japan. Finally, this paper reviews the U.S. trade policy towards Japan in the new era, and predicts the future trend of U.S. and Japanese policy options, and concludes that US-Japan alliance will enter the new era.Chapter 6 is the main conclusions and forecast. Based on the previously proposed theoretical framework and empirical analysis, this paper draws the main conclusions about the evolution of U.S. trade policy towards Japan, and finally sums up the enlightenment to China.