Orderly competition: American government, business and the role of voluntary export restraints in United States-Japan trade, 1934-1972

Aggressively marketed, low-cost Japanese imports consistently challenged the U.S. government's commitment to trade liberalization during the 1930s, 50s, and 60s. Almost coincidentally with the passage of the Trade Agreements Act in 1934, American policymakers instituted policies, procedures, and practices to limit the domestic impact of "disorderly" competition generated by increasing Japanese imports. Through the early 1960s, American government and business defined "disorderly" foreign competition and sought solutions for it, almost exclusively in terms of Japanese products.;The American commitment to reduce tariffs, unconditional most favored nation principles, and the avoidance of import quotas limited the strategies available to address low-cost Japanese imports.;In both the prewar and postwar periods, the U.S. government encouraged and often openly pressured Japan's government and industry to "voluntarily" restrain exports of products that threatened domestic American markets. These restraints, imposed unilaterally by the Japanese or negotiated bilaterally with the United States, relied on creation of rigid export cartels in Japan to ensure their success. Both American and Japanese policymakers believed that such restraints possessed advantages over more permanent restrictions such as import quotas or tariff increases sought by American producers. These voluntary export restraints (VERs) embraced significant percentages of Japan's exports to the United States during the 1930s and after the mid-1950s. VERs expanded to a wide range of Japanese products because of the deterioration of the United States' international competitive advantage and the increasing sophistication of Japan's economy after the late 1950s. VERs subsequently were extended to non-Japanese producers largely to protect the market shares of Japanese exporters and American manufacturers.;Changes in American antitrust law after 1940 eventually ensured that VERs would be negotiated between governments at a diplomatic level because of the prospects for antitrust liability.;VERs were inconsistent with the principles of the postwar General Agreements on Tariffs and Trade to which both Japan and the United States subscribed. Their proliferation in Japanese-American trade, however, was consistent with each nation's ideological preferences about the nature of its political economy. VERs allowed the United States to maintain a highly focused protectionist regime without dramatically compromising its international obligations, domestic institutions, and principles. The United States' insistence on VERs reinforced Japan's preferences for highly structured regulation of its domestic and international commerce.