The Political Economy of Trade

Abstract

In Chapter 3, you learned that it was possible for countries to move from autarky to inter-industry trading relationships based on patterns of comparative advantage. So, for example, Japan can export motorcycles to Vietnam while importing rice from Vietnam. You also learned that such movements from autarky to trade involve improvements in welfare for the countries involved. In other words, both Japan and Vietnam can experience gains from trade. In point of fact, however, Japan has a long history of restricting imports of rice. This reluctance to import rice has been explained by the Consulate General of Japan in San Francisco: Rice has been the staple of the Japanese for over 200 years and can be considered the most important element in the evolution of the Japanese culture and social structure. Therefore, a significant segment of the Japanese population express cultural concerns over rice imports. In addition, many Japanese rice producers have historically been strongly opposed to accepting rice imports for both economic security and cultural reasons. Indeed, during the Uruguay Round of multilateral trade negotiations, the Japanese Diet (Parliament) passed three resolutions opposing the proposed partial liberalization of the Japanese rice market. At the very end of the Uruguay Round negotiations (in 1994), Japan was given “special treatment” to continue to restrict rice imports. To this day, Japan offers significant protection to its domestic rice sector such that the domestic price is approximately twice as high as the world price.

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