Political Economy of Trade Liberalization: The case of postwar Japan

Author Name NAOI Megumi  (University of California, San Diego) /OKAZAKI Tetsuji  (Faculty Fellow, RIETI)
Creation Date/NO. November 2013 13-E-090
Research Project Historical Evaluation of Industrial Policies
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How did the postwar newer democracies, whose governments faced pressure from both vested special interests and voters, achieve trade liberalization? Exploiting the case of trade liberalization in Japan in the 1960s, this paper addresses this question. Because the benefits and costs of trade liberalization are unequally distributed among the population, generating winners and losers, trade liberalization is inherently a highly political issue. The Japanese government and the Liberal Democratic Party (LDP) leaders used two tactics to build a coalition of legislators for trade liberalization. While they used sequencing of liberalization to buy off support from the legislators of the Upper House, they relied on side payments for the legislators of the Lower House. This strategy choice was consistent with the difference in the sizes of the electoral districts between the Upper House and the Lower House.