INTERNATIONALIZATION, CORPORATE PREFERENCES AND COMMERCIAL POLICY IN JAPAN
INTERNATIONALIZATION, CORPORATE PREFERENCES AND COMMERCIAL POLICY IN JAPAN
Internationalization, Corporate Preferences and Commercial Policy in Japan Hidetaka Yoshimatsu MACMILLAN Business
First published in Great Britain 2000 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire R02l 6XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN 978-1-349-421 91-6 DOl 10.1057/9780230001213 ISBN 978-0-230-00121-3 (ebook) First published in the United States of America 2000 by ST. MARTIN'S PRESS, [NC., Scholarly and Reference Division, 175 Fifth Avenue, New York, N.Y. 10010 Library of Congress Cataloging-in-Publication Data Yoshimatsu, Hidetaka. Internationalization, corporate preferences and commercial policy in Japan / Hidetaka Yoshimatsu. p. cm. Includes bibliographical references and index. 1. International business enterprises - Japan. 2. Corporations, Japanese. 3. Japan - Foreign economic relations. 4. Japan - Commercial policy. I. Title. HD2907.Y6252000 338.8'8952 - dc21 99-054951 Hidetaka Yoshimatsu 2000 Softcover reprint of the hardcover 1st edition 2000 978-0-333-80292-2 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WIP OLP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. 10 9 8 7 6 5 4 3 2 1 09 08 07 06 05 04 03 02 01 00
Contents List of Tables and Figures Preface List of Abbreviations vi ix xi 1 Introduction 1 2 The Rise of Multinational Corporations and Policy Preferences 10 3 The Influence of Business on Japanese Policy Making 33 4 The Japanese Automobile Industry and Market Liberalization 48 5 The Japanese Electronics Industry and Trade Policy 85 6 Trade Policy Preferences in the Japanese Textile Industry 124 7 Keidanren's Stance on Trade and Investment Policies 160 8 Conclusions 201 Notes and References 217 Bibliography 249 Index 263
List of Tables and Figures Tables 1.1 Internationalization of Japanese manufacturing firms, 1980-96 2 2.1 Japanese foreign direct investment by destination, 1981-96 16 2.2 Number of alliances between Japanese and US firms, 1990-94 18 2.3 Japanese foreign direct investment in manufacturing by sector, 1980-96 24 2.4 Overseas production ratios in Japanese manufacturing sectors, 1980-96 25 2.5 Shares of intra-firm exports in Japanese manufacturing sectors, 1980-96 26 2.6 Shares of intra-firm imports in Japanese manufacturing sectors, 1980-96 26 2.7 Number of newspaper reports on corporate alliances 27 2.8 Ranking of Japanese multinational corporations (1) 28 2.9 Ranking of Japanese multinational corporations (2) 29 2.10 Import shares in major manufactured products, 1988-93 30 4.1 Local production by Japanese automakers in the United States, 1985-95 51 4.2 Reverse import of passenger cars, 1988-95 51 4.3 OEM supply from Japanese to US automakers, 1986-92 52 4.4 Number of US suppliers and business contracts, 1986-93 57 4.5 Value of US parts purchases, 1986-95 57 4.6 Number of overseas plants established by Japanese parts makers, 1986-92 58 4.7 Number of parts suppliers dealing with Honda in the United States, 1985-92 58 4.8 Number of US parts suppliers dealing with Toyota, 1990-93 59 4.9 Distribution channels of major Japanese automakers, 1994 62 VI
List of Tables and Figures vii 4.10 Japanese automakers' goals for US-made auto parts purchases 73 4.11 Japanese automakers' goals for US vehicles sales 74 5.1 Production of the Japanese electronics industry, 1960-95 87 5.2 Foreign direct investment by Japanese electronics producers by destination, 1970-94 88 5.3 Foreign trade of the Japanese electronics industry, 1960-95 93 5.4 Import volume of major electronic products, 1987-94 94 5.5 Shares of exports to Japan by overseas affiliates of Japanese electronics firms, 1980-95 95 5.6 MITFs commitments to the semiconductor arrangement 106 5.7 EIAJ's commitments to expanding market access for foreign semiconductors 108 5.8 Market shares of foreign semiconductors in Japan, 1986-94 109 5.9 Shares of foreign semiconductors in major electronics firms, 1986-91 114 5.10 Imports of integrated circuits, 1990-95 115 5.11 Number of alliances between Japanese and foreign semiconductor firms, 1985-94 119 6.1 Major industrial associations in the textile industry 127 6.2 Foreign direct investment by Japanese textile producers by destination, 1965-94 129 6.3 Number of export approvals for outward processing in textiles, 1985-92 131 6.4 Number of joint ventures in textiles 131 6.5 Shares of exports to Japan by overseas affiliates of Japanese textile firms, 1992 132 6.6 Import shares in textile products, 1986-93 134 6.7 Establishments, employees, value of shipments and value-added in the textile industry, 1970-95 134 6.8 Anti-dumping and countervailing suits in Japan 136 6.9 Policy stance of major industrial associations on import restrictions 147 6.10 Number of withdrawals of Japanese affiliates in Asia 148 6.11 Shares of exports to Japan by Japanese affiliates in Asia, 1980-95 151
viii List of Tables and Figures 6.12 Shares of establishments with less than four employees, 1993 153 6.13 Shares of service fee contracts in woven products, 1965-95 154 6.14 Major industrial indicators in the Japanese spinning sector, 1970-94 157 7.1 Number of corporate members in Keidanren by sector, 1975-94 162 7.2 Posts of chairman and vice-chairmen of Keidanren by sector 163 7.3 Ranking of membership fees in Keidanren, 1992 164 7.4 Policy committees in Keidanren, 1995 166 7.5 Keidanren's recommendations regarding agricultural trade and policy 179 Figure 3.1 Two-level relations among business, bureaucracy and politicians 44
Preface This book is about the relationship between the internationalization of corporate activities and the evolving commercial policy preferences of Japanese corporations, and the impact of this relationship on policy processes in Japan. While Japan's trade relations with foreign countries have been critical issues since the mid-1960s, a major concern has shifted from constraints on Japan's exports to the opening of the Japanese market since the mid-1980s. At the same time, the internationalization of Japanese corporations accelerated with a massive outflow of foreign direct investment after the mid-1980s. This research thus links the increased internationalization of corporate activities with Japan's trade relations and commercial policy. A critical element of the study of trade policy formulation is analysis of corporate preferences as an intervening variable in explaining changes in a state's trade policy. While most research in this field has had an interest of why and how industries and firms demand protection, some studies highlight political forces that favour antiprotectionist policy initiatives. These studies have founded that internationally oriented firms such as multinational corporations are the major actors who favour liberal commercial policy. However, previous research on anti-protectionist policy preferences has been confined to the western countries. This book seeks to fill the research gap by conducting similar research on Japan. Using case studies of the automobile, electronics and textile industries, and of Keidanren - the most important federation of big business - I develop the argument that as firms strengthen international linkages in the form of multinational operations and international corporate alliances, they become more committed to trade liberalization of the global market, including the market at home. The study of antiprotectionist policy preferences in the Japanese context has special implications. Since it is often presumed that Japan has different institutional settings from those of other industrial countries and maintains close business-government relationships, an investigation of the argument developed on the basis of experiences in western countries is all the more interesting and provides valuable insight into the current study of Japanese politics and political economy. Different versions of several chapters in this book have appeared ix
x Preface in academic journals: 'Economic Interdependence and the Making of Trade Policy: Industrial Demand for an Open Market in Japan', The Pacific Review, vol.11, no.l (1998) pp.28-50; 'Japan's Keidanren and Political Influence on Market Liberalization' ( 1998 by The Regents of the University of California, Asian Survey, vol.38, no.3, pp.328-45.) Permission to use these materials is gratefully acknowledged to Taylor & Francis Ltd (11 New Fetter Lane, London EC4P 4EE, England) and the Regents of the University of California. It is a pleasure to acknowledge my debt to those who have provided assistance through the preparation of this book which began as a PhD thesis at the Research School of Pacific and Asian Studies, Australian National University. I am indebted to Peter Drysdale and John Ravenhill for their intellectual guidance and constant encouragement. Professor Drysdale offered constant assistance, insight and advice over the course of this project. Professor Ravenhill gave me many valuable comments and criticisms that helped sharpen my thinking. I am also indebted to Aurelia George for her encouragement and assistance as well as helpful comments. Many others have offered valuable comments and suggestions, including Helen Milner, Ikuo Kabashima, Hayden Lesbirel, Keiko Tabusa, and William James. I wish to express my deep gratitude to Makoto Sakurai and members of the Mitsui Marine Research Institute in Tokyo who generously supported my field research. I am also grateful to numerous interviewees who kindly shared with me their ideas and perspectives on this project. I also wish to thank Shinichi Ichimura and colleagues at the International Centre for the Study of East Asian Development (ICSEAD). ICSEAD has provided me with a valuable research environment. Lastly, my gratitude goes to my wife, Mutsumi, and my son, Satoshi. Their willing sacrifices and constant support encouraged me to complete this book. HlDETAKA YOSHIMATSU
List of Abbreviations ASEAN Association of Southeast Asian Nations CAP Committee on Agricultural Policy DRAM Dynamic random access memory EIAJ Electronic Industries Association of Japan EPROM Erasable programmable read only memory FDI Foreign direct investment FMVs Fair market values FTC Fair Trade Commission GATT General Agreement on Tariffs and Trade JAIC Japan Apparel Industry Council JAMA Japan Automobile Manufacturers' Association JCFA Japan Chemical Fibres Association JCSFWA Japan Cotton and Staple Fibre Weavers' Association JKIA Japan Knitting Industry Association JSA Japan Spinners' Association JSRFWA Japan Silk and Rayon Fibre Weavers' Association JTIA Japan Textiles Importers' Association JTIF Japan Textile Industry Federation JTMA Japan Towel Manufacturers' Association LDP Liberal Democratic Party MAFF Ministry of Agriculture, Forestry and Fisheries MFA Multi-Fibre Arrangement MITI Ministry of International Trade and Industry MNCs Multinational corporations MOF Ministry of Finance NIEs Newly industrialized economies NUMMI New United Motor Manufacturing Inc. OEM Original equipment manufacturing OTO Office of Trade and Investment Ombudsman PARC Policy Affairs Research Council R & D Research and development SIA Semiconductor Industry Association SII Structural Impediments Initiative (talks) TVs Televisions UCOM Users Committee of Foreign Semiconductors VER Voluntary export restraint VTRs Video tape recorders XI