Can FTAs deliver market liberalization in Japan? A study on domestic political determinants

Abstract

ABSTRACT The last decade has witnessed Japan's transformation from one of the last hard core multilateralists to an active negotiator of free trade agreements (FTAs). This striking policy shift raises the question as to whether FTAs can finally deliver substantial liberalization of the Japanese market, a goal long sought by Japan's trading partners and domestic champions of structural reform. I argue that Japan's ability to negotiate such high-yield FTAs (with large trading partners, and encompassing substantial market access concessions and multiple WTO plus commitments) will hinge upon the intensity of lobbying by the internationalized business sector to overcome the resistance of uncompetitive sectors; and the centralization of domestic policy-making in order to break the protectionist inertia of traditional subgovernments. In developing this argument, I modify existing demand/supply models of FTA policy to factor in the preferences of societal actors in the game of selective and discriminatory liberalization and to take into account the influence of domestic political institutions through the logic of principal–agent relations.