The influence of sogo shosha companies on contract bargaining in the Pacific metallurgical coal trade

Abstract

The role of trading companies has been held by many economists to be that of reducing transaction costs between buyer and seller. This article examines the influence that Japanese general trading companies, known in Japan as sogo shosha, have on contract bargaining outcomes between buyers and sellers in the trade between the exporters of Australia, and Japan, the world's largest importer of metallurgical coal. Propositions that sogo shosha companies have played a differential role, influenced by factors peculiar to Japanese business culture, are examined in light of econometric modelling findings suggesting distortions in Pacific metallurgical coal markets. The veracity of the propositions is also explored by a survey of the literature and management opinion amongst coal exporters from Australia and Canada. Implications with respect to foreign ownership policies and countervailing contract bargaining strategies by Australian exporting interests are then explored.