27 J. World Trade 63 (1993)
Comparison of the Demand for Imports and Exports in Japan and the United States, A

handle is hein.kluwer/jwt0027 and id is 635 raw text is: A Comparison of the Demand for Imports and
Exports in Japan and the United States
Timothy A. DEYAK,* W. Charles SAWYER** and Richard L. SPRINKLE***
I.   INTRODUCTION
Over the past decade, Japan has emerged as the third largest exporter among the
industrialized countries. This development has been accompanied by relatively large
Japanese trade surpluses, which have contributed to frequent trade disputes between
the United States and Japan. While the typical economic analysis of Japan's trade
surpluses focuses on macroeconomic imbalances, it frequently is asserted that
Japanese imports and exports do not respond completely to the usual determinants of
trade flows.1 On the import side, it is alleged that while Japanese tariffs are not
abnormally high by developed country standards, a plethora of implicit trade barriers
work to lower the quantity of manufactured imports. This argument goes as far as to
assert that the basic structure of the Japanese economy poses a significant non-tariff
barrier to trade. On the export side, the argument is frequently advanced that the
Ministry of International Trade and Industry, in conjunction with large Japanese
trading companies, engages in strategic trade policy (industrial targeting). Under this
type of policy, specific Japanese industries receive protection in the early stages of
product development in order to achieve economies of scale in the domestic market.
Using this cost advantage, Japanese firms are then able to increase exports in world
markets over and above what they would be able to achieve without government
support.-
While the summary above sketches the conventional wisdom concerning the
operation of the Japanese economy in international trade, there is surprisingly little
empirical work on the subject. The implicit trade barrier argument has been made
mostly on the basis of cataloging these factors and making rough ex ante calculations
of the amount that trade would increase in the absence of these barriers.3 Another line
of work has dealt with the issue of whether Japan's trade patterns conform to those
* Assistant to the Director for Antitrust, U.S. Federal Trade Commission, Washington, D.C., U.S.A.
** Associate Professor of Economics, University of Southern Mississippi, Hattiesburg, U. S. A.
*   Associate Professor of Economics, University of Texas at El Paso, U.S.A.
The opinions expressed in this article are those ofthe authors and do not necessarily reflect those of the Federal
Trade Commission or any of the individual commissioners.
A recent statement of the macroeconomic imbalances argument can be found in Butler (1991). For a
thorough review of alternative views, see Lincoln (1990).
2 This is, of course, a simplification ofa much more complex argument. For a review of some of the issues
involved, see Krugman (1987).
For an example of this approach, see Lawrence (1987).
Copyright  2007 by Kluwer Law International. All rights reserved.
No claim asserted to original government works.

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