Leaders of Liberalization or Partners of Protectionism?
Multinational Firms in the Japanese Political Economy
This project examines the effects of internationalization on the politics of trade. How do the early stages of trade liberalization affect the formation of political coalitions between foreign and domestic actors? Why do patterns of coalitional formation and firm strategy vary across different sectors in a national economy? In order to answer these questions, I conduct a cross-sectoral analysis of Japan, which provides a fruitful context in which to study coalitions between domestic and foreign firms because it was remarkably closed to the latter until a relative boom in inward foreign direct investment in the 1990s and 2000s. These conditions make it easier to isolate the effects of trade liberalization on shifting domestic and cross-border political coalitions, and they also make Japan a “crucial” case for theories about internationalization.
Drawing on interviews, direct observation, archival material, market data, and newspaper articles, from over two years of field research in Tokyo, I examine the influence of foreign multinational firms on the Japanese policymaking process from the immediate post-World War II period to the present. I focus on in-depth case studies of four sectors which display different patterns of initial liberalization: agriculture, pharmaceuticals, insurance, and information technology. I also provide extensions of the theory to other sectors such as commercial aviation, automobiles, telecommunications, luxury goods, soft drinks, and retail. I find that while foreign multinational firms were initially dependent on their home governments to influence Japanese policy, opportunities for these firms to employ political strategies both independently and in coalition with Japanese partners increased with the opening of the Japanese economy and society. However, these changes were not uniform across sectors. Instead, the manner in which each sector opened, which I characterize as the pattern of internationalization, created complex political cleavages between firms in both the home and target countries of foreign investment.
My research demonstrates that the initial liberalization of a country’s economy produces unintended consequences for its politics by creating complex cleavages among firms in both the home and target countries of foreign investment. These cleavages shape multinational firms’ political strategies, which in turn affect not only Japanese politics but also the broader political economy through the emergence of global standards and the negotiation of bilateral and multilateral trade agreements.
This research has been generously supported by Harvard University, the Japan Foundation, the Boren Fellowship, the University of Tokyo, Waseda University, the UC Berkeley Center for Japanese Studies, and the UC Berkeley Department of Political Science.