Organizer: Bai Gao, Duke University
Chair: T. J. Pempel, University of Washington
Discussant: John O. Haley, University of Washington
When the Asian financial crisis deepened in 1998, Japan’s response to its economic problems was seriously constrained by its established economic institutions. As Japan has so far failed to help Asian countries get out of the crisis, the future of Japan’s deregulation program has become an international concern. Since both the bad loan problem in Japan’s financial sector and the failure of recent deregulation program are closely related to the nature of Japan’s competition regime—the way Japanese companies maintain their interorganizational relationships and the way the Japanese government defines and enforces the rules of market competition, the regime itself becomes extremely important to our understanding of current crisis in Japan and its potential impact on the global economy. Highlighting the cross-national variations among major industrialized countries, this panel brings four papers exploring Japan’s competition regime from comparative/historical perspectives, and each of them touches some important facets of this regime. This panel aims to shed lights not only on the regime’s historical evolution, but also on its key contemporary institutions and the relationship between the competition regime and other key economic institutions. All four presenters on this panel are working on a book-length project on this topic, and both the chair and the discussant are leading experts on Japanese ‘industrial policy and competition policy with expertise on comparative studies, who will further broaden the scope of discussion.
Comparing Competition Policy and Trade Openness in Japan and Germany
Mark Tilton, Purdue University
Competition policy has for some time been an important issue in U.S.-Japanese trade relations, and in recent years has been addressed at the global level as well. The U.S. government considers that weak competition policy in Japan unfairly allows private firms to block imports and has asked Japan to strengthen its antimonopoly law and enforce it more rigorously. Critics have argued that the U.S., with its liberal, pro-competitive policies and practices is the international outlier, and that it is unrealistic to expect other economies to follow its lead. Some argue that Japan’s economy is similar to the "Rhine capitalism model" and is best understood through comparison with countries such as Germany. This paper will assess whether this argument can be sensibly applied to the issue of competition and trade, by looking at the impact of competition policy on German and Japanese international trade in three sectors: autos, telecommunications equipment, and steel. The paper will look at formal policy and enforcement in the hands of competition policy authorities and other regulations and consider how patterns of competition and trade have developed in response to these policies.
The Transformation of Competition Regime in Japan and Germany During the Great Depression and World War II
Bai Gao, Duke University
The competition regime in Japan and Germany changed profoundly during the Great Depression and World War II. Before the 1930s, Japan and Germany had different competition regimes. The German state had adopted a pro-cartel policy. The Japanese state, in contract, had supported the private ordering of the market by zaibatsu, but had not adopted any coercive measures to organize cartels. In 1931–1945, the German practice of mandatory cartels and compulsory trade associations became the model for the Japanese. In this paper, I examine the dynamics behind the development of cartels and trade associations in both countries. I argue that the changing role of the state in governing the economy exerted a great impact on the transformation of competition regimes in Japan and Germany. Driven by the Great Depression and World War II, the state in both countries encouraged the development of non-market governing mechanisms in order to maintain order during the economic crisis and allocate resources in war mobilization. Contrary to the state centric arguments, the managed economy in both countries was carried out by delegating its daily operation to private or semiofficial institutions, rather than by direct bureaucratic control. Different from the market centric arguments, the markets in both managed economies were tightly organized. This nature of the competition regimes in these two countries in 1931–1945 is critical to their postwar evolutions.
The Tale of Two Trade Commissions: Independent Antitrust Commissions in a Comparative Context
Michael Beeman, Johns Hopkins University
One dimension to the differences among antitrust regimes in industrialized nations is the variation seen in the structure and powers of those regulatory agencies established to enforce and implement antitrust policy. Some nations possess prosecutorial-style bureaus that are integrated into national law enforcement departments, while others have created administrative-style bureaus that are accountable to or under the direct control of a minister of state or cabinet secretary. A third broad model is the independent regulatory commission, a structure that is designed to imbue the agency with a degree of fairness, impartiality, and expertise that is believed impossible from a traditional executive agency. Yet the ability of independent antitrust commissions to act freely of political interests is the matter of much doubt. My presentation will focus on Japan’s Fair Trade Commission in light of the experience of the Federal Trade Commission of the United States. It will examine how these agencies interact with their external environment and are affected by it. Particular attention will be paid to those direct channels whereby political influence may be exerted, including external control over the agency’s budget, its jurisdiction, and its top personnel appointment. Comparing the behavior of similar antitrust institutions in two different nations will reveal the degree to which the structure of regulatory bodies themselves appear to affect their output and the salient national variations in antitrust politics.
The Japanese and German Models of Capitalism: Collapse, Convergence, or Reorganization?
Steve Vogel, Harvard University
The Japanese and German models of organized capitalism are fundamentally transforming, yet they are neither collapsing nor converging upon the liberal market model. Rather, they are "reorganizing": charting distinct paths of adaptation conditioned by the logic of the models themselves. This paper develops this argument by examining recent changes in the micro-institutions of Japanese and German capitalism: Labor relations systems, financial systems, and inter-firm networks. At the level of firm behavior, Japanese and German firms; are constrained from moving more toward Anglo-American practices by the logic of pre-existing institutions, including their own internal corporate governance structures and their long-term relationships with workers, banks, and suppliers. At the level of national policy, the Japanese and German governments are constrained from embarking on bold liberal reforms by pre-existing institutions. Specifically, the competitive and protected sectors in the two countries are bound to each other through economic relationships and political bargains in ways that prevent the formation of a powerful liberalizing coalition.