The Trade Dispute Between Canada and Japan

In order to originate this investigation, it is helpful to first consider the specific events that promulgated the development of the trade dispute between Canada and Japan in the 1960s. Critically reviewing the relationship that existed between Canada and Japan in the 1960s, it is evident that Canada saw Japan as a portable trading partner. Researchers examining this relationship have noted that “Canada attached major importance to Japan as a tall and growing market for Canadian exports, particularly for foodstuffs and industrial materials, as well as for a modest range of manufactured goods” (Langdon, 72). From the end of World War II up until the late 1960s, the Canadian government supported Japanese efforts to progressively expand imports into the country. However, changes in the international community with respect to trade liberalization place considerable pressure on this relationship. Specifically, researchers have noted that in the early 1970s, of the American government’s decision to place a hefty surcharge on imports forced both Canada and Japan to reconsider the specific strategies that they would utilize for international trade (74).

The research is that the American government had placed on imports dramatically gash the ability of both Canada and Japan to compete effectively in the world economy. As such, the Japanese government made a proposal to the Canadian government to develop a partnership that would disable American attempts to dominate the world economy. Although it is evident that Canada may have benefited from this plan, the response of the prime minister during this time was one of negativity toward the Japanese government:

Pépin criticized Japan for its ‘restrictive import policies, extraordinarily aggressive marketing policies, and her undervalued currency.’ He said that Japan, as a major trading nation, should win the lead, implying that it should not only do the rallying of international forces against protectionism, but also indicate a satisfactory example by making it easier for restricted Canadian exports to enter Japan (74).

Considerable to the chagrin of the Canadian government the Japanese took the advice of Pépin and initiated aggressive tactics among members of the GATT to develop a new round of trade agreements that would help the Japanese government (74).

Partly as a result of the sparing that took place between Japan and Canada, Japan moved to further liberalize its trade partnerships. This process had a positive impact on the growth of the Japanese economy in the 1970s. The phenomenal changes that occurred in the Japanese economy during this time had a significant impact on the trade relationship that existed between Japan and Canada. Although Japan subsequently became Canada’s largest trading partner beginning in 1972, the two countries chose notably different approaches toward building of their economies. In particular, one author makes the following observations:

As a middle power, Canada decided on a multilateral approach while maintaining its alliance with the United States. Canadians were active in the United Nations as strong supporters of peacekeeping operations and arms control. In the meantime, Japan, as a rising economic power, was more concerned with enhancing its international status through its relations with the big powers, the U.S., the Soviet Union, and China. Consequently, during great of the cold war period, Japan and Canada had little contact with each other… (Nishihara, “Speech at…”).

The differing methods used by these two countries to develop their economies have a significant impact on the ability of governments from these two countries to interact successfully with one another. Despite the fact that both countries depended upon each other for the proliferation of trade very little consideration was given to the independent political development of either country.

In addition to the differences that existed between the specific political policies pursued by each country, researchers also noted that the foreign investment strategies pursued by these two countries was also considerably different. Averyt and his examination of the specific policies utilized by Canada to bolster trade in the 1960s and 70s note that the country’s trade and foreign investment policies were developed by the Foreign Investment Review Agency or FIRA. As a resource rich economy, Canada sought investors and trading partners with countries that could provide mighty financial capital into the country to develop and expand the utilization of natural resources available in the country (Averyt, 50).

As Canada actively sought investors and trading partners, Japan employed a much different strategy toward attracting trade partners. Averyt goes on to note that, “Japanese strategy regarding foreign investment was significantly different in several respects from that of Canada. The overriding goal in screening potential investors, for example, was the importance of the potential investors technology, not the capital, increased production, employment, or marketing skills which the new operation would bring” (51). Thus, the Japanese government sought specific trading partners with which it could build formable relationships towards establishing the overall infrastructure of the Japanese economy and society. The notable differences between the goals of both countries served as a significant barrier for both Canada and Japan to obtain a formidable trade relationship that allow for equal give-and-take from both sides.

The differing ideologies that both countries held with respect to the development of three partnerships and foreign investments clearly have an impact on the development of the economies for both countries. Unfortunately, Canada had taken a protectionist standpoint awaits its adoption of FIRA. In the early 1970s, FIRA mandated that all foreign investments taking place in Canada include a majority section by a Canadian individual or organization. As such, Canada had created a situation in which foreign investors had to seize a minority status when it came to the development of their business operations (Goerzen and Beamish, 5). This policy stands in stark dissimilarity to the Japanese policy of trade liberalization and the expansion of foreign direct investment in the Japanese economy.

The Auto Industry

In an effort to bolster its economy, the Japanese government made the decision to invest in automobile manufacturing. As a result of this process, phenomenal growth in the auto initiative Japan was noted between the years of 1960 and 1973. “Showing an average annual increase exceeding 26 percent, Japanese output of passenger cars rose from 165,000 in 1960 to nearly 4 1/2 million in 1973″ (Bardou, Chanaron, Fridenson and Laux, 182). In 1971, the Japanese overtook the Germans in terms of the total number of automobiles produced to become the second-largest automobile manufacturer in the world. The government was further able to exploit the site of the Japanese auto industry by further liberalizing trade. By 1971, country have managed to eliminate most of the trade barriers associated with automobile manufacturing. In doing so, the Japanese government was able to catch up to America and other European auto manufacturers (183). “It sold its products successfully on international markets by means of very competitive prices-stemming from low labor costs-and new and attractive technologies” (183).

Research on the Canadian automobile manufacturing industry demonstrates that the close relationship that have been developed between the US and Canada with respect to the automotive industry had repercussions for the Canadian economy. In the post-World War II era America had extensively developed its automotive industry throughout Canada. Researchers examining the situation have noted that, “American automobile manufacturers dominated the Canadian market for years with branch plants, and this developed into an integrated industry because of the automobile pact, designed as a response to the aspirations of the Canadian government for more manufacturing in Canada” (English, 7). As direct result of this partnership, automobile manufacturing in both countries expanded significantly Peralta mid-twentieth century. This profitable partnership or remained a central part of the trade problems that occurred as a result of Japanese expansion of its automobile industry.

Although the Canadian auto industry was not as strong or domineering as the auto industry in the United States, the liberalization of trade by Japan in the context of the auto industry had an impact on the development of this industry in Canada. Experts examining the impact that Japanese dominance would have on the American and Canadian auto industries commented that the ability of the Japanese takeover of the automobile industry would eventually turn the US and Canadian auto markets into a service oriented industry (Schaller, 232). “The Japanese are tranquil fighting the war, only now instead of a shooting war it is an economic war. Their immediate intention is to try to dominate the Pacific and then perhaps the world” (232). As such, the steps taken by the Japanese government to bolster its automobile initially were seen as comparatively aggressive and detrimental to the development of the North American automobile industry.

Adding to the complexity of the methods that Japan utilized to bolster its automotive production, researchers have noted that as the number of automobiles produced by Japan increased each year, the United States and Canada works to construct strategic methods of that would enable North American auto manufacturers to retain a dominance of the international automobile industry. “Western nations moved in step to competitively lower their production costs, financed with gracious capital resources, to capture markets throughout the world” (Fukurai and Krooth, 85). Despite these efforts however the Japanese government responded by putting in place a number of restrictions on the domestic automobile industry, pushing towards the centralization of the automobile industry and through the government.

Japan’s Ministry of International Trade and Industry (MITI) responded to this problem by openly demanding that the government promote the centralization and cartelization of the nation’s industry. Decrying excessive domestic competition, Japan’s largest concerns also called for government curbs on such competition in the interest of efficient, low-cost production. They contended that only with government controls and subsidies could Japanese businessmen succeed against their competitors abroad (85).

Pressure to centralize operations in the automotive industry led to the development of a considerable government controls over the development of the automobile industry. These controls were difficult, if not impossible for Western governments to overcome in their chance to garner control of the international automobile industry.

The tension a created between Japan and Canada during this time period was excessively overwhelming. However, the Japanese government maintained its station on trade liberalization by arguing that Western governments through their protectionist schemes sought to dismantle the Asian economy. As noted by one author, “Even in the mid-1970s, Japanese business leaders justified their nation’s autarchic leanings, expressing the feeling of being “surrounded” by Western competitors” (216). One Japanese businessman is noting as stating that, “The atmosphere is just like that on the eve of World War II, when America, Britain, China and Holland surrounded Japan in the Pacific and tried to squeeze Japan by pressing on its supply of raw materials” (216). Thus, the conflict to that developed with respect to the automobile industry had definitively divided viewpoints based on the geographical region of the individual observer.

Unfortunately, for Canada, the economic policies developed by Japanese government were not the only significant impediments to the development of the North American automobile industry. In addition to the fact that the Japanese had instituted significant economic policies toward promoting their automobile industry, Japanese car manufacturers had created significant production practices that notably reduced the final cost of the automobile. Considering the situation overall one author makes the following observations: “Japan’s automakers had already put in place the elements of the lean, flexible Fordist regime by the early 1960s. Thus Japan’s automakers were able to take advantage of the economies of scope and scale on a level unprecedented in the history of vehicle manufacturing” (Price, 223). What this effectively suggests is that not only have the Japanese government found a particular market niche to expand its overall economic development, but also automobile manufacturers in Japan have developed in the technology necessary to compete with North American auto makers in terms of both technology and price. These innovations made it difficult for Canadian auto manufacturers to effectively compete in this market.

As the Japanese began to dominate Western automobile markets, another problem developed which is significantly impacted trends in the automobile industry. In 1973, the oil crisis which had a damaging effect on the financial stability of both Canada and its citizens. The oil crisis brought to light the significant fuel efficiency that have been popular in automobiles produced by North American auto manufacturers. This realization prompted the consumers to consider purchasing Japanese made automobiles, which had traditionally achieved better gas mileage overall (Marty, 151). Thus, even though the Japanese government were struggling as a result of the oil crisis, principal gains were made in the automobile industry as a result of increased sales in North American countries. In a desperate attempt to reduce the costs associated with purchasing gasoline, many North American consumers chose to purchase a more fuel efficient Japanese automobile.

Developments Since the 1970s

Although the economic policies pursued by both Canada and Japan were significantly different, these two countries were eventually able to put their differences aside and establishing mutual framework for cooperative economic development. Clearly, the Japanese government’s aggressive tactics to promote the development of the automobile industry in the international economy have more far-reaching implications for the United States than it did for the Canadian government. As a result, the Japanese and Canadian governments were able to reconcile the problems created as a result of differing opinions on both trade and foreign investment and that had served as the impetus for an overall decline in the relationship between these two countries. At the present time, Japan and Canada both enjoy apt trade relationships with one another. Currently, Japan is Canada’s second largest trading partner followed only by the United States. What is clearly suggests is that the Canadian and Japanese governments have been able to effectively work together to improve the development of domestic economies while still ensuring favorable conditions for international economic development.

Synthesis of the Data

Synthesizing all of the information it has been presented in this investigation, it becomes evident that he trade dispute that developed between Canada and Japan occurred as a direct result of each country’s decision to pursue different methods of economic development. Japan, in an effort to slice the protectionist attitudes that have been established by the United States with respect to international trade developed extensively aggressive liberalization policies that would enable the government to effectively bolster the domestic economy. Canada, because of its terminate geographical ties to the United States had also chosen a primarily protectionist route in an effort to preserve the status quo of its economy. Unfortunately, the specific policies developed by the Canadian government in response to the trade liberalization of Japan have a detrimental impact on the ability of the Canadian economy to effectively develop in the mid-twentieth century.

In the end, this research clearly demonstrates the effectiveness of the Japanese government in its efforts to improve the domestic economy. Despite increasing pressure from Western countries toward protectionism, the Japanese government was able to find significant loopholes in the system that could be exploited for economic growth again. Interestingly, the specific policies adopted by the Japanese government during this time may not be effective presently. The juxtaposition of Western protectionism against Japanese liberalism is clearly the combination that served as the basis for the success of the Japanese government in developing its domestic economy. What this effectively implies is that if Western governments such as those in the United States and Canada had not adopted such rigorous protectionist attitudes against foreign trade the Japanese government may not have been so successful in its aggressive attempts to liberalize its domestic economy.

Conclusion

The efforts of the Japanese government to put itself as a necessary international automotive manufacturer has been quite successful. Even today, the United States continues to struggle in its efforts to dominate the automotive industry. Notable improvements that have been made in the context of the production techniques utilized by Japanese automobile manufacturers continue to make it considerably difficult for automobile manufacturers in the United States to sustain pace with the technological innovation and cost savings that have been engendered in the Japanese manufacturing system. In many respects, one could argue that the changes that took region in the automotive industry in the 1970s marked the beginning of the end for North American automobile manufacturers. At the present time, it does not appear as if North American automobile manufacturers will ever be able to rival products produced by the Japanese.

Works Cited

Averyt, William F. “Canadian and Japanese foreign investment screening.” Columbia Journal of World Business, 21(4), (1986): 47-54.

Bardou, Jean-Pierre, Jean-Jacques Chanaron, Patrick Fridenson, and James M. Laux. The Automobile Revolution: The Impact of an Industry. Chapel Hill, NC: University Of North Carolina Press, 1982.

English, Edward. Canada-United States Relations. New York: Academy of Political Science, 1976.

Fukurai, Hiroshi and Richard Krooth. Common Destiny: Japan and the United States in the Global Age. Jefferson, NC: McFarland, 1990.

Goerzen, Anthony and Paul W. Beamish. “Changing patterns in Japanese investment in Canada.” Ivey Business Journal. [2005]. Accessed April 3, 2006 at: http://www.iveybusinessjournal.com/view_article.asp? intArticle_ID=542.

Langdon, Frank. The Politics of Canadian-Japanese Economic Relations, 1952-1983. Vancouver: University of British Columbia Press, 1983.

Marty, Myron A. Daily Life in the United States, 1960-1990: Decades of Discord. Westport, CT: Greenwood Press, 1997.

Nishihara, Masashi. “Speech at dinner, Sutton Place, Toronto, November 8, 1999.” Government of Canada. [1999]. Accessed April 3, 2006 at: http://www.dfait-maeci.gc.ca/asia/main/japan/conference-en.asp.

Prince, John. Japan Works: Power and Paradox in Postwar Industrial Relations. Ithaca, NY: Cornell University Press, 1997.

Schaller, Michael. Altered States: The United States and Japan since the Occupation. New York: Oxford University Press, 1997.

Japanese And Canadian Economies Of The 60s And 70s Picture

Japanese And Canadian Economies Of The 60s And 70s Image

Japanese And Canadian Economies Of The 60s And 70s Picture

Japanese And Canadian Economies Of The 60s And 70s Photo

Japanese And Canadian Economies Of The 60s And 70s Picture

Japanese And Canadian Economies Of The 60s And 70s Photo