Abstract
Scrutiny of Japan’s market structure, with modifications also existent in Korea, results in the conclusion that it presents a serious obstruction to competition, both from abroad and from domestic newcomers. The economic system explains the behaviour of Japanese producers on foreign markets. Restrictions on competition were decisive for the infallibly strong position of Panasonic and ultimate victory of its video recorder system. The restrictions also resulted in exclusively Japanese trade flows of Japan with Asia. A computation of Customs Duty Equivalence is an effort to quantify the import barrier effect of the distribution system. The protective effect of the distribution system does not only affect foreign exporters but is also a barrier to domestic innovation. The effect of the system equals a prohibitive import tariff of about 40 %. It also has some disruptive effects on export markets. Additionally, this distribution causes a sclerotic economy, where small innovative initiatives are suffocated. This contributes to Japan’s continuous economic depression.
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Notes
- 1.
Article XXIII concerns nullification or impairment of concessions made in the past. The complaint was made by a communication, L/5479 dated 8 April 1983: Japan – Nullification or Impairment of the Benefits accruing to the EEC under the General Agreement and impediment to the attainment of GATT objectives.
- 2.
GATT C/M/167, 6 May 1983, Minutes of Meeting, Held in the Centre William Rappard on 20 April 1983.
- 3.
The 30 % figure, found for electronics, was also found in an investigation on behalf of the European car industry into dumping of cars from Japan that took place during the early 1990s. It appeared that the same applied to the passenger car industry.
- 4.
Japan Chamber of Commerce: “Distribution System and Market Access in Japan, 1989, for Promoting Better Mutual Understanding”; Tokyo: The Japan Chamber of Commerce and Industry; June 1989, p. 18.
- 5.
It was practically impossible to sell the idea that Philips was not successful in Japan. Various Philips executives claimed extraordinary accomplishment, often referring to the income from the joint venture with Matsushita. Former bosses of Philips Japan pretended to be extremely effective in the Japanese market, but only shavers appeared to be sold in Japan. This is explained in this chapter.
- 6.
The Japan Economic Journal, June 2 1990.
- 7.
Bartlett (2008), p. 8.
- 8.
Source: UNICE, External Relations Department: “Main Obstacles to Imports in Japan. Working Paper”; Brussels, February 1985. An updating has been composed from various marketing data, MITI statistics, miscellaneous newspaper articles, such as ACE, Vol. 11 No. 9; Electronic Industry Association of Japan Statistics. According to recent literature, the situation has not changed very much.
- 9.
Matsushita Electric Industrial versus Council of Ministers, Case C104/90-1a, No. 362762, 1990, and Defence of the Council, 11 July 1990.
- 10.
Opinion of Mr. Advocate General Mischo delivered on 13 December 1990. – Matsushita Electric Industrial Co. Ltd and Matsushita Electric Trading Co. Ltd v Council of the European Communities. – Anti-dumping duties on plain paper photocopiers originating in Japan. – Case C-175/87, paragraph 9.
- 11.
Opinion of Mr. Advocate General Mischo, 13 December 1990, recital 23.
- 12.
Japan Times, Saturday, 30 June 2001.
- 13.
Wall Street Journal, 6 January 1982: “Imitators Thwart Sony Unit, Exporting Is Easier Than Importing in Japan”: Sony imported Whirlpool refrigerators, small domestic appliances made by Oster Inc. (United States) and Robert Krups (Germany), but these products were then imitated. “‘Japanese manufacturers may not have any morals for international business,’ says Sony Trading president Tetsuro Yotsumoto. ‘They are always imitating – it’s a very bad point.’”
- 14.
Wall Street Journal, 6 January 1982: “Imitators Thwart Sony Unit, Exporting Is Easier Than Importing in Japan”.
- 15.
Morita (1986, pp. 77–78).
- 16.
Wall Street Journal, 31 August 1989: “Electrolux Forms Alliance With Sharp to Sell in Japan”. Electrolux’s Mr. Johansson, who conceded that quick revenue was not expected, is quoted as saying: “This is an experiment in opening up the Japanese distribution system.”
- 17.
Japan Economic Journal, 7 October 1989.
- 18.
Keizai Koho Center: “Japan, An International Comparison”, 1991. Nikkei News, 26 June 1990: “Toshiba Corp. overtook Sharp Corp. for second place in domestic colour television shipments in 1989, scoring 15 % against its rival’s 14.5 %. This was attributed to Toshiba’s success with large-screen TVs. Matsushita Electric Industrial Co. expanded its range of large screen TVs and retained top spot with 24 %. Domestic shipments of colour TV sets in 1989 numbered 9,485,000, down 0.2 % from previous year. At least in 1987.” TV Digest, 13 July 1987. The television market was, according to the Japanese electronics and information industry association JEITA, in 2002 not much different (9.6 million units of cathode ray TV).
- 19.
- 20.
Nester (1991), p. 109.
- 21.
Japan Economic Journal, 2 June 1990, reports a few thousand less than in Table 7.1.
- 22.
Shimotani (1995), p. 65.
- 23.
Japan Economic Journal, 10 February 1990.
- 24.
Ohmae (1985).
- 25.
Asahi Shimbun, 20 April 2011: “Delayed electronics releases lead to bleak summer outlook”.
- 26.
Information Bulletin No. 29, 25 August 1995, Japan Web, http://web-japan.org/trends95/29.html
- 27.
Marukawa (2004).
- 28.
Magaziner and Patinkin (1989).
- 29.
- 30.
Magaziner and Patinking (2004), p. 64.
- 31.
It is not well possible to judge whether the prices of Japanese supplies from subsidiaries in ASEAN countries are relatively cheap, because profits have to be made in Japan. Striking aspect of Japanese imports is that imports prices are extremely low compared with those from the same countries into the United States. It may be a matter of inter-company prices.
- 32.
Electronics Industry Association of Japan (EIAJ) and trade statistics of the Ministry of Finance of Japan.
- 33.
Van Wolferen (1989), describes these weird practices. It has resulted in an economy hampered by its own success. The big companies appear a brake on progress. Having become leading in various industry sectors, their ability to copy other producers has lost its effect, but their problem is how to innovate in an economy without the stimulus of competition with foreigners and without competition in Japanese market, where newcomers are crushed and, often, their innovations are appropriated by the big. Van Wolferen saw Japanese behaviour as a conspiracy. It is not. It is a Catch 22.
- 34.
Japan Times, Friday, 21 September 2007: “Sharp and Pioneer to form alliance.”
- 35.
Japan Patent Office, annual report 2011, published in Keizai Koho Center, “Japan 2012, an International Comparison”.
- 36.
Distribution trade happens to apply just a certain per cent gross margin, irrespective of the product involved. Products with a high turnover are, of course, pushed by such a system.
- 37.
The estimate is derived from production figures from the EIAJ, presently the Japan Electronics and Information Technology Industry Association (JEITA) in 2003. The calculation is supported by trade statistics of Japan of the Ministry of Finance. The figures used are an example and the case does not depend on microscopic presentation of real figures.
- 38.
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van Marion, M. (2014). Japan’s Market Structure as International Trade Barrier. In: International Trade Policy and European Industry. Contributions to Economics. Springer, Heidelberg. https://doi.org/10.1007/978-3-319-00392-4_7
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