Continued Openness and Reforms for Agriculture in Japan

Abstract

Debates over the economic merits of free trade have surfaced recently. Trade tends to bring about what Ohta and Nakagawa (2008) called the ‘worsening terms’ of exchange, which is a more intra-national than inter national phenomenon. Yet this more intra-national, distributional conflict manifests itself as a stumbling block to international trade, as suggested seventy years ago by Stolper and Samuelson (1941) (SS).¹ An enormous amount of subsidy is reportedly poured into the adversely affected sectors in Japan, in particular agriculture. Further increased open trade will be an important factor in raising the average living standards of people in the country. However, agricultural trade liberalization has remained controversial and should be debated. Irwin (1996) and Bhagwati (2002) have discussed the economic merits of free trade. The negative effects of protectionism are well documented by Bhagwati (1988). Krugman (1987) has stated: ‘the case for free trade is currently more in doubt than at any time since the 1817 publication of Ricardo’s Principles of Political Economy…’. However, he also noted that ‘… free trade is not passe´… Its status has shifted from optimum to reasonable rule of thumb. There is still a case for free trade as a good policy, and as a useful target in the practical world of politics,…’. Herrmann (2007) discusses the linkages between agricultural support measures in developed countries and food security in developing countries. He argues that ‘A credible phasing-out of agricultural support should receive priority in multilateral trade negotiations.’ Sound agricultural policies eliminating market distortions should be based on an economic rather than a political rationale.

I would like to thank Professor Hiroshi Ohta for valuable comments and suggestions. All errors, however, are mine alone.