Political Economy of Trade Liberalization: The Case of Postwar Japan

How did post-War newer democracies, whose governments faced both pressures from vested special interests and voters, achieve trade liberalization? Exploiting the case of trade liberalization in 1960s Japan, this paper addresses this question. Because the benefits and costs of trade liberalization are unequally distributed among the population, generating winners and losers, trade liberalization is inherently a highly political issue. The Japanese government and the LDP leaders used two tactics to build a coalition of legislators for trade liberalization. While they used sequencing of liberalization to buy off support from legislators of the Upper-House, they relied on side-payments for legislators of the Lower-House. This strategy choice was consistent with the difference in the sizes of electoral districts between the Upper-House and the Lower-House.