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Volume 15, Issue 1 (Mar 2013)

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Business advocacy in Asian PTAs: a model of selective corporate lobbying with evidence from Japan

Mireya Solís
  • Corresponding author
  • The Brookings Institution and American University, Washington, DC, USA
  • Email:
Published Online: 2013-03-15 | DOI: https://doi.org/10.1515/bap-2012-0045

Abstract

What explains the pattern of selective business interest in preferential trade agreements (PTAs) with active campaigning for and utilization of tariff preferences for some trade agreements, but not others? Under what conditions can business advocates of PTA policy mount an effective lobbying campaign to influence policy outcomes (i.e., shaping decisions on who to negotiate with and what to negotiate about)? These are important questions given that analyses of Asian PTAs frequently assign a negligible role to business interests either out of apathy or lobbying weakness. To understand the pattern of selective business lobbying for PTAs, I develop a theoretical model with three main independent variables: venue selection, preference intensity, and advocacy effectiveness, and apply it to the case of Japan to test its usefulness. My model shows that the conditions for effective business PTA campaigning are exacting: loss avoidance, high technical expertise, and influence-seeking strategies that maximize access opportunities given institutional constraints. And yet when these factors align, business interests do influence PTA outcomes. My research shows that the current trend to characterize the agency of PTA proliferation as either state-led or business-driven needs to be re-examined as it is more useful to think about state-society constellations in favor or against PTAs.

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About the article

Corresponding author: Mireya Solís, The Brookings Institution and American University, Washington, DC, USA


Published Online: 2013-03-15


Dent 2006; Ravenhill 2010.

Koo 2009.

Ogita 2003; Krauss and Naoi 2011.

Wan 2011.

Terada 2009.

Sally 2007; Hoadley 2008.

Solís 2003; Sally 2007; Choi 2009; Manger 2009.

Rhyu 2011: p. 82.

Katada and Solís 2010. Also see Yoshimatsu 2005.

Kawai and Wignaraja 2011.

Study by Chiravathivat cited in Wignaraja et al. 2011: p. 207.

Ravenhill 2006.

Jiang 2010: p. 245.

For a discussion of the security rationale in PTA proliferation, see Mochizuki 2009.

I do not imply that politics is absent from WTO negotiations. The impact of power asymmetries among industrialized countries and developing nations on outcomes in multilateral rounds of negotiation or the maneuvering among different types of coalitions, such as the Cairns Group or the G20, are some well known examples of politics influencing bargaining dynamics. Rather, the simple point I am making is that PTAs allow countries to formally raise the status of their bilateral relationship or of regional (or cross-regional) groupings in a way that is not possible in the WTO.

Several examples attest to this dynamic at play: 1) The political stakes for state elites in Argentina and Brazil in founding Mercosur were high: the distension of regional tensions that would help curtail military expenditures and the consolidation of the democratic project by facilitating economic growth. Hence, policymaking was top-down with governments deciding the integration agenda and bringing in business mostly to facilitate implementation (Gardini 2006). In contrast, Chile’s accession into Mercosur was not affected by these political/strategic imperatives, and occurred mostly at the behest of Chilean business associations following their own economic interests (Schneider 2004: pp. 227–228). 2) China assigned utmost priority to the PTA with ASEAN to assure its neighbors in Southeast Asia of the joint gains from China’s rise. Therefore, Premier Zhu and foreign policy bureaucrats dominated the decision-making process and the adjustment burden of the Early Harvest Program on Chinese farmers was explicitly downplayed. However, in subsequent negotiations with Australia, key decisions reverted back to foreign economic policy bureaucrats and the defensive interests of Chinese peasants and state owned enterprises were given much more play in drafting China’s bargaining position (Jiang 2010: p. 3).

Moravcsik 1993.

Pekkanen et al. 2007.

Aggarwal and Lee 2011.

Putnam 1988.

Woll and Artigas 2007.

Levy 1997.

Stein 1993; Taliaferro 2004; Odell 2006.

Katada and Solís 2010.

Baldwin 1995.

Solís 2010.

Schneider 2010.

Kim 1999: pp. 286, 290.

Fields 1997: pp. 136–138.

Laothamatas 1992. Laothamatas labels Thailand “liberal corporatism” to account for the co-existence of state sponsorship and private sector initiative.

Campos and Root 1996: p. 94.

Even at the height of state corporatism in prewar Japan, big business resisted encorporatization by the government (Pempel and Tsunekawa 1979), and in the postwar era the Japanese state has not controlled appointments or the internal operations of the peak umbrella association–Keidanren.

In fact, reliance on the autonomy dimension to gauge an association’s influence may be misleading. Less independent associations may capitalize on their privileged access to policymaking circles and the government’s dependence on their implementation of state policies to press for their organizational goals, as case studies on Korea and China show (Kim 1999; Foster 2001; and Deng and Kennedy 2010).

Schneider 2004.

Laothamatas 1992; Sally 2007: pp. 1603, 1608.

Fields 1997: p. 138.

Cheong and Cheo 2011.

Aggarwal 2001; Baron 2010.

Woll 2008; Schneider 2010.

Interview with former senior METI official, Tokyo, summer 2005.

Solís 2003.

Manger 2009.

Interview with officials from the Japan Maquiladora Association, Tijuana, July 2006. The fact that Prosec failed to address the concerns of Japanese companies in the maquiladora industry is also evident in their explicit complaints about this program during the Japan-Mexico PTA study group. See Japan-Mexico Joint Study Group on the Strengthening of Bilateral Economic Ties, “Final Report,” July 2002, http://www.meti.go.jp/english/information/downloadfiles/cJa-Mereporte.pdf.

Interview with former senior METI official, Tokyo, May, 2006.

Munakata 2002.

Ogita 2003.

Terada 2010.

The timing of the reports is also important in that in all of these four cases, Keidanren advocated the PTAs well ahead of the launch of official negotiations. Hence, Keidanren’s advocacy is proactive and not merely a reaction to the government’s policies.

Another way to gauge selective business interest is to look at the PTA utilization rates. Takahashi and Urata (2010) found very different levels of use in a survey of Japanese corporations: 32.9 percent for the trade agreement with Mexico, versus 12.2 percent for the deal with Malaysia. And within the Japan-Mexico PTA, the steel industry and automobiles reported very high utilization levels of 47.4 percent and 51.2 percent respectively.

METI released these figures as it actively supported the agreement with Mexico once negotiations with Korea failed to take off quickly and the agreement with Singapore was little used by the Japanese private sector. Only one other time has the Japanese government circulated figures on the estimated losses from the lack of a PTA: the estimated 29.3 trillion yen in losses if Japan abstained from the TPP. For an analysis of this negotiation, see Solís and Katada (2007).

This report, published by Keidanren on April 19, 2011, in Japanese, is available at: http://www.keidanren.or.jp/japanese/policy/2011/030/betten.pdf.

Keidanren is not the only business association actively involved in PTA lobbying. At the industry level, the associations for automobiles, electronics, textiles, and machinery exporters, among others, have also actively articulated their views on preferential trade negotiations. The Japan Machinery Center for Trade and Investment (JMC), formed in 1952 with 290 members including electronic and general machinery exporters as well as trading companies, illustrates the dynamics of effective lobbying highlighted here: the association carries out surveys to assert member positions and has an active research department that disseminates information on PTAs around the world. Based on this technical expertise the association puts together policy proposals on PTA negotiations and submits them to METI (Interview with JMC officials, Tokyo, June 2008). However, as a multi-sector umbrella organization that acts as the conduit for corporate donations and enjoys privileged access at the top levels of policymaking, Keidanren is the most powerful business advocate and hence my analysis focuses on its activities.

PTAs can also sow division among companies from the same sector when firms may gain market share by exporting duty free from the home base under a new PTA vis-à-vis companies that had already established assembly plants in that market to get past high tariffs. Sekizawa (2008) argues that such a divide emerged between Toyota and Nissan in the PTA negotiations with Mexico and prevented a strong lobbying campaign from industry. However, Toyota did invest in a truck plant in Mexico in 2002, rendering the exporter/local assembler divide moot (See Toyota Motor Company’s press release from September 20, 2002, http://www.toyota.co.jp/en/news/02/0920_2.html). In the end, both companies strongly supported the trade deal with Mexico (Manger 2009).

In the area of bilateral investment treaties, Pekkanen (2008) also finds that Keidanren’s BIT model largely shaped Japan’s negotiation strategy.

Keidanren’s policy assessments are available on their website at: http://www.keidanren.or.jp/english/policy/.

Yamamoto 2007: p. 203.

Nikkei News, 5 August 2009.

Data on corporate political contributions is available in Japanese at: http://www.keidanren.or.jp/japanese/policy/2003/122/suii.pdf.

Nikkei News, 28 September 2011.

Mainichi News, 8 October 2011.


Citation Information: Business and Politics, ISSN (Online) 1469-3569, ISSN (Print) 1369-5258, DOI: https://doi.org/10.1515/bap-2012-0045. Export Citation

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