Country Risk Assessment on Japanese Imports of Drugs

Country Risk Assessment on Japanese Imports of Drugs

History

Japan, being the world’s most dynamically competitive nation, is facing an ironic balance in trade with the U.S. The Japanese economy relies too heavily on exports, especially to the U.S., causing increasing trade surpluses. They have been in a repetitive cycle for the last 25 years in which the government allows the yen to fall against the dollar to boost exports and restrict domestic growth to dampen imports. The Japanese government has set too many trade restrictions on U.S. imports, trying to compete against and keep out American imports.

This all began during the postwar period when Japan imposed heavy import barriers. Virtually all products were subject to government quotas, many faced high tariffs, and the Ministry of International and Trade Industry (MITI) had authority over the allocation of foreign exchange that companies needed to pay for any import. These policies were justified at the time by the weakened position of the Japanese industry and the country’s chronic trade deficits. By the late 1950’s, however, they had regained balance and could not justify their payment system. Despite Japan's rather good record on tariffs and quotas, it continued to be the target of complaints and pressure from its trading partners during the 1980s. These complaints revolved around non-tariff barriers other than quotas, which included standards, testing procedures, government procurement, and other policies that were be used to restrain imports.

Import Policies

In 1984 the United States government initiated intensive talks with Japan on four product areas: forest products, telecommunications equipment and services, electronics, and pharmaceuticals and medical equipment. The Market Oriented Sector Selective (MOSS) talks were aimed at routing out all overt and informal barriers to imports in these areas. The negotiations lasted throughout 1985 and achieved modest success.

Supporting the view that Japanese markets remained difficult to penetrate, statistics showed that the level of manufactured imports in Japan as a share of the gross national product was still far below the level in other developed countries during the 1980s. Frustration with the modest results of the MOSS process and similar factors led to provisions in the United States Trade Act of 1988 aimed at Japan. Under the "Super 301" provision, nations were to be named as unfair trading partners and specific products chosen for negotiation, as appropriate, with retaliation against the exports of these nations should negotiations fail to provide satisfactory results.