The Political Strategy of Trade Policy Decisions: Evaluating the Protection and Liberalization of Japan’s Citrus and Cigarette Markets

Abstract

Under what conditions do governments choose to employ protectionist measures, and what determines their choice between tariffs, quotas, and other non-tariff barriers? This thesis addresses these questions through a case study of the protection and subsequent liberalization of Japan’s citrus and cigarette markets in the 1980s, two industries that differed in the extent of state intervention in production. I argue that while protection in both industries originated as the strategic allocation of political support to the Liberal Democratic Party’s core agricultural constituency, the specific policy choice reflected distinct underlying objectives for the state. The quota choice in citrus allowed policymakers to tightly control import quantities—thus predictably limiting competition for growers and keeping prices high—while allowing the state to distribute valuable rents to politically connected import firms of its choosing. In the cigarette case, a restrictive tariff preserved the government tobacco monopoly’s market dominance and thus revenue-generating capacity. Empirical analysis suggests that liberalization likely reshaped production and the distribution of voters across citrus varieties in Japan, while in tobacco, monopoly control over output and acreage does not strongly predict changes in the number of tobacco-growing households. Overall, these findings demonstrate that governments select trade policy instruments not only to restrict imports, but to shape the distribution of economic rents in ways that align with their political incentives.