The modern state and economic leadership: Canada, New Zealand and Australia’s trade and investment relations with Japan 1985-1998

Governments around the world are preoccupied with the confusing, uncertain and often chaotic influences of an expanding free market economy, increased globalization, major attempts to deregulate national regulatory systems, and the closely related development of powerful multi-national corporations. In the 1970s, free market western industrial nations partially, but by no means systematically, squared off against the USSR and China-led communist block, numerous socialist states, and a multitude of developing nations. Near the end of the 20ᵗʰ century, with communism in full-scale retreat and socialism largely politically discredited, the free market stands in the ascendency. While significant academic and political voices continue to express concern about a head-long rush into open markets, deregulation and business-driven economies, the rush of political and commercial sentiment appears to have shifted decisively away from government-led economic development. The primary purpose of this study is to examine the role of the state in the management of national economies in an area of state liberalism. In the post-war period, when many governments had faith in their ability to lead economic planning, departments and agencies attempted to manage and shape national and regional development. In the current age of neo-classical economics, where country after country has publicly indicated their greater confidence in the ability of the free market to determine the best economic opportunities, governments have surrendered some, if not all, of their responsibility for managing the shape, direction and character of the national economic and commercial system. By accepting this limited role, the argument will be advanced - western industrial governments have not provided leadership and direction in a time of dramatic economic change. Testing the proposition proposed above requires an examination of the acceptance of neo-classical ideas of the state by a national government or national governments and an assessment of the impact of this approach to state affairs on economic policy and outcomes. This study considers how three western governments, Canada, Australia and New Zealand, reacted to the pressure to liberalize the state. Each government adopted, to a greater or lesser degree, the proposition that the role of government in the economy should be reduced. The study then examines how these three countries responded to a major shift in economic prospects and opportunities and how national choices affected economic activity. The specific case under investigation is that of changes in national trade with Japan in the period 1985 to the present. Japan was selected for two main reasons. First, it is the largest (in the case of Australia) or second largest (for Canada and New Zealand) trading partner of the three countries under investigation. Second, Japan has undergone major changes in its internal and economic trade relationships over the past fifteen years, creating risks and opportunities for countries relying on access to the Japanese market. The transitions in the Japanese economy provide an opportunity to gauge the responsiveness of national governments and their ability and willingness to translate international market intelligence and understanding into concrete national economic policy and action. Canada, New Zealand and Australia embrace, to greater or lesser degrees, a neo-classical mindset which promotes limited governmental involvement in the economy. The actions and initiatives that these governments could undertake, therefore, were constrained by the bounds of an approach to political economy which dictates that economic decisions should be made by the marketplace and not by governments. While the investigation is rooted in a consideration of the intellectual debates surrounding state involvement in economic planning, it seeks to examine the practical, political and administrative issues associated with international trade, the mobilization of national government action, and the shifting ground that lies under the business-government relationship in the late 20ᵗʰ century global economy