The economic futures of the United States, Canada, and Japan are tightly linked by the extremely powerful trade network these nations share. Yet because of trade and domestic policies aimed at preserving economic and, some argue, cultural integrity, there has at times been considerable friction among the three nations. Much of the recent trade animus of the U.S. has been aimed Japan, the country with the largest trade surplus with the United States. Canada, the largest trade partner of the U.S., maintains fiscal policies which resemble those of Japan, but has not been the focus of similar concern. Since the actions of each nation reverberate throughout the network, a full and accurate understanding of these complex relations will be essential if ongoing trade negotiations, policymaking, and international relations are to be constructive. The papers in this volume were developed from a conference that addressed the need to discover which structural determinants and policies shape the close economic ties among these nations. Leading experts on trade and macroeconomics from all three countries examine disproportionate saving rates, exchange rate volatility, varying industrial policies and levels of financial innovation, the effects of present tax policies and proposed reforms, and the dynamism of major Pacific nations and the leadership role Japan may play in U.S. relations with that region. Several important conclusions are reached by the contributors. They assert that Japan's trade barriers are relatively low overall and are comparable to those maintained by the United States and Canada, and that divergent fiscal policies have been the major source of macroeconomic imbalances between the United States and other major countries in the 1980s. They also conclude that current trade imbalances may persist for some time. The analyses offered here are likely to prove influential in future policymaking and will be of interest to a wide audience, including academic economists, government officials, and students of theoretical and policy issues of international trade, investment, and finance.

From the back cover: Richard Wright's study chronicles and analyses the Japanese business presence in Canada. It reveals several distinguishing characteristics of Japanese investment, which should help allay some traditional Canadian concerns about foreign investment. Japanese investment is small in proportion to the total volume of Canada-Japan trade. Moreover, unlike other traditional foreign investors, who generally seek to gain direct control of affiliated companies in Canada, Japanese investors aim primarily to secure reliable flows of raw materials. Because the Japanese emphasis is on trade rather than on investment flows, a high proportion of Japanese investment is in the form of loans rather than equity, and the Japanese often take minority holdings or enter into joint ventures. The role of Japanese investment is thus a very different one from that which has been a source of concern about foreign ownership in Canada.

Two of the biggest issues facing nation states in the twenty-first century are the role of government in the management of national economies, and the cultivation of international trade and investment in an age of globalization. In Government, International Trade, and Laissez-Faire Capitalism Carin Holroyd offers a comprehensive comparison of Australian, Canadian, and New Zealand policies and strategies aimed at improving economic relations with Japan, the world's second largest economy. She illustrates negative consequences that result when governments withdraw from trade promotion and leave the development of commercial opportunities to the private sector. Holroyd focuses on how Australia, Canada, and New Zealand responded to the dramatic changes in the Japanese economy that followed the 1985 Plaza Accord and currency reforms. She examines trade promotional activities, efforts to coordinate business responses to the Japanese market, and the cultivation of Japanese investment, indicating how new paradigms of state involvement in the economy influenced international trading activity. Holroyd demonstrates that rather than responding proactively to changing conditions and new opportunities, the national business sectors stayed with traditional patterns of trade and investment, losing significantly in market share and export opportunities as a consequence.