TIME: Almanac 1993/TIME Almanac 1993.iso/time/042489/04248900.015

Text File | 1992-09-23 | 9.5 KB | 187 lines

                B÷                                                            BUSINESS, Page 44

Friend or Foe?


The FSX becomes a symbol of mounting strain between the U.S.
and Japan

By John Greenwald


    American television manufacturers were the first to fall.
Then Japanese firms rolled through markets ranging from autos to
semiconductors. Now many Washington politicians fear that U.S.
plans to develop the FSX fighter jet with Japan could give Tokyo
a vital jump start in the aerospace industry, one of the few
high-technology fields in which American companies still
dominate. The growing outcry has transformed the proposed jet,
an advanced version of the F-16, into a powerful symbol of the
rising tensions between two countries that are close military
and diplomatic allies but also archrivals for the economic
leadership of the world. "What we're seeing is the emergence of
an entirely new concept of national security," says Wisconsin
Democrat Les Aspin, chairman of the House Armed Services
Committee. "It embraces economics and competitive, commercial
relations."

    Any Japanese inroads in aerospace would be a serious blow to
U.S. industrial might. American manufacturers exported $26.9
billion worth of passenger planes and military aircraft and
missiles in 1988, which gave the U.S. a $17.9 billion surplus in
aerospace trade. These were precious exports, considering that
the U.S. ran an overall trade deficit of $119.8 billion last
year; the gap with Japan alone was $52.1 billion. U.S. trade
woes were underscored last week when the Government reported
that the deficit during February widened to $10.5 billion, up
21% from the previous month. The major cause: a fresh flood of
imports from Japan.

    Mindful of polls showing that many Americans are more
fearful of Japan's economy than of the Soviet Union's military
strength, President Bush has made the FSX an example of U.S.
willingness to get tough with Japan by reopening an agreement
that the Reagan Administration had considered closed. For the
second time since he took office, the President last week
demanded that Tokyo clarify terms of the FSX deal.

    Under the original agreement reached last November, Japan's
Mitsubishi Heavy Industries would design the fighter (top speed:
1,300 m.p.h.) in cooperation with St. Louis-based General
Dynamics. The deal guaranteed U.S. contractors 40% of the $1.2
billion development budget and allowed access to the secrets of
advanced Japanese radar gear and composite materials. But Bush
wants further assurances that American firms will receive 40% of
the $5 billion to $10 billion in production contracts for as
many as 170 fighters, which are to be deployed in the late
1990s.

    The Administration's hard line has settled a feud between
the Defense Department, which has championed the FSX deal as a
strategic and technological boon for the U.S., and the Commerce
Department, which challenged it as a giveaway of fighter
technology to Japan. Both agencies now support the White House
position. Says Defense Secretary Richard Cheney: "My hope is
that we'll be able to get that clarification and resolve our
differences with the Japanese."

    Yet some congressional leaders insist that the agreement is
nearly beyond repair. Says California Democrat Mel Levine, a
member of the House Foreign Affairs Committee: "I just don't
think we should help Japan build its own jet fighter when the
U.S. already builds the best-quality, best-priced jet fighters
in the world. Japan should buy the product from us." FSX
opponents contend that if Japan wants to retain access to
American markets, it should be willing to buy goods that the
U.S. produces at competitive quality and prices. They claim
that Congress will reject the jet agreement when Bush finally
submits it for review, unless the deal contains major Japanese
concessions. Yet the opponents would almost certainly lack the
votes to override a presidential veto of any blocking
legislation.

    The congressional outcry reflects frustration over the U.S.
trade deficit, as well as the feeling among many legislators
that Japan has refused to throw its markets wide open to
American goods. Time and again the U.S. has negotiated trade
agreements with Tokyo only to find Japanese buyers still
reluctant to pull out their checkbooks as often as U.S.
politicians would like. In 1986, for example, Tokyo agreed to
help U.S. companies win a 20% share of the Japanese
semiconductor market by 1991. While American microchip sales in
Japan rose sharply last year, thanks to an expanding market,
U.S. companies have increased their share of the total to only
10.5%.

    Congress paved the way for sharp U.S. retaliation by passing
landmark trade legislation last year that may cause further
friction between the two countries. The law has a provision
dubbed Super 301 that requires the U.S. Trade Representative to
identify by May 30 those countries that systematically restrict
U.S. access to their markets. The Super 301 offenders must then
agree to lift their barriers or face U.S. import restrictions
on their goods. Says Missouri Republican John Danforth, a member
of the Senate Finance Committee: "I would really be startled,
and very disturbed, if Japan were not on the list."

    Ironically, the latest round of Japan bashing comes at a
time when Tokyo believes it has been doing its best to improve
U.S. trade ties. Last year Japan dropped quotas on beef and
citrus imports and began to open its construction market to
U.S. firms. "Through hard joint effort we put a lot of thorny
issues behind us," says Peter Y. Sato, director general of the
economic affairs bureau of the Ministry of Foreign Affairs.
"Yet Americans are not satisfied with the speed." Other leaders
see the FSX wrangle as a dramatic symptom of unreasonable U.S.
demands.

    At one point in the mid-1980s, Japan intended to build its
own jet to patrol Pacific sea-lanes and provide air support for
its defense forces. Washington offered instead to sell Japan
planes that could be modified by adding new technologies, but
Tokyo complained that the jets did not meet its military
requirements. After the U.S. pressed the issue, Tokyo and
Washington agreed last year to design the FSX (for Fighter
Support Experimental), an advanced aircraft that would add new
electronics and wings to the F-16 fuselage.

    But the Reagan Administration's agreement ran into
turbulence during two of Bush's National Security Council
sessions in mid-March. Outspoken opponents included White House
chief of staff John Sununu, a former engineering professor, who
argued that the U.S. risked losing the technological edge
represented by the plane's so-called source codes, which
coordinate its electronic features. The doubters were joined by
Secretary of Commerce Robert Mosbacher, who says he wanted to
ensure that "this aviation technology, which has taken so many
years of blood, sweat, tears and money to develop, did not
instantly allow our biggest competitor to catch right up."
After hearing the objections, Bush decided to reopen the
agreement and press Japan for safeguards, including a clearer
understanding of what the U.S. would gain from the project and
the technological secrets it could withhold from the Japanese.

    For its part, the U.S. Defense Department, based on its
history of cooperation with the Japanese Defense Agency, sees
few dangers in the FSX. Pentagon planners say the Japanese will
learn little from the aging F-16 airframe. At the same time,
the Pentagon covets Japan's miniaturized phased-array radar
technology, which will use thousands of tiny, independent
sensors to sweep large sections of the sky. The new radar will
provide sharper resolution and greater range than traditional
back-and-forth scanners. In addition, the Japanese will pay for
the development of a larger, stronger and lighter wing for the
F-16.

    Proponents of the deal believe the bulk of technology flow
will be from Japan to the U.S. Edward Bursk, chairman of the
Aerospace Industries Association of America's International
Council, told Congress last month he thought the agreement was
fair. Said Bursk: "The U.S. technology involved in FSX is at a
reasonable level and under U.S. Government control," adding
that Japan could build a comparable plane by itself.

    To those who argue that the FSX will help Japan become a
major power in civil aviation, the deal's supporters reply that
Tokyo already has entered the field with willing help from U.S.
aerospace firms. Japan is developing an advanced jet engine
with U.S., British, Italian and West German companies and is
building a rocket that may launch a two-ton satellite into orbit
by 1992.

    The Bush Administration, in asking for safeguards in the
deal, is not trying to crush Japan's aerospace ambitions or
force Tokyo to buy wholly U.S.-made planes off the shelf.
Rather the struggle over the FSX appears to mark the start of
a new get-tough era in U.S. relations with its trading partners.
Armed with the Super 301 weapon provided by Congress, the White
House in coming months could bring actions against Japan if the
U.S. determines that Tokyo has failed to open its markets for
everything from weather satellites to financial services.
Moreover, the Administration now considers U.S. industrial
competitiveness to be as essential as tanks or missiles to
American security. "Trade is defense," says Clyde Prestowitz, a
former U.S. trade negotiator. "We must recognize the nature of
the game." George Bush, for one, seems determined to play
harder.