TIME: Almanac 1993/TIME Almanac 1993.iso/time/060589/06058900.020

Text File | 1992-09-23 | 8.8 KB | 165 lines

                                                                                BUSINESS, Page 54

Special Report: Does Japan Play Fair?

Is the Door Open Wide Enough?


Despite much talk of global neighborliness, more push is needed

By Edwin M. Reingold


    The root of the problem may be a failure to communicate.
Washington's message of rising frustration, and even anger,
over Japan's trade practices is being received in Tokyo with
chagrin and incredulity. The reason for the perplexed reaction
is that the flurry of Japan bashing in the U.S. comes at a time
when the Japanese feel they have made historic changes for the
better in their restrictive and protectionist policies. Japanese
politicians and business leaders insist that the old ways have
been replaced by an expanding spirit of openness and global
neighborliness. Kokusai-ka, the Japanese term for
internationalization, has become a watchword at the Ministry of
International Trade and Industry, which led Japan's
industrialization and trade drives and once was instrumental in
blocking foreign goods from Japan.

    While most Americans believe Japan's trading manners are
still dangerously one-sided, the Japanese offer some impressive
evidence that they are trying to play fair. Japan has the lowest
average tariffs of any developed country, will rank as the
world's largest foreign-aid donor in fiscal 1989, and is host
to hundreds of U.S. firms that have captured a profitable share
of its market. In some businesses -- fast food, soft drinks,
razors, cancer insurance and disposable diapers -- American
companies control the largest shares in the Japanese
marketplace. IBM, the biggest U.S. business in Japan, posted
sales of $9.3 billion there last year, up 12% over fiscal 1987.
Says Takeshi Isayama, director of the Americas division of MITI:
"The U.S. Government tends to listen to those who fail in Japan
rather than all those who succeed."

    Japan has moved a long way from its closed-door past. For
much of the postwar era, Japanese politicians built on their
resource-poor nation's sense of vulnerability as a
rationalization for outright protectionism and discrimination
against foreign goods. When the economy was still a fragile
blossom sprouting in a war-devastated landscape, that was
tolerated by Western countries. At the same time, Japan
developed a socioeconomic system that guaranteed full employment
-- there was neither the money nor the will to finance a public
dole -- by means that created a stable business climate but were
foreign to Western free-market ideas. The Japanese way of doing
things included subsidies for employers, a complicated system
for distributing goods, and government-enforced product
standards that foreigners found impossible to meet.

    By the mid-1980s, however, that one-way trading mentality
had fostered such huge financial imbalances with the U.S. and
other countries that Washington pressured Tokyo into adopting
a blueprint for economic change. The plan, under which Japan
pledged to stimulate domestic spending so that exports would no
longer lead the economy, has achieved dramatic results. During
1988, imports rose 33.4% over the previous year, to $187.4
billion. Japan increased imports of auto parts, electronic
products, medical equipment and pharmaceuticals. Purchases of
foreign-built cars last year rose 37.1% over 1987, to $3.1
billion. Toyota's domestic sales went up 13%, while its exports
grew a mere 2.5%.

    The Japanese are dismayed that politicians in Washington
and many U.S. businessmen brand Japan as "protectionist"
whenever some products fail to sell in Japan, even though the
market is opening up. U.S. sales of telecommunications equipment
in Japan, for example, reached $263.3 million last year, up from
$106 million in 1985. Yet the U.S. is basing its current trade
complaints at least partly on the problems Motorola has faced
in getting frequency clearance in Tokyo for the cellular
telephones it is selling in Japan; Tokyo considers the grievance
too small to justify the hubbub surrounding it. Observes Peter
Tasker, British author of The Japanese: "Japan is not alone in
some of these disputes. Try selling telecommunications to the
French."

    Some pundits who believe Japan is failing to make quick
enough progress suggest that the country will need far more
pressure from the outside. James Fallows, author of More Like
Us: Making America Great Again, contends that the Japanese
economy is chronically biased in favor of corporate profits and
investment abroad at the expense of the Japanese consumer's
living standard. Example: the Japanese have only recently begun
to do away with mandatory Saturday office hours. Dutch
journalist Karel van Wolferen, in his recently published book
The Enigma of Japanese Power, argues similarly that Japan is run
by a near conspiracy of Big Business and bureaucracy, whose only
concern is to expand global market share.

    Tokyo lacks the leadership to launch the kind of overnight
reforms that would convince U.S. politicians that they were
being heard. A Japanese Prime Minister does not carry the clout
of an American President or a British Prime Minister; the
ability to decree change is limited. The Recruit bribery scandal
has virtually paralyzed the lame-duck administration of Prime
Minister Noboru Takeshita at a critical moment in U.S.-Japan
relations. Says an official in the Foreign Ministry: "We have
a first-rate economy, a second-rate standard of living and
third-rate politicians." But the Japanese are beginning to look
for stronger leadership. Cultural anthropologist Masao Kunihiro
says that during a recent lecture tour he found voters
"increasingly becoming aware of international affairs";
eventually, he suggests, "they will choose more genuinely
international minded politicians."

    For all their recent progress, the Japanese could do more
to open their market and reduce the stubborn trade gap with the
U.S. While the government has cleared the way for more imports
of U.S. beef and citrus products, bans on purchases of American
rice are being retained. Says a Japanese diplomat, in specific
reference to a U.S. barrier: "We'll do rice when the U.S. does
sugar."

    The Japanese point out, with some justification, that the
trade deficit is as much the fault of America's bad habits as
the result of Japan's economic policies. Says former Foreign
Minister Saburo Okita: "The Americans should take a second look
at themselves. Obviously they cannot go on with runaway spending
forever." The U.S. borrowing-and-spending binge, which involves
both Government and consumers, has boosted the tide of imports
to the U.S. The Japanese also complain that the U.S. has
leadership problems of its own. Washington has been sending out
conflicting signals because trade policy is shaped and shared
by several Government departments -- including State, Defense
and Commerce -- that are often at odds. The dispute about
whether to scrap the agreement for joint U.S.-Japan production
of the FSX jet fighter, in which the Defense and Commerce
departments were squaring off before President Bush decided to
go through with the deal, annoyed the Japanese because their
trustworthiness was so openly debated.

    A fundamental problem in U.S.-Japanese relations is that
the two countries have different concepts of how an economy
should work. Americans and Europeans continually tell Tokyo that
they want "fair" trade, which at its simplest means equal access
to the market. The notion carries moral overtones that do not
necessarily jibe with the Japanese view of the world. Kyoto
University history professor Yuji Aida recently wrote that "the
American predisposition to view things in simplistic
black-and-white terms is antithetical to our mind-set. Whereas
the U.S. was founded by a people convinced of a single, revealed
truth, Japan's long history has taught us that in the realm of
human behavior there is no absolute right or wrong."

    Then what is the correct path? Since the two economies have
become closely interwoven through joint ventures, investment
and trade, the health of the total relationship has become far
more important than one-upmanship by either country. As Aida
writes, "The leitmotiv of Japan is not saints and villains
engaged in mortal combat, but morally complicated human beings
living together, confronting and battling one another from time
to time, but ultimately yielding, compromising and coexisting
in harmony." If Japan can extend that philosophy to its economic
partners, relationships will thrive. In fact, the talk of
Japanese internationalism is more than sentimental optimism.
Says author Tasker: "They may not create their own momentum for
change. They have to be pushed, but when they move, they move."
The U.S. ought to give Japan greater credit for movement, even
as it keeps up the pressure for more.