Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, March 7, 1994 TAG: 9403080012
SECTION: EDITORIAL PAGE: A7 EDITION: METRO
SOURCE: CARL H. TONG
DATELINE: LENGTH: Long
Today, many Americans are deeply concerned about the unbalanced trade relationship between Japan and the United States, and view Japan's neo-mercantilism as a grave threat to America's economic future and standard of living. Between 1978 and 1993, Japan's merchandise trade surplus with the United States totaled $524 billion. Our ambassador to Japan, Walter Mondale, describes Japan as "a closed market." U.S. Trade Representative Mickey Kantor says, "The Japanese insist their markets are open. They are not. No more business as usual. We want results."
Many Americans think Japan has an economic system very much like ours. This creates serious problems because our misconceptions often lead us to formulate ineffective economic policies toward Japan. As Alan S. Blinder, a member of President Clinton's Council of Economic Advisers, has pointed out, "Studying the Japanese economy has led me to a tentative conclusion: that market capitalism, Japanese-style, departs so much from conventional Western economic thought that it deserves to be considered a different system."
American-style capitalism and Japanese-style capitalism differ significantly in three aspects: national interest, economic planning and trade policy. American business executives typically make business decisions without considering America's national interests. In contrast, most, if not all, Japanese business leaders put Japan's national interests first and then fit their organizational strategies and actions into the framework of Japan's national development plans.
The government-business relationship in the United States tends to be adversarial. Japanese governments and businesses work closely together and support each other.
This difference between the two countries has a cultural root. Most Americans understand the importance and benefit of teamwork, but individualism is unmistakably our cultural norm. No matter if it is in the school or at the workplace, we are usually evaluated, rewarded and punished on an individual basis. In comparison, the Japanese think that each person is an interdependent group member, that one should be conscious of others, and that the group always comes before an individual.
Japan has been developing and using multi-year economic plans to quicken the pace of its industrial growth since 1955. Its Ministry of International Trade and Industry officials give special care to those industrial areas that they think are critical to Japan's economic future, exclude foreign competitors and investors from their home market, help Japanese firms buy foreign technology at the lowest possible price, promote the construction of modern plants and the use of modern equipment, encourage Japanese companies to cooperate to penetrate promising foreign markets, and export as many high-tech products as possible.
The semiconductor industry serves as a good example. It has been reported that: "In the 1970s and early 1980s, Japan's MITI threw up barriers to chip imports and required U.S. investors to share technology with Japanese partners. At the same time, MITI put big money behind an expansion by Japan's giant electronics companies into chipmaking."
In contrast, the United States does not have a long-term economic development plan, and is the only major industrial country without a Department of Industry. American government officials, business leaders, academicians and media commentators are still debating whether developing a national economic plan is a good idea, and wonder whether such a plan will do more harm than good to the economy.
The United States basically has been following a free-trade policy since the end of World War II. Japan has been using a different policy. On the one hand, the Japanese protect their home market through government restrictions and semi-official business arrangements. On the other, the Japanese pursue an aggressive export policy. Lester Thurow, Dean of MIT's Sloan School of Management, describes the situation as follows: "Price differentials that should not exit in a global market do exist. The prices of tradable products are 86 percent higher in Japan than the prices of those same goods in the U.S. Theoretically, there is a lot of money to be made by buying products in America and selling them in Japan. Yet no one in Japan takes advantage of these huge profit opportunities. Outsiders who try, fail."
In addition, Japan frequently has been accused of dumping and/or monopolizing in foreign markets - television, steel, semiconductor, VCR, video games, to name just a few of the product categories.
While President Clinton is pressuring Japan to become a fairer trader in the global economy, we must recognize that America's international competitiveness is determined mainly by our domestic economic performance in terms of our technological development, product innovation, product quality, service quality, production cost, marketing cost, customer satisfaction and worker satisfaction. In other words, both forcing Japan to open her market and continuously improving our own economic and business systems are necessary for us to rebuild a strong, healthy U.S. economy.
Japan is a very tough competitor. We Americans must study the Japanese carefully, understand them thoroughly, out-think them strategically, pay attention to details, get our competitive act together, and strive to surpass them in economic performance on every relevant and important occasion. Let's turn the Japanese challenge into a golden opportunity to upgrade our economic and business systems, for the benefit of our citizens as well as for the furtherance of global stability.
Carl H. Tong is professor of marketing and international business at Radford University.
by CNB