Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, June 19, 1995 TAG: 9506200033
SECTION: EDITORIAL PAGE: A-7 EDITION: METRO
SOURCE: CARL H. TONG
DATELINE: LENGTH: Long
After World War II, the United States helped Japan build a democratic country and rebuild its industrial capacity. The U.S.-Japan Mutual Security Assistance Pact of 1952 extended the U.S. nuclear umbrella over Japan. Guided and assisted by the Japanese government, many Japanese producers, trading companies and banks became world-class players during the past 25 years.
The end of the Cold War in 1992 shifted the primary concern of the American people from military issues to economic matters. In early 1993, President Clinton faced two serious deficit problems - a federal budget-deficit problem and a merchandise trade-deficit problem. To build a long-lasting healthy and prosperous U.S. economy, he had to significantly reduce or eliminate these two deficits.
The United States has had a merchandise trade deficit every year since 1976. Our 1994 merchandise trade deficit totaled $166 billion, up from $133 billion in 1993. This prolonged deficit has caused two problems: (1) the loss of high-pay jobs for U.S. citizens; and (2) the perpetual decline of the value of U.S. dollars in the foreign-exchange market.
While the United States has experienced large merchandise trade deficits in recent years, Japan has run up a huge merchandise trade surplus with the rest of the world year after year since the early '80s. The U.S. merchandise trade deficit with Japan was $66 billion in 1994, up from $59 billion in 1993. About 55 percent of the 1994 U.S. merchandise trade deficit with Japan was due to imports of Japanese autos and auto parts.
Comparative statistics from six industrialized countries clearly show that Japan's market is extremely difficult for foreign auto companies and auto-parts makers to penetrate. Foreign firms' share of the auto market in Italy, the United Kingdom, Germany, France, the United States and Japan is 55 percent, 54 percent, 39 percent, 38 percent, 33 percent and 4 percent, respectively. Foreign firms' share of the auto parts market in the United Kingdom, France, the United States, Germany, Italy and Japan is 60 percent, 49 percent, 33 percent, 25 percent, 16 percent and 2 percent, respectively.
At the core of this 1995 U.S.-Japan auto-trade dispute is the question: Does Japan trade fairly? President Clinton and his negotiators are frustrated by two years of unproductive trade talks with the Japanese in opening Japan's auto and auto-parts markets to American companies. U.S. Trade Representative Mickey Kantor states, ``In July 1993, we reached a framework agreement with Japan. A priority sector was automobiles and auto parts. Japan agreed to significantly increase access and sales of auto parts and autos in their markets as a result. ... They've not lived up to that agreement. ... In 25 years, the Japanese have sold 40 million cars in the United States; we've sold 400,000 in Japan. It's a 100-to-1 ratio. ... The United States was criticized four or five years ago for not having products available to Japanese customers. That's no longer the case: The Big Three automakers in the past five years have invested $117 billion in new plant equipment, training, research and development. We've addressed all the criticisms Japan has made of the U.S. auto industry.''
Specifically, the United States would like to see the following three things happen:
American auto companies become able to sell their cars and trucks in Japan through existing dealerships, just as Japanese auto companies have access to GM, Ford or Chrysler dealers in the United States.
Japanese auto makers change their clannish purchasing behavior and commit themselves to buy more American-made original equipment parts.
The Japanese government modify its complex and unfair vehicle inspection system so that American auto-parts makers can have an equal chance to do business in Japan's auto repair and replacement market.
Donald E. Petersen, president and then chairman of Ford Motor Co. in the '80s, reported his observation and experience as follows: ``As Japan got stronger, its government eliminated many of the laws against foreign investment, but it resorted to a highly developed system of impediments that still make it very difficult for Americans to export products to Japan or set up facilities there. ... For much of the '70s and '80s, there was no way to slice through all the paperwork. Each and every car had to go through a maze of approvals. In Japan, you have to sell cars door to door. But our salespeople wound up sitting around the import authority office waiting for permission to bring their cars in. The officials were extremely adept at being out to lunch or taking a tea break. Days could go by, and a salesman who is stuck at the import office isn't selling any cars.''
After determining that Japan lacks sincerity in opening its market to American-made autos and auto parts, President Clinton has threatened to impose 100 percent tariffs on 13 Japanese luxury car models beginning midnight June 27. Clinton is doing exactly the right things in his earnest attempt to open Japan's market. Free trade must be based on fair trade; fair trade means reciprocal and mutually advantageous arrangements between two trading countries. This ``fair trade'' idea is explicitly expressed in the preamble of the General Agreement on Tariffs and Trade.
The Japanese economic system differs considerably from the American economic system. Japan practices nationalistic capitalism; the United States uses individualistic capitalism. My conclusion is: The goal of the Japanese economic system is to achieve global economic dominance through ownership. The nation's major strategies include mercantilism (meaning the Japanese government encourages exports but discourages imports to accumulate wealth and raise the value of Japanese yens) and predatory trade (meaning Japanese companies use their fixed costs and make profits and then charge relatively low prices for their products in foreign markets to grab a sizable market share abroad or destroy non-Japanese competitors completely).
Patience is a virtue; however, being overly patient is a clear sign of weakness and foolishness. The United States has been extremely patient with Japan in trying to open that country's market; so far the result has been very unsatisfactory. It is time for the United States to demand a solution.
The countries in the world can be classified into three categories: those that make things happen, those that watch things happen, and those that wonder what happened. If we want the United States to have a bright long-term economic future, we must have the wisdom, courage, ability and perseverance to make things happen.
Carl H. Tong is a professor of marketing and international business at Radford University.
by CNB