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U.S. Financial Markets Urged to Retaliate Against Foreigners

January 23, 1992

WASHINGTON (AP) _ The United States should retaliate against Japan and other countries allegedly discriminating against American investors, a congressional panel was told Wednesday.

″The time is ripe for some form of legislation″ to rescind the unlimited welcome to foreigners in U.S. securities markets, Rep. Mary Rose Oakar of Ohio declared at the end of a hearing of her House Banking subcommittee.

″The status quo cannot remain ... we have to level the playing field,″ she said, extending to financial services the concerns long aired in Congress about foreign market barriers against U.S. manufactured goods.

Unequal costs of capital are partly to blame for job losses and the shrinking U.S. industrial base, the hearing was told.

Statements of Oakar and other lawmakers suggested good prospects for legislation now before both houses of Congress to replace unrestricted access to U.S. securities markets with reciprocal national treatment.

President Bush ″might as well have been on another planet″ when he traveled to Japan earlier this month to ″sell open markets,″ testified Kevin Kearns of the Economic Strategy Institute, a private organization promoting government-managed industrial policy.

The Japanese ″do not practice our brand of capitalism ... and they see little need to change. By keeping their markets closed as long as possible ... Japan has grown into the second largest economy in the world″ and may be first by the turn of the century, said Kearns.

Japan has a closed financial system providing cheap capital that enabled its manufacturers to invest $660 billion in plant and equipment in 1990 compared to $510 billion in the United States, a 2 1/2 -to-1 Japanese advantage on a per capita basis, he said.

Kearns is a former U.S. State Department officer who quit after charging that a group in the department nicknamed the ″Chrysanthemum Club″ coddles Japan.

Matthew P. Fink, president of Investment Co. Institute, a U.S. trade group, said only four foreign mutual fund sponsors have been able to get Japanese licenses.

The sole American one, Fidelity Group, has abandoned efforts to do business there, he testified, because of ″onerous requirements″ including establishing a subsidiary with minimum capitalization of about $8 million and employment of 30 employees in Japan.

South Korea does not even accept applications for licensing of foreign fund managers, Fink said, while the European Community and Canada generally are granting Americans equality with their own nationals.

Tokyo University law Professor Hideki Kanda took issue with the idea that foreign financial interests are denied access to Japanese markets. But, he acknowledged, they face difficulties understanding and participating in the complex rulemaking process.

Echoing frequent advice from other Japanese, Kanda told the committee that U.S. firms should be ″more aggressive″ in establishing their presence in Japan.

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