U.S. Trade Negotiators Asking Japanese Consumers: 'How're We Doing?' Graphic.
Apr. 14, 1991
TOKYO (AP) _ They are like subversives in an economic cold war, sent here to sow rebellion among Japan's high-paying consumers.
They are America's trade negotiators, armed with an unprecedented scheme to break down protectionist social machinery that the U.S. government blames for its chronic trade deficits with Japan.
Critics say the 2-year-old Structural Impediments Initiative will do little to change Japan. But the latest generation of U.S. trade warriors believes it has history, and the Japanese people, on its side.
''We had a sense when we put the SII together that the (Japanese) government was lagging behind its own people'' in assessing the need to adjust the economy, said S. Linn Williams, the deputy U.S. trade representative for Japan and China, whose team resumes talks with Japan next month.
Earlier this month, President Bush met with Japanese Prime Minister Toshiki Kaifu to discuss Japanese restrictions on trade. The April 3 talks were aimed at shoring up relations strained during the Persian Gulf War and by long- running trade disputes between the countries.
Tensions have been exacerbated by Japan's increasing share of the U.S. auto market, its unwillingness to allow imports of U.S. rice, and its refusal to back U.S. negotiators in Geneva last December in getting European negotiators to reduce or eliminate agricultural subsidies.
SII is an attempt to eliminate those barriers beyond such formal hurdles as tariffs and quotas, which have been largely eliminated under U.S. pressure. It seeks to eradicate a grass-roots protectionism that manifests itself in price- fixing cartels, Japanese-only stock-holding arrangements between banks and corporations, and Japanese-controlled distributor chains.
Although the first SII agreements were signed only last summer, they have already borne fruit. In March, Toys 'R' Us got permission to open a store in a shopping complex in the city of Niigata, making it one of the first foreign companies to benefit from relaxed regulations on setting up large-scale stores in Japan.
The key to SII's success, however, may lie outside the bargaining room, U.S. negotiators say. It means winning the favor of a Japanese public strapped to an economic engine that has run them ragged for 45 years.
For all their hard-won wealth, Japanese pay far more for homes, food and many basic consumer goods than Americans and Europeans. Infrastructure problems are rife. The percentage of homes connected to sewer systems is only about half the average of the major industrialized nations. Many parts of the nation lack sufficient parks and roads.
''Playing catch-up for more than a century has left a legacy - a set of interlocking institutions, policies and behavior patterns that tend to skew resources toward ... manufacturers and away from consumers,'' Edward Lincoln wrote in his recent ''Japan's Unequal Trade.''
Furthermore, the public doesn't have the know-how or power to remedy its problems, SII negotiators say.
The U.S. team has surveys on its side. According to a poll last year by the Yomiuri newspaper, a large number of Japanese believe SII either will benefit them as consumers or improve their lifestyle.
''Every Japanese citizen was hoping that the talks would force Japan to change its structure,'' said Noriko Kimura, 55, a suburban housewife.
Yet many critics, including American businessmen here, say the U.S. effort is misguided. Indeed, they say SII may only make Japan's economy a more efficient competitor with little direct benefit to U.S. exporters. Most of them, unlike Toys 'R' Us, deal in industrial rather than consumer products.
And many Japanese and Americans contend Japan's market is already largely open, despite such well-known exceptions as rice and strategic high-tech industries such as supercomputers, telecommunications and computer chips. Separate talks are being held on those issues.
One problem with the U.S. effort, the critics say, is that perceptions of Japanese business practices lag far behind reality since most formal trade barriers were eliminated only recently. One of the last was a luxury tax on big cars, dropped in 1989.
''Did you know the Japanese market has been the most receptive to American exports'' in the world since 1985, said Makoto Kuroda, one of Japan's toughest trade negotiators in the 1980s.
A 1985 currency agreement raised the value of the yen relative to the dollar. Since then, U.S. exports to Japan have more than doubled to $49 billion last year. At the same time, U.S. imports from Japan rose 30 percent to $90 billion.
''We have to raise our voices more in criticizing ... America's failure to put (its) own house in order,'' Kuroda said.
As part of SII, Japan extracted changes including a U.S. pledge to reduce the budget deficit. But Japanese officials, worried about growing U.S.-Japan frictions, have not pressed their side of the agreement.
The most recent survey by the American Chamber of Commerce in Japan, in 1987, found that 72 percent of U.S. companies here felt no restrictions existed in their industries.
''The real impediments to entering this market are commercial rather than governmental,'' said Keith G. Johnson, chairman of Shin Caterpillar Mitsubishi Ltd., a 27-year-old joint venture between the U.S. and Japanese heavy machinery giants.
''Because of the land cost situation, to enter the Tokyo market today and open up distribution centers is tough. And with the long-standing relationship of buyers to their suppliers, loyalties are very deep here. So trying to convert customers away is a long-term proposition.''
It is mostly such commercial impediments that U.S. negotiators are after. Land costs are high partly because of government tax policies. And too often, U.S. officials say, deep business loyalties between Japanese companies cross the line into price-fixing monopoly practices the government does little to remedy.
Indeed, anti-monopoly enforcement was the major point of dispute at a round of talks in January.
''There are problems in antitrust enforcement here that are bigger than anyplace else in the industrialized, civilized world,'' said Williams, the U.S. trade representative.
Like any good subversives, the SII negotiators have enlisted the support of local malcontents.
One is the Fair Trade Commission, although it has long been a stingless gadfly to formidable government ministries. It's been 16 years since a case against monopoly price-fixing was filed in Japan, and no plaintiff has ever won.
This year, under strengthened antitrust laws pledged by Japan during SII, Japan's antitrust investigators will get help for the first time from the Justice Ministry, said Makoto Kurita, a commission official.
Also in response to U.S. pressure, the FTC tripled the penalty for monopoly violations from 2 percent to 6 percent of sales for large companies.
There are few signs Japan's compliant consumers are about to rise up and join in the push for changes. But that could change.
''The press actively reported the SII discussions, so Japanese consumers are much more familiar with the importance of our commission and the anti- monopoly act,'' said Kurita. ''And Japanese consumers, they are not so happy.''