Japan a Hard Sell, Even for Asians
In the midst of an appeal for the United States and Japan to quit quarreling over bilateral trade and to work together to solve long-range problems, the prediction came out with all the naturalness of discussing the sun rising tomorrow:
“You will soon be buying cars made in (South) Korea,” declared Sadami (Chris) Wada, vice president of Sony Corp. of America.
Wada was speaking in Los Angeles to a panel of Americans, including Douglas A. Fraser, former president of the United Auto Workers, and it was clear that you meant Americans.
And for good reason. The Japanese, unlike Americans, will not be buying cars made in South Korea.
When asked why South Koreans could ship passenger cars across the Pacific to the American market, beginning next year, but not across the Sea of Japan to their neighbor, Wada was nonplussed. He confessed that he could not answer.
As U.S. trade deficits with Asian countries continue to climb, the question of why the United States will import Asian-made goods while Japan will not promises to gain prominence as a “third dimension” to U.S.-Japan trade frictions.
Recently, the Japan External Trade Organization (JETRO) compiled statistics that underscored the issue. Between 1974 and 1984, JETRO reported, exports to the United States from five countries--Thailand, Malaysia, Singapore, Indonesia and the Philippines--belonging to the Assn. of Southeast Asian Nations (ASEAN) plus three “newly industrialized countries” of Asia--South Korea, Taiwan and Hong Kong--grew by 4.7 times, exactly the same growth rate as Japan’s exports to the United States over the same period.
Statistics Tell the Story
The eight countries’ exports to Japan expanded by three times during the same period, or only 64% of the rate of growth in exports to the United States.
In 1984, the same eight nations sent $44.9 billion in exports across the Pacific to the United States but managed to sell their Asian neighbor, Japan, only $30.7 billion worth of goods, JETRO reported. In addition, the nations’ reliance upon the American market increased--while their reliance on the Japanese market declined--during the 1974-84 period.
In 1974, the eight nations sold 24% of all their exports to the United States. In 1984, they sold 28%. But Japan, which took 26% of their exports in 1974, bought only 19% last year, JETRO said.
With Japanese machinery, equipment, parts, and semi-finished industrial products used by the Asian countries to produce finished goods, Japan served as a “prop of (the eight nations’) prosperity,” said Shiro Miyamoto, vice chairman of JETRO.
He noted, however, that Japan’s contribution was made in the form of Japanese exports, while America’s contribution to their prosperity came in the form of U.S. imports.
Miyamoto pointed to what he called an “economic structure” that dictates that, when the eight countries’ exports to the United States increase, “their imports from Japan grow.”
Miyamoto, whose organization has shifted its emphasis from export promotion to import promotion, also issued an unusual appeal to the Japanese to expand their imports from the eight Asian nations, particularly now that American economic growth has slackened.
Such references to the “third dimension” of U.S.-Japan trade problems, however, are still rare.
So far, American trade negotiators have mentioned it only in passing. But the beginning of passenger car exports from South Korea to the United States could turn a new spotlight on the issue.
Hyundai Motor Co. plans to export 100,000 cars to the United States next year, and two other Korean firms, Daewoo and Kia, will follow suit in 1987. If Korean hopes are realized, the three firms together will ship 400,000 cars to the United States--and most likely none at all to Japan in 1987.
Owns 10% Stake in Hyundai Motors
Mitsubishi Motor Corp. reinforced that forecast recently with the disclosure that it will sell 30,000 cars on behalf of Hyundai beginning in 1987--in the showrooms of its American dealers. Mitsubishi owns 10% of the equity of Hyundai Motors, which plans to sell the bulk of its exports to the United States through its own newly established dealer network.
Asked when Mitsubishi planned to sell its affiliate’s cars in Japan, the initial reaction in the Japanese firm’s public relations department was stunned silence. Shigetsugu Tateyama, manager of the international public relations section, phoned back later to confirm that Mitsubishi had “no plan at all” to sell Hyundai cars here.
A day later, Yotaro Iida, president of Mitsubishi Heavy Industries, the principal owner of Mitsubishi Motors, confessed at a news conference that he had never heard anything about, or given any thought to, importing Hyundai cars. His reaction, like Wada’s, was one of instinctive astonishment that such a question would even be asked.
Tateyama said Mitsubishi will import some auto parts from South Korea next year. But, as for car imports, he offered only a host of theories why Korean cars aren’t likely to sell in Japan. Among them: The Japanese car market is already saturated, there is fierce competition among Japanese auto makers, advertising costs are prohibitive and safety standards and emissions controls in Japan would be a problem for Hyundai cars.
At a Loss for an Answer
When asked why Mitsubishi helped Hyundai meet U.S. safety standards and emissions controls but couldn’t help the firm do the same in Japan, Tateyama had no answer.
Although no restrictions stand in the way of Hyundai--or other businesses throughout Asia--making their own effort to set up dealer networks in Japan, the costs of land or rent alone make such an undertaking economically impossible.
And, in the case of cars--unlike dealers in the United States, who often are willing to handle imports in addition to American cars--Japanese dealers are all rigidly tied to auto firms in exclusive sales agreements.
The answer to the broader issues involved in the “third dimension” of U.S.-Japan trade relations lies in Japanese manufacturing firms developing a new role as buyers, not just sellers.
