Japan’s Trade Image Improves in Some Areas : American Firms Say It Lives Up to Commitments on Telecommunications

Times Staff Writer

America’s deficit in telecommunications trade with Japan, although virtually certain to be permanent, no longer upsets the U.S. Electronics Industries Assn., according to John J. McDonnell Jr., the association’s vice president for telecommunications.

New opportunities for American firms here have suddenly made Japan, which was the target of congressional attacks last year for its telecommunications policy, a model for the United States to use in seeking to open markets for telecommunications equipment in Canada and Europe, McDonnell recently told a group of foreign correspondents here.

A year after Japan denationalized Nippon Telegraph & Telephone, which had been a government monopoly, Japan “has carried out, or is in the process of implementing, every commitment it made” to the United States to open up its telecommunications industry, he said.

McDonnell, who was an adviser to U.S. government officials in last year’s negotiations with Japan, expressed pleasure at the results to date. He and American officials alike said that U.S. firms now have “substantially equivalent competitive opportunities to those (that) Japanese companies have in the United States.”


New Interest in Japan

The breakthrough, McDonnell said, has encouraged a spurt of new interest in Japan by American telecommunications equipment makers--made evident in early April at a telecommunications trade show sponsored by the Electronic Communications Industry Assn. of Japan. U.S. companies more than tripled their exhibit space compared to last year, he said.

American executives, he said, felt that they had established “valuable contacts with potential customers and distributors.” And virtually all of them, he said, indicated that they would be back at the show next year.

McDonnell said the success “will do a great deal to eliminate skepticism” about opportunities in Japan. “Hopefully, it will encourage some more companies to come and try this market,” he said.


“All of us,” he said, “are absolutely delighted” with the operations of a new, independent certification agency that replaced the old system under which Nippon Telegraph & Telephone certified all equipment for use in Japan.

Approval is now being granted within two to three weeks after an application is submitted, he said. So far, 28 American firms have obtained certification to sell products for telecommunications systems used by banks, securities and commodities exchanges and brokerages. All but one of the 28 companies had been operating in Japan, but Contel IPC, a division of Contel, a telecommunications firm with $2.6 billion in sales last year, is a newcomer.

Comparable System

“I can state unequivocally that there is in place here a (certification) system at least comparable to the system in the United States,” McDonnell said. “It is clear the Japanese are following through on their commitments.”


Future opportunities also exist for American firms in Japan’s new “value-added network,” or VAN, market, which involves equipment that makes possible communications between computers, and in radio communications equipment, McDonnell said.

He said that all of the U.S. VAN companies had set up joint ventures in Japan in the past year in order to enter a market that in five years could be worth $1 billion. American firms could get a 20% share, or $400 million in sales, in the market for radio communications equipment, which eventually will amount to $2 billion, he said.

American telecommunications sales to Japan have increased only slightly in recent years, to between $200 million and $300 million, but Japanese exports to the United States promise to reach $2 billion this year, double the amount of only three years ago, McDonnell said.

However, the increase in Japanese exports is slowing down, he said, adding that Japanese sales to the United States this year probably will not grow by more than $200 million, compared to $500 million in 1984.


A steep appreciation in the relative value of the yen, he said, will induce more and more Japanese companies to set up factories to manufacture their products in the United States. Over the next two years, he said, “that is where the change in the (telecommunications) trade imbalance will come from.”

Sumitomo Electric, he said, has already put up an optical fiber equipment factory in North Carolina, and NEC has “more than doubled” its manufacturing floor space with three new American plants in the last two years.

McDonnell acknowledged, however, that the United States will not be able to wipe out its deficit with Japan in telecommunications, which was $1.5 billion last year, no matter how much the yen’s relative value increases.

Japan, he said, will continue to manufacture at home “such a significant number of products for which (it) is our principal supplier . . . that I don’t ever expect, in my lifetime, to see a positive balance in trade with Japan in telecommunications.”


With American Telephone & Telegraph’s move to manufacture telephones in Singapore, the consumer telephone manufacturing business, “for all practical purposes, no longer exists in the United States,” he said, adding:

“If you want to sell a product to a consumer in the United States for less than $400, as a practical matter, it’s just impossible to competitively manufacture in the United States. That’s history. It’s gone away with all of the consumer electronics.”