Governor Ends Japan Trip Talking Tougher but With More Insight

Gov. George Deukmejian ended his weeklong trade and investment mission Saturday, a lot wiser about the political muscle of Japanese farmers and talking even tougher than when he arrived.

The image of himself that Deukmejian left with the Japanese seemed to be that of an amiable, unemotional, but firm and fairly important politician who mistakenly blames them for the U.S.-Japan trade imbalance.

Whether the governor’s trip will accomplish its primary goal--to stimulate investment in California and open more Japanese markets for the state’s exports--”remains to be seen,” he said in his customary, uneffusive manner.

‘We’ll See Some Progress’

Not everyone in Deukmejian’s party, which included eight top advisers, was as cautious in predicting how the Japanese will respond.

“I’ll bet you anything that when it comes time to negotiate new quotas on oranges and beef (sometime this year), we’ll see some progress out of the trip,” California Agriculture Director Clare Berryhill said, adding that he also expects the Japanese to lift a ban on nectarine imports.

“I’m happy with what the governor was saying over here. Once in awhile, you’ve got to hit people over the head with a two-by-four to get their attention.”

Deukmejian repeatedly warned Japanese government and business leaders, in private conversations and in public utterances, that they must move faster to lower import barriers if they expect “free trade” politicians like himself and President Reagan to hold back U.S. “protectionists.” Americans are “growing impatient,” he said, with a U.S.-Japan trade imbalance expected to hit almost $60 billion for 1986.

Deukmejian wound up the week even threatening a return by California to the unitary method of taxing multinational firms if the Japanese--as he sees it--keep dragging their feet. The Japanese fought for a decade to overhaul the unitary system--under which multinational firms paid California taxes based on their worldwide profits--and the governor last year signed compromise legislation that they supported.

‘Statement of Reality’

Deukmejian’s chief of staff, Steven Merksamer, said of the governor’s admonition about the unitary tax: “That’s just a statement of reality.”

This was Deukmejian’s first trip overseas since he served with the Army in West Germany in the early 1950s. And the overseas education of Deukmejian on this trip included a lesson about farm power in Japan.

Deukmejian told reporters that he found out it was even more difficult for California agriculture interests to deal with Japan than he had imagined.

Japanese farmers, he said, have more political clout than U.S. farmers do. In fact, he said, the Japanese farmers have more influence “than they should have,” given the vastly greater urban population.

In all of his meetings with government officials, Deukmejian reported, the issue of the farmers’ political power “just sort of automatically came up.” And virtually everybody told him, he added, that “it would be extremely difficult to open up the markets for California agricultural products.”

Price a Secondary Concern

Deukmejian came here trying to persuade the Japanese they are paying too much for food--and could pay less if only more California crops were imported. But the Japanese traditionally have been obsessively loyal to their own products--especially agriculture crops--and, unlike Americans, the price seems to be of secondary concern.

The price of food here was a real eye-opener for Deukmejian and many others in his traveling party. A check of Tokyo grocery stores found such prices as: Fatty steak “on sale” for $17 a pound, good steak for $45; lettuce $1.19 a head; milk $1.45 a quart; large strawberries, 10 for $10; nine asparagus spears $4, and--most astounding for Californians--three cantaloupe in a fancy wooden box, $300.

Deukmejian sampled several aspects of Japanese life style while here--fancy restaurants, middle-class shopping areas, Buddhist temples, a high school English class and a factory.

Campaign Bumper Sticker

On Saturday, walking with his wife, Gloria, from small shop to shop in a craft area, the governor happened upon an “American Portrait” sketched in color on a mirror. It featured a Ford pickup with a Deukmejian campaign bumper sticker on the tailgate. It also showed a bumper strip sticker of a Deukmejian political friend, Riverside County Supervisor Corky Larson.

But being the fiscal conservative that he is, the governor made no offer to buy the unique $10 item. Instead, he gave his business card to the shopkeeper, who obviously was confused by all the attention the art object was receiving from a dozen Americans.

Deukmejian came away from the school in midweek wondering whether California educators might not have their priorities wrong in trying to reduce class sizes. He noted that Japanese classes are larger than California’s--about 50 students on the average--and the education system here is regarded as excellent.

Impressed by Workers

Everywhere the governor went, and especially at a household appliance factory in Osaka, Deukmejian was impressed that Japanese workers “pay more attention to service and detail than ours do.”

California did record some victories--mainly small ones--on trade and investment issues while Deukmejian was in Japan. But aides acknowledged that his presence probably was not a major factor in most cases.

The successes included, in descending order of Deukmejian’s involvement:

- A tentative agreement by Japan’s powerful Keidanren (Federation of Economic Organizations) to send an investment study team to California sometime this year. Deukmejian requested the mission during a tough-worded speech to the business organization. And it was learned that Sony Chairman Alio Morita, a top Keidanren officer, later informed the governor that the mission will be sent.

- The Bank of Tokyo’s announcement to Deukmejian that it will display California products and promote the state’s tourist attractions at branches throughout Japan. The Bank of Tokyo owns California First Bank.

- Trade Minister Hajime Tamura’s official confirmation to Deukmejian that a Japanese organization created to promote Pacific Rim imports had selected California camping and hiking equipment to feature this year.

- The announcement by several Japanese firms that they have agreed to join with Dynatec Corp. of Calabasas to build a $200-million steel mill and waste-to-energy facility at Sanger in Fresno County.

- The awarding by Osaka airport developers of a small subcontract to Bechtel Civil Engineering of San Francisco. It was the first contract won by a U.S. firm on the $8-billion project. Nevertheless, Deukmejian still criticized the developers in an Osaka speech for “denying fair access to the bidding process.”

Actually, Deukmejian struck a sympathetic chord in his scolding of the airport developers. Yoshihiro Kawase, an executive of the Osaka-based Konoike Construction Co., told The Times after the governor’s speech:

‘If We Lose, We Lose’

“In our hearts, yes, we would like to have all the contracts for ourselves. But we ourselves are going overseas and winning contracts. We should have the resolve to compete openly at home, and, if we lose, we lose.”

Kawase also had a word of praise for Deukmejian’s style, noting: “The governor goes overseas and says what’s on his mind.”

But Deukmejian ran into some sharp rebuttals to his lectures about “free trade, but fair trade.”

One was delivered publicly by Sony Chairman Morita, responding immediately after the governor had finished his Keidanren speech. Morita took issue with a Deukmejian charge that Japanese semiconductor firms still were engaged in “predatory pricing.”

“I am one of them,” the Sony chairman reminded the governor, referring to Japanese semiconductor manufacturers and disputing his contention.

Statements Challenged

Morita also challenged Deukmejian to produce specific examples of “unfair trade practices,” rather than making what he characterized as mere general charges.

Speaking privately after the Keidanren speech, Koh Kurosawa, deputy president of the Industrial Bank of Japan, also took issue with Deukmejian. American semiconductors may perform satisfactorily at first, he said, but they wear out more quickly than Japanese brands. “That is the reason,” he said, “why Japanese firms are reluctant to buy American-made semiconductors.”

Satoshi Sumita, governor of the Bank of Japan, said: “Japan alone cannot eliminate the trade imbalance. It also is necessary for the United States to correct the essence of its economy, which is now one that is conducive to imports.”

Little Public Attention

Deukmejian’s visit attracted little public attention, although his Japanese hosts accorded him much higher “V.I.P.” status than most governors receive.

Although the Nihon Keizai newspaper and NHK, the partly government controlled radio and TV network, interviewed him, and the Asahi newspaper ran a profile feature, none of the four major national newspapers published anything about the major luncheon speech Deukmejian delivered at Keidanren.

In addition, Japanese businessmen and politicians alike were distracted all week by the record surge of the yen’s value against the dollar--a factor presumably helpful to U.S. imports.

Still, Deukmejian--governor of America’s most populous sate, and a longtime ally of President Reagan--was paid attention to by the Japanese government and the corporate community.

Met With 5 Ministers

“It is not normal for a governor to meet five ministers and be an official guest,” said a Foreign Ministry official, who asked not to be named. Deukmejian, he noted, met not only Prime Minister Yasuhiro Nakasone, but the ministers of Foreign Affairs, Finance, Agriculture and International Trade and Industry.

But will Deukmejian’s trip have any impact on trade and investment issues? “Coming to Japan certainly has a bigger impact than not coming at all,” the ministry official said.

Deukmejian said: “I didn’t come over here to close any deals. . . . But I think persistence and perseverance will pay off in the long run.”

Deukmejian left Kyoto late Saturday afternoon, Japan time, and arrived back in San Francisco Saturday morning, California time.