Intense Lobbying Cools U.S. Anger at Toshiba
It was only last July that eight sledgehammer-wielding members of Congress smashed a Toshiba radio-cassette recorder on the Capitol grounds to protest the company’s illegal sale of submarine technology to the Soviet Union.
The Senate, acting on its version of an omnibus trade bill, quickly voted to ban the Japanese manufacturing giant from its lucrative $2.5-billion-a-year U.S. market, and one House member said Toshiba deserved a Benedict Arnold traitor’s award.
But now the burst of anger has dissipated under the impact of one of the most pervasive and sophisticated lobbying efforts in Washington in many years. The version of the trade bill that cleared the Senate last week and the House the week before nearly obliterates the punishment for Toshiba by limiting the ban to its annual $200 million in sales to the U.S. government.
Toshiba’s success speaks volumes about the intimate links between U.S. and foreign companies in today’s increasingly global economy. Its multimillion-dollar lobbying campaign relied heavily on the many American companies that depend on Toshiba for products they sell under their own brand name or for parts that they build into their products.
The battalions of lobbyists working on Toshiba’s behalf carried a simple message: If you punish Toshiba, you hurt American workers. Members of Congress found themselves confronted not by lobbyists from Japan, the nation with the biggest trade surplus with the United States, but by representatives of businesses in their own back yards.
“They came in waves, first the Washington lobbyists and then people from companies in my district,” said Rep. Donald E. Lukens (R-Ohio). He learned that various Japanese firms were active in six of the nine counties in his congressional district.
Toshiba America, the company’s U.S. subsidiary, employs 6,000 Americans who make laptop computers in Irvine, television sets and microwave ovens in Tennessee, television tubes in New York, copying machine parts in South Dakota and engineering controls in Oklahoma. But beyond that, thousands of other Americans are employed by firms that use key Toshiba components or sell Toshiba imports under their own labels.
Sen. Jake Garn (R-Utah), author of the ban on Toshiba products, said the lobbying effort was the most intense in his 14 years in Washington. Toshiba acknowledges spending $3 million on the campaign, and American business spent unknown millions more.
“There was a perception in Congress of massive Toshiba lobbying, but a lot of the people running around were representing American companies who would be hurt,” said Burton Wides, attorney for Toshiba America.
Dirty Word
Toshiba itself did not sit on the sidelines. For high-level contacts with the Reagan Administration it hired Leonard Garment, a Washington attorney with contacts throughout the Republican Party. Also assigned to the campaign from Garment’s firm was former Rep. James R. Jones (D-Okla.), once the chairman of the House Budget Committee. Lobbying ammunition was supplied by Toshiba’s main American law firm, Mudge Rose Guthrie Ferdon & Alexander.
During last year’s initial anti-Toshiba backlash after reports that the company had sold the Soviets the technology they needed to make their submarines quieter and harder to detect, “Toshiba” became a dirty word in the halls of Congress.
David P. Houlihan, a partner in the Mudge Rose law firm, advised his colleagues to skip making their normal political contributions, lest the congressional recipients be embarrassed by them.
“Toshiba was just closed out,” said Roger Majak, manager of federal affairs for Tektronix, an Oregon-based electronics firm. “At one point, I was mistaken for a Toshiba lobbyist by a Senate staffer, and he practically threw me out of the building.”
Although Majak did not work for Toshiba, he most certainly was lobbying to avert the Toshiba ban. Tektronix, like a host of American electronics firms, depends on the Toshiba megabit memory chip to make many of its products.
While the trade bill moved through Congress, Tektronix ran a lobbying “swat team” whose other members were from Hewlett-Packard, American Telephone & Telegraph and Compaq.
Going Their Own Ways
The “swat team” won assurances that any ban on Toshiba from U.S. government contracts would not apply to U.S. firms using Toshiba components. That was particularly important for Tektronix, a $1.4-billion-a-year firm that sells about 20% of its output to the Defense Department and other federal agencies.
Members of Congress and their staffs “didn’t fully believe how important a player in the marketplace Toshiba is,” Majak said, “and they didn’t want to hear that U.S. companies could be heavily dependent on Japanese technology.”
Toshiba lobbyists did not even try to coordinate all the activity on Toshiba’s behalf by American firms. “They said, ‘We’ll go our own way; we don’t want to coordinate with Toshiba because the political overtones are too nasty,’ ” Houlihan said.
“I’d love to take credit for everything that happened, but we didn’t do it,” he added. “Toshiba never knew how important it was to the high-tech industry in the U.S. until this happened.”
Tektronix, for example, could have found another supplier to replace the Toshiba motors in its computer printers, Majak said. But it could not do without Toshiba’s semiconductors, he said, because, even though there are other suppliers, “we can’t get enough of what we need now from all of them.”
Barring Toshiba would have eliminated the most important supplier not only for Tektronix but for other U.S. companies that are heavy users of semiconductors as well, he said. The American Electronics Assn. enlisted corporate executives to bombard legislative offices with calls and letters. “What Congress began to realize is that the industry is a global industry,” said Jim LeMunyon, senior manager for government relations at the AEA. “Any company that had anything to do with Toshiba was in here,” said Don Upson, Republican staff director for the House Government Operations Committee. “It was by far the most heavily lobbied issue in the trade bill. Everyday, somebody from a different company or organization was coming into the office.”
Andrew E. Manatos, who served as assistant secretary of commerce during President Jimmy Carter’s Administration, lobbied 20 or 30 members of Congress on behalf of Audiovox, which imports $10 million worth of cellular telephones each month from Toshiba.
Lobbying Efforts
“We talked to other companies involved in computers and copying machines and other businesses,” Manatos said. “They all had the same problem. They could shop around and find someone else to replace Toshiba. But it could take months before they could be back on line with their products.”
Manatos said he found members of Congress sympathetic to the arguments and eager to ensure that “American workers and companies do not get caught in the net.”
Manatos’ wife, Tina, gave a maximum $1,000 campaign contribution last year to Sen. Paul S. Sarbanes (D-Md.), who played a key role in the House-Senate conference committee on the trade bill. Manatos said the contribution was irrelevant and that he and his wife have known Sarbanes for years.
Also joining the lobbying campaign was Harris-3M, a joint venture of two American firms that sells Toshiba copiers under its own label. The corporate parents are the giant 3M Co. and Harris Inc. of Melbourne, Fla., which has 12,000 employees in the state and is the biggest electronics firm headquartered in the Southeast.
Fearing any cutoff of its supply of Toshiba copiers, Harris-3M hired John Mica, a Washington lobbyist whose brother is Rep. Dan Mica, a Florida Democrat who is seeking his party’s Senate nomination this year. In addition to corporate officials, Toshiba was supported in Congress by the Reagan Administration. The State and Defense departments argued that Japan was taking steps to protect militarily sensitive technology against further security leaks.
As for Toshiba’s own lobbyists from the law firm of Mudge Rose, they concentrated on telling Congress that the parent should not be punished for the sins of the errant child. Houlihan emphasized to members of Congress that it was Toshiba Machine, a subsidiary of the electronics giant, that was responsible for selling the submarine technology to the Soviets.
An independent investigation in Japan, he said, cleared the parent company of complicity. And to prevent future technology diversions, he added, his law firm helped develop a security compliance program for Toshiba that has become a model for Japanese industry.
No Sanctions
Lobbyists for Toshiba America, including former Rep. Michael Barnes (D-Md.), concentrated on the impact on its 6,000 U.S. workers of the proposed Toshiba sanctions.
The massive effort paid off handsomely. The Toshiba sanctions approved by the Senate last year as part of the omnibus trade bill would have cost Toshiba $2.5 billion a year by shutting down the entire Toshiba empire’s access to American markets for five years.
The House had included no Toshiba sanctions in its version of the trade bill, which it had passed before the Toshiba scandal broke. So the lobbying battle focused on the House-Senate conference committee that had to compromise the two versions.
The compromise would bar Toshiba Machine from all U.S. sales for three years and prohibit the parent Toshiba from federal contracts for the same period. The total price tag: about $200 million a year.
And even the watered-down sanctions may fail to become law. President Reagan has vowed to veto the bill over an unrelated provision to require advance notice of plant closings and major layoffs, and Congress may be unable to enact any legislation at all in the face of his opposition.
To Rep. Duncan L. Hunter (R-Coronado), that would mean that Toshiba would have escaped a richly deserved punishment.
“A corporate life sentence would have been appropriate,” said Hunter, who wanted the firm barred forever from doing business in the United States. In classified briefings, he said, members of Congress have seen evidence that the parent Toshiba Corp. has been selling highly sensitive equipment to Warsaw Bloc countries for years.
Toshiba vociferously denies the charge, and the Reagan Administration says there is no compelling evidence of any security violations by Toshiba. Hunter’s explanation: “The Administration took that position as a result of heavy lobbying.”
