FSX Deal Becomes Test of U.S., Japan Relations : Sharing of Technology, Defense Plan at Issue; Bush Agrees to Review Pact

When American and Japanese officials signed a deal late last year for joint development of a new Japanese fighter plane called the FSX, they expected it to win approval in Washington quickly and with little controversy.

Instead, the proposed FSX agreement has turned into a highly public test of U.S.-Japanese relations--one that underscores the conflict between Japan’s role as a close defense ally of the United States and its role as this country’s leading economic competitor.

Under pressure from critics, the Bush Administration recently agreed to take a second look at the FSX deal completed in the final months of the Reagan Administration. If the Bush Administration decides to go forward, it will soon submit the agreement to Congress, where opposition is mounting.

Most analysts believe that the Administration will proceed with the FSX agreement. But Administration officials categorically deny reports that they have already decided to send the deal to Congress and that the U.S. Commerce Department has withdrawn its objections to the FSX agreement.

“The suggestion that we’ve made up our minds is an incorrect one,” Wayne Berman, counselor to Commerce Secretary Robert A. Mosbacher, said Saturday. “We’re just not there yet. The decision has not been made.” A senior Administration official confirmed Berman’s account.

Emotions are running high. Opponents of the FSX deal view it as a foolish giveaway of American technology to Japan’s budding aerospace industry. Supporters call the deal vital to the future of American defense planning in East Asia and the Pacific, as well as to the fundamental trust between the two governments.

One opponent, Massachusetts Institute of Technology scholar Charles H. Ferguson, told a recent congressional hearing that the FSX deal is an example of “the ruthless dynamism of the Japanese industrial system and the amiable naivete of the United States.”

With equal fervor, American supporters of the FSX deal accuse the critics of unwittingly aiding Japanese who favor a stronger, more independent Japanese military. American opponents “play into the hands of the Japanese nationalists . . . who never wanted this deal in the first place,” said Joel Johnson, a representative for an American defense industry trade group.

More than merely the issue of weaponry, “the maintenance of a relationship of trust” between Japan and the United States is at stake, former Prime Minister Yasuhiro Nakasone said last month.

Under the proposed agreement, an American company, General Dynamics, would serve as subcontractor to Japan’s Mitsubishi Heavy Industries to develop a new Japanese plane, the FSX (Fighter Support Experimental). That plane would be based upon the American F-16, which is itself built by General Dynamics. According to the Air Force, it cost the United States $3.1 billion to develop the F-16.

In exchange for its F-16 technology, the American company would get about $440 million from the Japanese government for development work, a 35% to 45% share. However, there is no guarantee that General Dynamics would get any of the subsequent production work, which the Japanese Defense Agency values at about $5.2 billion in 1985 prices. For each aircraft produced in Japan, the American company would get a royalty payment, the amount of which has not been disclosed.

General Dynamics would also obtain some Japanese technology it does not already have. The value of this Japanese technology is in dispute: American proponents of the FSX claim that it may prove extremely important, while critics say the Japanese technology may be virtually worthless.

To its American and Japanese supporters, the FSX accord was merely a reasonable compromise.

The Japanese Defense Agency had fought hard for the right to develop its own, all-new fighter plane. U.S. officials had sought in vain to persuade Japan to buy some version of existing American planes. The two sides settled on a deal in which Japan would develop a plane that used U.S. F-16 technology.

“This agreement was a breakthrough in military cooperation,” said a Pentagon official involved in the FSX deal.

Pentagon and State Department officials argue that the FSX deal managed to land a reasonable share of the work on the plane for an American company, while keeping Japanese defense planning and technology linked closely to that of the United States.

“The FSX deal . . . ties U.S. and Japanese (defense) industries together for the next 20 years, to the benefit of both,” James E. Auer, a former Pentagon specialist on Japan, said recently.

However, critics in Congress and elsewhere charge that the supposed compromise is a bad deal for the United States. The FSX deal, they say, enables Japan to obtain, at relatively low cost, the sort of know-how that could eventually enable Japanese aerospace firms to compete with U.S. ones.

“It is clear the Japanese are now targeting their aerospace industry for development,” said Rep. Mel Levine (D-Santa Monica), a leading congressional opponent of the FSX deal. “We cannot prevent Japan from becoming a competitor in aerospace, but I do not see why we have to subsidize the development of our own competitors.”

Could Balance Off Trade Deficit

Furthermore, opponents contend, the FSX deal demonstrates Japan’s unwillingness to help the United States reduce the trade imbalance. They argue that Japan should have agreed to buy an existing American fighter plane such as the F-16, rather than producing its own aircraft.

“We need to balance off that $55-billion trade deficit (with Japan), and here’s a place where it could be done,” asserted Rep. Don Ritter (R-Pa.) at a recent congressional hearing.

This argument finds support within the bureaucracy. Officials at the Commerce Department and the U.S. trade representative’s office say they should have a greater voice in such matters because the State and Defense departments sometimes fail to give enough weight to the impact their decisions will have on American industries.

Critics say the FSX is a classic example of how Japan refuses to follow the basic free-trade principle of buying the best and cheapest product on the world market.

“No one doubts that we have the best aircraft available at the lowest price,” said Clyde V. Prestowitz of the Carnegie Endowment for International Peace, a former U.S. trade official. “Yet we are being told that we can’t sell this aircraft to Japan.”

Japanese officials counter that existing American planes such as the F-16 cannot provide what Japan will need.

“The F-16 was on the cutting edge a decade ago,” said an official at the Japanese embassy in Washington. “The FSX is the aircraft that will be responsible for our defense from 1997 beyond, into the 21st Century.”

As for suggestions that Japan should buy U.S. planes to help reduce the trade imbalance, Japanese officials say it would be a mistake to let trade factors affect defense policy.

“Military capability, not trade, will be the consideration that matters,” said the Japanese embassy official, who asked not to be identified. “If you were in our shoes, your U.S. government would have decided things in the same way.”

American supporters of the FSX deal say there is no way Japan could have been persuaded to buy F-16s or other American planes.

“Obviously, we’d rather sell them our own airplane,” said Al Spivak, a General Dynamics spokesman. “But they’re not looking to buy a plane off the shelf. It never was in the cards that they’d buy the F-16.”

Former Defense Secretary Frank C. Carlucci, in a recent article defending the FSX deal in the Washington Post, said the Japanese government “has not made such an off-the-shelf purchase (of U.S. aircraft) since 1955.”

“Understandably, Japan regards co-production as greatly preferable to an outright buy (of American planes) because it generates employment,” Carlucci wrote. “If we now reverse gears (by rejecting the FSX deal), Japan will almost certainly revert to developing its own aircraft, as the Europeans are doing. “

Yet critics of the FSX deal say that if Japan is unwilling to buy American F-16s, then it should be required to take the time and bear the extraordinary expenses of developing its own plane without the benefit of American technology.

“If Japan builds its own plane, it would produce a fighter of lesser capability than ours, at multiple times the cost,” said a congressional staff aide opposed to the FSX deal. “Sure, they could do it on their own, but they might fall flat on their faces.”

Some Say Technology Dated

Supporters of the agreement also contend that the technology that the United States would give to Japan under the FSX deal is no longer so new or valuable.

“Most of the technology involved in the F-16 is at least a decade or two old,” said Johnson, who is executive vice president of the American League for Exports & Security Assistance, a trade group for the U.S. defense industry. The Pentagon is developing a fighter plane more advanced than the F-16.

Opponents say those considerations are irrelevant, because Japan does not have any such technology right now. “Technology is only old if you have it,” countered Prestowitz. “The current F-16 is the best we have.”

The Bush Administration is expected to try to hammer out a final position on the FSX deal within a week or so. Congressional opponents charge that the entire review process is a phony one. These critics point to recent Japanese press reports saying the Bush Administration has assured Japan that the FSX agreement is not in trouble.

If the Bush Administration decides to go ahead with the FSX deal, it will take effect unless both houses of Congress vote to disapprove it. Despite the furor, most analysts believe that the pact will eventually take effect.

But scholars believe that the debate may have long-term consequences for relations between the United States and Japan.

“Originally, the Japanese wanted to do this on their own, and then they agreed to use American technology,” said Susan J. Pharr, director of Harvard University’s program on U.S.-Japan relations. “This will be taken by the Japanese as one more issue where, when it comes to the United States, they can’t seem to do anything right.”

UC San Diego Prof. Chalmers Johnson said the FSX debate shows how the ties between the United States and Japan that have evolved since World War II will have to change. “We are defending a nation to whom we are going into debt,” Johnson said. “If that doesn’t seem unstable, then I don’t know what instability is.”