Trading in Favors : How One U.S. Firm Influenced Our ‘Hit List’ for Japan
One of the first harvests of the 1988 trade bill has now arrived: a senseless squabble over a demand for special treatment by Japan for one American cellular phone-maker. Michael Boskin, President Bush’s chief economic adviser, has warned that the furor over such issues could lead to a trade war and a world recession.
With tensions at their peak following release of the U.S. trade representative’s list of unfair traders, one company has been capitalizing on the political climate. The United States and Japan have different frequencies for cellular telephones. While Japanese companies export phones to the United States made for American frequencies, the American electronics firm Motorola chose not to make its phones to meet Japanese specifications. In 1987, Motorola succeeded in having the U.S. government persuade the Japanese to set aside a special frequency for Motorola equipment. This frequency covered most of Japan but left out the heavily populated Tokyo-Nagoya corridor, where the Japanese Ministry of Posts and Telegraph insisted that two frequencies could not be allowed. Motorola disagreed and claimed that the Japanese government should somehow accommodate it by finding a new spectrum.
Distribution of the communications spectrum for cellular and other mobile phones is often an issue of fierce contention in this country, and the same is true of Japan. But to listen to Motorola, one might think that manufacturing cellular phones to Japanese standards amounts to a major trade barrier. Yet Motorola is already manufacturing a limited number of cellular phones to meet Japanese specifications and selling them to Nippon Telephone and Telegraph. It is not that Motorola cannot produce to Japanese specifications--but that it would prefer to stick with its American model, which it feels is technologically superior.
This squabble is especially overblown because within a few years a new generation of car telephones will be out that will no longer need a special spectrum. The issue then is whether the United States will strong-arm Japan to provide Motorola with a special communications spectrum to help sell car telephones over an additional part of Japan between now and 1991.
Motorola has chosen to invest its resources in Washington rather than in manufacturing products to customers’ demands. Michael Galvin, the son of Motorola Chairman Robert Galvin, donated more than $100,000 to Republican candidates in 1988 and was the finance chairman of the Illinois Bush campaign. Bush has announced that he will nominate Michael Galvin as assistant secretary for export administration in the Commerce Department. Michael Skarzynski, formerly a lawyer at Motorola, has been nominated to become Commerce’s assistant secretary for trade development.
If the Japanese government does not accommodate Motorola’s demand for more cellular-phone spectrum, the Bush Administration has already published a list of potential targets for retaliation with a heavy tariff. The list includes telephone answering machines, telephone handsets, television receivers, burglar alarms, radar detectors and motor vehicles.
How many thousands of American businesses and families should the government punish in order to get an expanded affirmative action program for Motorola? How many millions of dollars in extra tariffs should American consumers pay in order to reward Motorola for the hundreds of thousands of dollars that Motorola associates helped raise for the Bush Administration and Republican National Committee?
From listening to the recent protectionist rhetoric, one would think that no U.S. company had succeeded in selling a single widget in the Land of the Rising Sun. But as Peter Drucker notes, “American goods have a share of the Japanese market that is about twice as much per capita than goods made by Japanese companies have in the American market.” Coke and Pepsi dominate the soft drink market, and Oreos are the most popular cookie in Japan. Schick razor blades account for 70% of the safety blade market, and Pampers account for 22% of the disposable diaper market.
Two current major barriers to increased U.S. exports to Japan are the Japanese retail distribution system and Japanese attitudes toward foreign products. What should Washington demand? That the Japanese government conscript a million Amway salesmen to hawk American goods? That the Japanese government erect 500,000 billboards proclaiming “Buy American” along Japanese highways?
Japan does have significant barriers to U.S. service industries, and Washington should be negotiating with Japan and among the partners to the General Agreement on Tarrifs and Trade to lower those barriers. But to create an international furor over whether a single U.S. company gets a special telephone frequency for a part of Japan is senseless. Surely the brain trust in the U.S. trade representative’s office and the Commerce Department can come up with better reasons for sending American consumers on an economic kamikaze charge.
