Japan Urged to Help Ease U.S. Hostility

U.S. Ambassador Michael H. Armacost denied Thursday that American racism is creating a backlash against Japan’s investments in the United States but warned the Japanese that they must improve their track record to combat anti-investment sentiment.

The warning was delivered in a speech to a conference of business and political leaders from Texas and Japan.

“There should be no question--the welcome mat is still out,” Armacost assured the Japanese. But, he said, “Sony’s recent purchase of Columbia Pictures crystallized . . . concerns about the rising flow of foreign investment in the United States.

“Some Americans worry that for a substantial, perhaps a technologically critical, part of the U.S. economy, a measure of control over decisions affecting our national interest could be lost.

“There is a natural concern that foreign managers may not be sensitive to American traditions and unwritten rules. . . . Like Japanese, some Americans worry that our social harmony may be disrupted,” the ambassador said.

“This is not racism,” he added, taking note of recent criticisms made privately by Japanese against America’s growing condemnations of Japan, in general, and of Sony’s acquisition, in particular. “We have worked hard to wipe out the stain of racism on our history. . . . And we have largely succeeded.”

Rather, he said, Americans are criticizing investments such as Sony’s because they “perceive that Japanese firms are free to acquire existing American companies but that comparable opportunities are rarely available here” in Japan.

As both U.S. Trade Representative Carla A. Hills and Deputy Treasury Secretary John E. Robson did during visits here last week, Armacost said opportunities for U.S. firms to buy Japanese corporations are needed to ensure that American support for foreign investment continues.

Lack of reciprocity, Armacost said, “is not a simple issue of Japanese legal prohibitions, as it once was. It’s a consequence, instead, of the close relationships that complicate many foreign investors’ entry into the Japanese market.”

To combat rising American criticism, Armacost also advised the Japanese to “demonstrate that their presence benefits the United States and, particularly, the communities where they locate.”

Japanese investors, he said, should “localize” their U.S. management structures, “fully integrate their U.S. manufacturing,” rather than merely assembling products, and “increase business dealings with established U.S. firms,” rather than bring with them subsidiaries of their traditional parts suppliers in Japan.

They also should get involved in community service activities, “like the Rotary, the Jaycees, Scouts, Little League and PTA,” he added.

Although many Japanese economists had predicted that establishment of manufacturing plants in the United States would result in generating new exports to Japan, the ambassador complained that growing flows of Japanese machinery to equip new factories in the United States have “greatly outweighed” exports to Japan of goods produced in those factories.

Armacost cited a survey by the Ministry of International Trade and Industry showing that Japanese-owned factories in the United States shipped back to Japan only $980 million worth of their American-based production in the Japanese fiscal year that ended in March, 1987.

At the end of 1988, Japanese investment in the United States amounted to $53.4 billion, 16% of total foreign investment and second only to that of Britain, he said. But investment from Japan doubled in two years and expanded twice as fast as foreign investments as a whole, he added.

“Because it is the fastest growing and tends to be readily recognizable, Japanese investment stands out most,” he said.