How the United States and Japan Can Resolve Their Rift
President Bush and an assortment of U.S. automotive executives will present a pathetic spectacle this Tuesday in Tokyo as they try to persuade Japan to open its markets and buy more American auto parts.
Japanese Prime Minister Kiichi Miyazawa will be equally pathetic as he genuflects to the U.S.-Japan Security Treaty as the linchpin of “the most important relationship in the world.” There are 50,000 U.S. armed forces personnel stationed in Japan. The Japanese government pays 50% of their cost, or roughly $3.5 billion.
Truth is, that relationship has turned into a nasty dialogue of the deaf, with U.S. officials--even Bush himself--blaming Japan for the U.S. recession and Japanese officials tossing barbs at American work habits and ethnic and racial slurs at American society.
At this point, the United States and Japan need a cooling-off period, a separation of sorts to allow the parties to appreciate each other’s values. Because it’s a relationship worth saving.
Both countries have benefited immensely in the 46 years since World War II--the U.S. economy has grown 25-fold, and given the American people the world’s highest living standard. Japan’s economy has become the world’s second largest, producing two-thirds the annual output of America with half of America’s population.
But the relationship seems stuck in the postwar mode, in which the United States is protective parent and Japan a growing adolescent, nurtured economically and protected militarily in ways that Germany and other nations of Europe have outgrown. The danger in such arrested development, as in any household, is of bitterness--which could provoke a crisis between the world’s two largest economies.
Fortunately, the problem is not intractable and solutions are readily available. For the United States, the answer lies in its laws and traditions of antitrust.
On Japan’s side, it lies in the country making its own global political decisions--which means handling its own defense needs. If its Asian neighbors get nervous about a rearmed Japan, let them deal with it. Hiding behind the American flag can’t be a long-term policy for Japan.
In business, the problem goes beyond the U.S. trade deficit with Japan, which totaled $35 billion last year--about $26 billion in automobiles and parts. One difficulty is that Japanese auto makers, even when they make cars in the United States, favor their old Japanese suppliers--companies tied to them by ownership of stock. Toyota, for example, owns 20% of Nippondenso and Aisin Seiko, two of its main suppliers.
Honda, according to the University of Michigan, gets 64% of the parts for its U.S.-assembled automobiles from imports and Japanese suppliers. Honda disputes the claim, and the U.S. government is looking into the matter.
But why argue? If Japanese car makers are favoring suppliers unjustly, that’s what the U.S. tradition of antitrust is designed to cope with. A Justice Department antitrust suit to settle the matter would be more useful and dignified than presidential arm twisting.
Antitrust is not a legal technicality in America but the reflection of a fundamental policy of making room for outsiders--in business, where the brash entrepreneur is treasured, no less than at the ports of immigration.
The tradition dates at least to 1824, when steamboat inventor Robert Fulton and his financial backers tried to keep other shippers from using their own varieties of steam locomotion on New York waterways. The courts ruled against Fulton on grounds that the competition would bring down freight costs.
Japan’s defining tradition is different. According to Japanese elder statesman Jiro Tokuyama, it is the tradition “of the village, of the group that excludes the outsider.” Its model in business is the group company or keiretsu , in which individual firms hold stock in one another and do business together. That doesn’t mean a closed market but one that is difficult for outsiders to enter.
Thus, the roots of conflict are clear: America has tried to bring its open market principles to Japan, and Japan its group business practices to America.
But ways of resolving the conflict are also clear. For Japan, the message is that togetherness is nice, but a country that seeks to benefit from free markets can’t fall back on group behavior, at home or abroad. A reform of the keiretsu tradition is in order.
For Americans, the message is that political pressure may be appealing but free markets are won more often by hustle and investment than by rhetoric. Japan’s market may be a tough nut to crack, but those of developing Asia have been open for years and yet American business is conspicuous by its absence.
While U.S. auto makers lounge around Tokyo with Bush, Japan has three assembly plants in Thailand--a growing market in which 95% of the automobiles are Japanese. Japanese cars dominate emerging markets in India, Malaysia, Indonesia, Taiwan and China.
Ironically, those markets are opening up because of the global prosperity America created in the postwar period. It’s a legacy of opportunity for U.S. business, but to seize it America must get out of its own postwar mode--the idea that it alone should guide and rule, and other nations should deliver tribute.
The world is more pluralistic today, not because America has declined, as some say, but because it has succeeded. Think of how the postwar period might have been different.
Ancient Rome destroyed Carthage and sowed salt in its soil. Carthage was no more. Had America done likewise to its adversaries after World War II, would the world today be as prosperous, or as safe? A world of competitors is a lot healthier than an empire of subjects.
