PERSPECTIVE ON TRADE : Want to Do Business in Japan? Hire Businessmen : Replace the lawyer-dominated win-lose bargaining with a win-win framework run by people who have met payrolls.

By CRAIG R. JOHNSON and M. CARL JOHNSON JR.

July 14, 1993 12 AM PT

<i> Craig R. Johnson is managing director of Infrastructure International, an Indianapolis-based investment firm; M. Carl Johnson Jr. is president of VFI Associates, an international marketing firm in Springfield, Va. Both have lived in Japan. </i>

Although presidential spin doctors called it a historic jobs summit, promising up to a million new jobs, last week’s Group of Seven trade talks in Tokyo will not create a single new job in the sector that produced more than 80% of the new U.S. jobs in the 1980s: small business. Particularly in the bilateral talks with Japan, U.S. efforts were an abysmal failure, papered over by a face-saving last-minute agreement to continue negotiations, which is exactly where we were before Tokyo.

Even the much-touted four-way GATT agreement on some manufactured goods, timed as a fig leaf for the G-7, was more promise than reality. Just after President Clinton called it the greatest trade breakthrough in history, French President Francois Mitterrand called it no so such thing, insisting that France would not sign off on the draft agreement in its present form. For G-7 members that did support the accord, it was giving away the sleeves out of their vests, since it addressed goods they already are highly competitive in, or have little domestic interest in as producers.

The GATT quartet ignored the sectors of most interest to both small business and corporate America: agriculture and services, particularly financial, insurance and real estate. Instead, they agreed on beer but not barley, on construction equipment but not construction, on (some) furniture but not lumber.

All the pundits have missed the primary reasons the negotiations failed: Clinton’s Tokyo advisers were remarkably illiterate about international business operations. Like his Cabinet, none has ever met a payroll or shipped a product, much less done so in Japan, and the lawyer-dominated structure of the negotiations was geared to adversarial win-lose bargaining. As the Japanese say, “Lawyers only know how to cut the pie into different pieces, while businessmen make the pie bigger.”

Just before the Tokyo summit, Japan put forward its COMET proposal--a Committee on Market-Oriented Economy and Trade, composed of trade experts, to review key trade issues. But U.S. negotiators gave short shrift to the concept, preferring to try to force-fit numerical merchandise and surplus benchmarks. Clinton should now tell the Japanese that we will in fact embrace COMET, and would like to even improve it. This borrows from an old negotiating trick, disarming the expectations of “opponents” by adopting one of their proposals at the outset. He should propose:

* Adopting the format to address our most pressing trade issues, dividing issue areas into baskets to be considered by COMET task forces.

* Using COMET as a “one-text” vehicle to jointly develop win-win solutions, rather than the win-lose positional bargaining typifying past discussions. In the “one-text” method of negotiation, joint teams of negotiators draft a single agreement rather than exchange competing drafts.

* Appointing to COMET loaned or retired senior executives who have worked in the other country, not the usual lawyers, lobbyists and academics.

COMET could be used for even the most intractable U.S.-Japan issues, for example, government procurement policies or Japan’s engineering and construction markets. In government purchasing, we should of course expect that bidding be open to foreign firms. In engineering and construction, COMET could help stop the cartels from fixing prices and jobs among favored Japanese firms.

We should not rosily expect, however, that this approach will lead to specific “managed trade” outcomes. It is simply impossible to force people, in a free country, to buy things they don’t want.

Two of our clients are small businesses in two of the targeted manufacturing segments, medical devices and auto parts. They have had difficulties accessing the Japanese market--though not for any of the reasons cited by the Clinton team--but are now successful. The medical firm lacked adequate capital to open a distribution system in Japan, but we helped them develop a strategic alliance with a Japanese trading company that has given them both additional capital and market access. The auto-parts firm’s casting dies were unable to reach tolerances demanded by Japanese auto makers--though acceptable to their Big 3 customers--but they have since entered a joint venture with a Japanese parts firm, and are now supplying both Japan and U.S. auto makers.

None of the “historic” agreements in Tokyo will do a thing for our service companies or our clients in accessing Japanese markets. By embracing the COMET approach within the new (framework) talks, however, we can help the Ministry of International Trade and Industry give face-saving and political cover to Japanese companies that wish to go outside of their Keiretsu supplier family to give business to U.S. vendors, but don’t want to damage longstanding domestic relationships.

Finally, Clinton and the other G-7 leaders should not look to lower budget deficits and lower interest rates to solve the “jobs” deficit. We and our clients aren’t holding back on hiring because interest rates are too high, but because our customers are hunkering down for the same kind of recession that followed the 1990 tax increase “solution” to the budget deficit.