No. 34 September 1, 2000

Feature Article


A Roundtable Discussion


About 20 years ago, the U.S. subsidiaries of major Japanese companies began in increasing numbers to establish offices in Washington, D.C. to monitor, analyze and report on developments in Congress and in the executive branch relevant to their interests. There certainly was much to cover. Japan was emerging as a global economic powerhouse, and its trade surplus with the United States was rising sharply. Moreover, Japanese manufacturers across a broad spectrum of industries seemed to be outcompeting American firms on their own turf. Congress responded in the 1980s with a spate of legislation aimed at protecting U.S. markets and safeguarding the jobs of American workers while prying open foreign markets. This drive culminated in the Omnibus Trade and Competitiveness Act of 1988.

For its part, the executive branch launched a full-scale assault on Japan's market access barriers as well as on its alleged unfair trade practices. Washington conducted two series of in-depth negotiations with Tokyo on structural impediments to imports and investment during the 1980s and also held talks on any number of product-specific issues. Moreover, it initiated in response to industry complaints a rash of antidumping investigations and proceedings under other U.S. trade statutes. Limits were imposed early in the 1980s on Japan's U.S.-bound car exports and, in the middle of the decade, an equally controversial semiconductor trade agreement was forged.

Transpacific trade disputes were not the only hot Japan topics in the halls of Congress and in administration offices farther down Pennsylvania Avenue during the 1980s. Late in that period, the "buying of America" by corporate Japan became the subject of headlines as well. Washington representatives of Japanese companies consequently had their hands full trying to stay abreast of fast-changing developments and, at the same time, working to ensure that their firms were not unduly penalized or otherwise shut out of American markets.

At the start of the new millennium, Japanese firms in America face a different set of challenges. The drumbeat of anti-Japan criticism on Capitol Hill has quieted due largely to the economic role reversal of the two countries; Japan has battled recession for the past decade, while the United States has enjoyed a bull economy. The deep-seated perception of Japan as both an unfair trader and a closed market persists, however, and tempers in Washington could flare quickly if the U.S. economy begins to slow. But important changes have occurred that will make it difficult for administration policymakers to resort to 1980s-style protectionist remedies. Perhaps most significantly, many Japanese firms have substantial manufacturing operations in the United States that collectively employ hundreds of thousands of Americans and procure huge volumes of U.S.-supplied goods and services.

The fact that the U.S. subsidiaries of numerous Japanese companies are integral parts of the American economy has dramatically altered both the nature and the agenda of corporate Japan's activities in Washington. The boom in information technology also has revolutionized how representational offices operate as well as broadened their policy portfolios.

In a recent roundtable discussion, the highly respected Washington representatives of three Japanese companies and an industry trade group — Lawrence Bruser of Mitsui & Co. (U.S.A.), Inc., Michael Call of Mitsubishi International Corp. and David Olive of Fujitsu, Ltd., plus Paul Ryan of the Association of International Automobile Manufacturers, Inc. — discussed with JEI Senior Political Analyst Barbara Wanner the evolution of U.S.-Japan economic relations over the past two decades. The resulting changes, as the participants concur, have affected business decisions, policy agendas and how they represent their firms in Washington.

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Weekly Review

--- by Douglas Ostrom

While an increasing number of observers apparently agree that the Japanese economy performed reasonably well in the first half of 2000, opinions regarding prospects going forward still differ. With consumer spending showing few signs of life, corporate investment in plant and equipment will be key to continued expansion. Optimism in this regard is growing, in part because several surveys suggest that companies increasingly are willing to boost capital spending. Whether these outlays will be sufficient to set off a transformation that is broad enough to create a "New Economy" in Japan remains to be seen, however.


--- by Arthur J. Alexander

The Bank of Japan's August 11 vote to boost the interest-rate target for uncollateralized overnight interbank funds to 0.25 percent from zero (see JEI Report No. 32B, August 18, 2000) ended a unique 18-month policy that had dropped the cost of money to levels not seen since 14th-century Italy, according to some monetary historians. Shortly before the decision to reverse course was made, the rate on the benchmark Japanese government bond was 1.7 percent and bank deposits yielded a scant 0.05 percent. One largely unexplored issue is how the central bank executed its February 1999 move toward zero interest rates and then undid it.


--- by Jon Choy

Ever since the Japanese economy was sent reeling by the first global oil crisis in the early 1970s, government-funded construction projects have been a mainstay of Tokyo's arsenal of recession-fighting tools. The public welcomed initiatives that poured massive amounts of money into parks, roads, railways, sewers, flood-control systems, airports, harbors and other infrastructure since Japan lagged its Western peers in these areas. As the nation reconsiders its economic, bureaucratic and government frameworks in the wake of a decade-long slump, however, public works policy is a natural focus of debate.


--- by Barbara Wanner

With the American presidential candidates battling for the political center, it is no surprise that the Republican and the Democratic platforms share some common themes, particularly with respect to trade. Each of the parties notes the importance of exports to continued U.S. economic growth. Each also emphasizes that trade must be fair. American companies should enjoy broad access to foreign markets and receive protection from unfair competition, the Republican and the Democratic policy blueprints both argue.

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