The Business of America / Losing on Both Fronts
Stelzer, Irwin M.
THE BUSINESS OF AMERICA LOSING ON BOTH FRONTS A merica's businesses are fighting a two-front war. And losing.. Or so they think. On one front they face the Japanese, mighty exporters and now...
...He cites the case of Toyota's auto plant in Kentucky...
...These measures will surely raise production costs, reducing European industry's ability to compete with imports from America and Japan...
...Whether the Japanese believe this nonsense, or only say they do to appease their Arab oil suppliers, no one knows...
...Hills is preparing to get tough with Japan, to pry its markets open, threatening retaliation if restrictions are not removed...
...So he entered the Oval Office with no ready response...
...On the European front things seem to be going equally badly for American industry...
...It is leaning increasingly toward "managed trade," a system of dividing up world markets, product-byproduct, to assure that America gets a "fair share" of each market...
...A University of California scholar complains that "Japan has undue influence in the U.S...
...This is surely the first time in history that a territory in the process of being colonized has actually paid for the right to defend the colonizer," writes Prestowitz...
...All this confusion diverts attention from attainable policies...
...farmers are far more efficient than their Japanese counterparts, but Japan won't allow most American agricultural products into the country...
...1 Or so Prestowitz says, citing one study estimating that for each job created in a Japanese-owned factory in the U.S., two are destroyed in other American businesses...
...Americans, on the other 37 hand, contend that the Japanese, when confronted with charges of protectionism, refuse to consider them on their merits...
...Irwin M Stelzer is chairman of the Regulated Industries Group, Harvard University, and an American correspondent for the London Sunday Times...
...It will be ironic, indeed, if the only large, import-hungry consumer market in the 1990s proves to be Gorbachev's Russia...
...So the Brussels eurocrats-12,000 of the highest paid, most perk-ridden politicians in Europe—will be driven to adopt protectionist measures, to force consumers to pay prices high enough to fund welfare schemes that these same consumers, in their roles as taxpaying voters, refuse to endorse...
...First, we are seen to be losing out in the trade battle...
...s for Japan, we seem to be witnessing a widening schism between presidential trade representative Carla Hills and Democrats in Congress...
...its admission is new...
...real estate and industrial properties...
...On one front they face the Japanese, mighty exporters and now major acquirers of US...
...The anti-Semitic argument used by the Japanese is that the complaints against them are made by America's Jews, frustrated at their declining power over the world's economy...
...Instead, the Japanese concocted a "joint venture" that would give them access to sophisticated computer and jet engine technology in return for doing what any free trader would do in this case anyhow—buy American...
...Japan's foreign asset holdings, which rose from $11.5 billion to $180 billion between 1980 and 1986, are expected to climb to $853 billion in 1995, most of them in America...
...American efforts to get Japan to ease its restrictions on American imports seem to have stalled...
...Lester Thurow, dean of the management school at Massachusetts Institute of Technology, adds, "They've by Irwin M. Stelzer learned how to play us like a violin...
...It bought wheels from another Japanese company, and was financed by a Japanese bank...
...But blaming foreign devils for domestic problems is easier...
...Like the Iran-contra deal, "1992" is an item that apparently escaped Bush's attention during the eight years of his vice presidency...
...banking rules are being drafted to cripple American banks' ability to compete in Europe...
...It is in America's power to reduce its budget deficit by bringing spending under control...
...Only Britain's Margaret Thatcher has had the sense and courage to rail against this turn of events...
...trade negotiator now resident at the Carnegie Endowment, and author of Trading Places.' This fear of Japan has three strands...
...America can develop policies to increase its savings rate...
...I n the end, all of this destroys jobs...
...The Financial Times called it "one of the investment coups of the decade...
...they seem to know nothing about the political battles that will shape Europe's ultimate trading posture, post 1992, and even less about the specific American interests threatened...
...In the fiscal year that ended on March 31, Japan's trade surplus rose by four percent...
...The New Republic reports that several bestsellers, marketed in "Jewish corners" of Japan's bookstores, contend that an international Jewish conspiracy wants to destroy Japan's economy, so that the Jews will have no rival contestant for world domination...
...was on the rise as the year ended-21 percent higher in March 1989 than it had been in the same month of 1988...
...More ominously for America, Japan's surplus with the U.S...
...and the European Community have the world's largest trading relationship—some $1.2 trillion ingoods and services is exchanged annually...
...Add to all of this four new facts: • American politicians have begun to wonder why we should continue to expend large sums defending Japan...
...In the case of Europe, as in other areas, the Bush Administration has no discernible policy...
...Being so racially mixed, the work force is unable to achieve the level of cooperation necessary to produce high-quality goods...
...For some reason, Americans find it par'Basic Books, $19.95...
...American airplane makers have far better and cheaper military products than do the Japanese, but Japan won't buy them...
...American politicians report themselves more and more subject to the needs of Japanese investors...
...Finally, the Japanese are building more and more facilities in America...
...One would think that Americans would be overjoyed at this development...
...This would create a unified market of some 320 million consumers...
...One Japanese writer says that "the large number of different races and ethnic groups" in America is "reflected in the quality of your products, in the difficulties you have in managing things...
...As American businessmen and some nervous politicians see it, the Japanese have already won the battle for world markets in most industries...
...A Commerce Department study has already identified key areas in which the European Commission is developing standards designed to exclude American-made telecommunications and software products...
...On the other they face a newly renascent Europe about to marshal its previously fragmented forces under the unifying banner of "1992...
...The governor of Tennessee says he makes more trips to Tokyo than Washington because "that's where we can get some real help...
...Second, the Japanese are becoming increasingly active acquirers of American assets...
...In short, American industry may soon be faced with a "Fortress Europe," a huge market at least partially closed to its goods...
...So the outlook for preservation of the generally free international trading system that contributed so much to postwar prosperity grows dim...
...Masauru Yoshitomi, director general of Japan's Economic Planning Agency, told a group of business economists that Japanese policies "are now . . . in a position to influence the value of the dollar and hence the dollar interest rates and stock market prices in Wall Street...
...Not a bad thing...
...America's response to the twin Japanese and European threat varies between none and a resort to old-fashioned protectionism...
...Not content with winning these markets, the Japanese are now buying up America, either by acquiring real estate and businesses, or by building new plants here...
...Japan is becoming increasingly aggressive in its relations with America...
...THE AMERICAN SPECTATOR JUNE 1989 ticularly galling that half of the office space in downtown Los Angeles is now in Japanese hands...
...The racist response is that America's ethnically and racially mixed society cannot compete with its purer-blooded Japanese rivals...
...The British, for example, rejoiced when Fujitsu announced that it would build a £400-million semiconductor plant in County Durham, creating 1,500 jobs...
...Creation of a Fortress Europe would be no small matter: the U.S...
...Congress feels that's not enough...
...Instead they resort to racist and anti-Semitic responses...
...And Japan has been flexing its financial muscles at recent international financial meetings, lecturing America on everything from the handling of its domestic budget to its policies toward Latin American debtors...
...But Prestowitz argues that such joy should be restrained, because the job-creating benefits of Japanese investments are a mirage...
...ILI 38 THE AMERICAN SPECTATOR JUNE 1989...
...So, the Japanese conclude, America's professed fears are merely new versions of the old "yellow peril" paranoia...
...Recent data certainly provide some basis for concern...
...Toyota hired a Japanese construction company to build the plant...
...In short, America had better begin looking its Asian gift horses in the mouth...
...Influence follows money...
...And, the argument continues, it is the shoddiness of American products, not Japanese restrictions, that is creating the U.S...
...Furthermore, massive Japanese investment in America will soon make us a Japanese colony, the Prestowitz school contends...
...The fact is old...
...This is, of course, a means of substituting a bureaucrat's judgment as to which goods should be made at home, and which imported, for the market's judgment...
...trade deficit...
...The "verticle investment" mirrored the way Japan manages its tourist business: Japanese come to Americaon Japan Air Lines, take Japanese tour buses to Japanese-owned hotels, and dine in Japanese restaurants...
...America can decide to make Japan pay for its own defense...
...America is "a colony-in-themaking," warns Clyde Prestowitz, Jr., a former U.S...
...Informed sources report that leading American businessmen are stunned at the ignorance of administration officials...
...It generally approves of greater European unity, but has no policy-level official in charge of formulating a coherent response to the Fortress Europe threat...
...Japanese protectionism, Europe's inward-looking, socialist drive toward 1992, and America's incoherent response seem likely to produce rising trade barriers...
...But the socialists in control of the European Community's Brussels bureaucracy have attached to that laudable goal a more pernicious one: a "social dimension" (Neil Kinnock, the leader of Britain's Labour party, more candidly calls it "the socialist dimension") that includes increasing the reach of the welfare state and placing trade union representatives on corporate boards of directors...
...and "European content" regulations have been adopted to require television broadcasters to use mostly European-made programs...
...And they worry about Japan's rising purchases of pieces of America's financial institutions...
...America can improve the education and hence productivity of its work force by making its schools safer from physical and intellectual thuggery, the latter by academics who regard great Western thought as racist, and therefore expungable from the curriculum...
...Yet no one seems worried about becoming a British colony...
...So much for the Asian front...
...European governments have more or less decided to remove all internal barriers to the free movement of goods and people by 1992...
...All of these complaints are overlaid with increasingly ugly charges of . cism—by both sides...
...The Japanese, who hold $96.7 billion of American assets at last count, point to the fact that they own far less of America than do the British ($133.8 billion) or the Canadians ($129.5 billion...
...Their companies dominate the consumer electronics industry, are capturing increasing shares of the machine tool, semiconductor, and automotive markets, and stand a good chance of repeating that success in financial services...
Vol. 22 • June 1989 • No. 6
