In Defense of the Other Side

...If there are trade complaints against it—and certainly there are many legitimate ones, as is true of virtually every country including our own?it wants them to be settled in the multilateral, symmetrical fashion that has become the practice among trading partners...

...Bridgestone, in following the American takeover model, committed a critical "cultural" error that an American firm would never have made: It failed to fire at the outset the large numbers of redundant employees in Firestone's bloated worldwide operations...

...Else they were wicked, predatory in their exports and exclusionary in their imports, and deserving of "special treatment" in the form of such measures as the Clinton Administration's "managed trade" demands...

...Bill Emmott's book could help point him in the right direction...

...The legacy of this revisionism was evident in the failure of the February summit meeting that brought then Prime Minister Morihiro Hosokawa to Washington...

...Emmott's new book, Japanophobia, is a useful corrective to both stereotypes...

...government serve as plaintiff, judge and jury for allegations by American industries that Tokyo has "nullified and impaired" treaty-established conditions...

...All this was plain for everyone to see?except, apparently, the Clinton Administration...

...It is ironic that an Englishman should chide us for our prejudices...

...Japanese companies, Emmott finds, rarely buy out other firms, preferring to build their own plants from the ground up...

...The author grounds his overarching and illuminating review of the subject in case studies of recent high-profile Japanese ventures...

...It solidly debunks the myth of Japan's invincibility and also attacks the notion of its viciousness, though with less fanfare and emphasis...

...could continue to define its trade relationship with Japan asymmetrically: by threatening retaliation if American requests were not heeded, instead of by offering the incentive of reciprocal concessions, as with other trade partners...

...Since Japan's exports are subject to greater U.S...

...Even today, Emmott notes, Michael Lewis says of Salomon Brothers' John Gutfreund in Liar's Poker: "It never occurred to him that anyone would manage his London office but Americans...

...Today we are booming by contrast with Japan's recession...

...The Americans are the teachers and the Japanese are the students...

...Just as he shows the Japanese are not Supermen, the author convinces us they are not all Lex Luthors either...

...The new Japan is intent on removing the last vestige of its counterproductive industry regulation under its own steam, not under Washington's threats...

...But it is unlikely ever to yield a normal rate of return...

...Each of these key components of the Clinton trade policy reflects a view of Japan as a bizarre or "special" nation outside the framework of "normal" economic behavior and discourse—an "outna-tion," to borrow the description by journalist Jonathan Rauch that is the title of his brilliant and sympathetic short book published two years ago...

...This is economically rational behavior: American operations have done the same—and drawn criticism—in poor countries that set up such barriers to attract foreign investments...

...Reviewed by Jagdish Bhagwati Arthur Lehman Professor of Economics, Columbia University...

...Thus Bridge-stone—which had outbid Pirelli's by 30 per cent for the takeover, cushioned by Japan's boom and its soaring stock market at the time—soon found itself pouring an additional $3 billion into the acquired company, and it has spent more since...

...The Japanese, for example, don't employ local managers...

...Emmott cites evidence of a similar attitude in many of the frequent critiques of Japan's business practices, although if put into historical and comparative perspective, much of what is being criticized falls well within the "normal" range...

...trade restrictions than those from other countries, it should come as no surprise that Japanese ventures exhibit higher imports-to-local-content ratios than other foreign companies...

...The enormous investment may yet prove marginally profitable—in fact that seems to be the case at present, due to the American auto industry's comeback...

...The dual images of power and perfidy added up, in our nation's popular imagination, to the obsessive envy and fear that define Japanophobia...

...Take the complaint that Japanese multinationals with plants in the United States buy from their own—that is, import components from Japan rather than use local suppliers...

...Two examples in particular catch the eye: the entry of Sony and Matsushita into Hollywood, and Bridgestone's takeover of the Firestone Tire and Rubber Company...

...As Bill Emmott, editor in chief of the Economist, reminded us with the title of his well-received previous book, The Sun Also Sets...

...The question now is whether President Clinton will recognize this, or persist with the bluster and threats that bode ill for the nearly half-century-old U.S.-Japanese amity...

...In a chapter aptly titled "Mugged in Hollywood," Emmott recounts the story of Sony's 1989 purchase of Columbia Pic-tures for $3.4 billion and Matsushita's purchase of MCA, the owner of Universal Studios, for $6.1 billion the next year...

...Our trade relations with Japan cannot assume any degree of normalcy until we finally accept it as a country that must be allowed to play by the rules the trading nations of the world have set for themselves...

...Prejudice tends to assume the failings of its victims are singular and presents their venality as unique...

...Hosokawa, especially since his country is moving toward internal political and economic reforms, firmly rejected the notion that its alleged "exceptionalism" could any longer be the basis for trade negotiations with the United States...

...President Clinton and his aides, having worked themselves up into an aggressive posture, pursued two "principles" that virtually no distinguished scholar of international trade in the world supports...

...The story of Bridgestone's 1988 takeover of Firestone in Akron, Ohio for $2.6 billion is equally revealing...

...In similar fashion, Emmott finds American parallels for many of the complaints against Japan's business practices...

...In the entertainment business it is different...

...Indeed, their tuition has been very expensive, and to date neither Sony nor Matsushita has managed to turn a decent profit on those investments...

...author, "India in Transition" In the 1980s, Americans came to regard the Japanese as either Supermen or Lex Luthors...

...The Superman part of the equation is therefore at a discount, but the Lex Luthor part persists in full measure...

...First, they demanded that Japan accept numerical benchmarks and targets for imports in several sectors—what economists call "managed trade...

...there can be no doubting they belong to the human race...

...They were invincible and omnipotent, their economic efficiency overpowering and unbeatable...

...Second, they proceeded on the political assumption that the U.S...

...The 1990s, however, have seen the Japanese economic juggernaut grind to a halt...

...It also resents having the U.S...

...Struggling to boost productivity, the new Japanese executives feverishly attempted to upgrade equipment...

...The summit, therefore, was doomed to merely confirm the ineptitude of the U.S...

...Well, what did we do when we started to expand overseas...

...Back then we were the generous victors, strong and visionary...

...Both arguments are made by analyzing Japanese direct investments abroad during the' 80s and early '90s...

...They were playing in a sport quite alien to them, Emmott observes: "When Japanese firms operate factories abroad, they act as teachers, bringing in their superior manufacturing methods...

...But in the 1980s, our vociferous "revisionists" nearly regressed us to a socially tolerable form of the Japan-ophobia that wracked the West Coast in the '20s...

...approach...

...Emmott points out that when foreign firms invest in a country primarily to get around trade barriers against finished vehicles or other finished products, they import as many components as they can to minimize using more expensive local components...

...The two megacorporations were literally "taken" by the operators, duped into dishing out ever larger sums to "local American advisers...

...Their apparent geniality and deference of manner, in the latter view, concealed a malign intent: They bowed low only to cut you off more easily at the knees...

...After World War II, Europe's mood toward Japan was hostile and its fear of Japanese competition was real: Europeans refused to let Japan into the General Agreement on Tariffs and Trade (gatt) until 1955...

...These show dramatically the folly the Japanese are capable of...