Japan and America: Are Our Hands Really So Clean?
Is Japan an inexorable force, bent on domination of the global economy—or simply one of the great economic powers, along with the U.S. and Germany? How Congress answers that question will determine our economic (and political) well-being for years to come. As we saw in last week's column, much of the conventional wisdom that is animating the "Japan debate" is dangerously wrong. But there's more.
Conventional Wisdom: Japan is an unfair trader. We are fairness personified.
Fact: A just-released survey by a respected European research institute identified six of the 23 member-nations of the Organization for Economic Cooperation and Development (OECD) as unfair traders. The three worst offenders: Japan, Korea, the United States.
CW: We have been and remain wide open to imports.
Fact: Over 30 percent of our goods are protected by import quotas, duties, and the like. That's a four-fold increase in just the last decade.
CW: The Japanese are savers. We are spendthrifts.
Fact: Any number of plausible statistical adjustments make a case for the U.S. as investor rather than wanton consumer. For example, Japan counts all government spending (roads, bridges education) as investment; we label such spending consumption, thus understating our level of investment compared to Japan's. Differences in depreciation—accounting systems and wildly understated book values of many U.S. companies' relatively older overseas investments make our debtor status appear much worse than it is—to the tune of a half-trillion bucks or more.
CW: The availability of "cheap money" (centrally managed, low interest rates) is an insuperable Japanese corporate advantage.
Fact: The world's funds markets are now thoroughly homogenized. The "real" (adjusted for inflation) price of money is about the same throughout the developed nations.
CW: Big American companies are losing out overseas.
Fact: American-based companies' share of world exports continues to climb, as it has for the past 20 years.
CW: The Japanese are tops as multinational managers.
Fact: Americans are arguably the top multinational managers. Japan has thrived for years on domestically-produced exports. Now, it's racing to "multi-nationalize," shifting production offshore from Japan to Asia, North America and Europe.
CW: U.S. companies can't make it in Japan.
Fact: U.S. companies by the bus load do make it in Japan: from big high-tech firms (IBM, Texas Instruments, 3M, Hewlett-Packard, Motorola) to big service outfits (Disney, McDonald's) to smaller fry (Loctite, A.T. Cross, Weaver Popcorn). U.S.-based companies' production volume in Japan exceeds Japanese-based companies' production volume in the U.S.
CW: We buy lots from Japan. They don't buy much of anything from us, except some raw materials.
Fact: The percentage of Japanese per-capita income spent on American imports is about equal to the percentage of American per-capita income spent on Japanese imports. Japan's overall manufacturing imports, from the U.S. and elsewhere, nearly doubled from 1985 to 1988.
CW: Americans can't own companies or land in Japan. On the other hand, Japan is buying up America at a reckless rate.
Fact: We own lots of land and companies in Japan. Japanese investment in the U.S. has just passed that of the Netherlands and remains miles behind Great Britain. The rate of Japanese investment increase is tailing off.
CW: America's educational system is hopeless compared to Japan's.
Fact: Sure our K-12 system is a mess. But who's better? It depends on the criteria. (Japanese kids are good at rote activities, as reflected in fill-in-the-blanks test scores. Ours are better at creative activities.) As to university systems, there's no contest—it's the U.S. by 20 furlongs.
CW: Japan doesn't change.
Fact: Everything is changing in Japan. Japan's offshore production activity has more than doubled in the last five years. Credit card use is soaring. Consumption, tourism and participation of women in the work force are all growing wildly in Japan.
Can any of my "facts" be refuted? I'll concede that the savings and investment statistics are murky and subject to multiple interpretations. Otherwise, few of the assumptions that accompany our rancorous stance on trade with Japan survive scrutiny. But the point is not to quibble over this or that statistic. My contention is simply that there is a robust case for other than America-is-in-precipitous-decline-and-the-Japanese-are-to-blame: My "facts" are as good as anyone else's "facts."
Let's acknowledge that we are strong, but sorely challenged. Let's get on with building companies that bash competitors in the marketplace, rather than mindlessly bashing Japan and starting a trade war in pursuit of crude, partisan political ends.
(C) 1990 TPG Communications.
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