JPRS ID: 9293 JAPAN REPORT U.S.-JAPAN AUTO TRADE DISPUTE

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• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000300030013-1
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• Original Classification: U
• Document Page Count: 40
• Document Creation Date: November 1, 2016
• Sequence Number: 13
• Content Type: REPORTS

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i~ ~E~TE~#~E~ i~~~ U. -,~~iP'~1~ AUT~ T1~t~~E ~ I~~UTE i fl~~ ~
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I~(IR ON'F'f('I:~1. l`tiF: O'~'I.ti"
JPt~S L/9293
1 ~ September 1980
~ Ja crn Re ort
p p
(FOUO 22/80)
~ U.S.-Japan Auto Trade Disput~e
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JPRS L/9293
10 September 1980
JAPAN REPORT
(FOUO a2/so)
U,S~-,JAPAN AUTO TRADE DISPUTE
CONTENTS
ECONOMIC
Rekindled Japan-U.S. Auto Trade Dispute Analyzed
(ASAHI JINARU, 11 Jul 80) 1
Differences in Two Industrial Structures
Collision of Two Different Cultures, by Akira Kubota
Japanese Auto Indujtry's Move To Alleviate Car Trade Dispute
(NIHON KEIZAI SHIMBUN, 11, 3 Jul 80) 19
Automakers Plan Corrective Measures
Move To Alleviate Car Trade Dispute
Toyota's Cooperation With the U.S. Analyzed
(NIHON KEIZAI SHIMBiJN, 11, 13 Jul 80) 25
Well-Calculated Decision Bescribed
Global Strategy, Its Impact
Japan's Car Export Restraint Will Not Hurt Its Economy
(SHUKAN SHINCHO, 10 Jul SO) 34
- a - [III - ASIA - iii FOUO]
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- ECONOMIC
FcEKINDLED JAPAPI-U.S. AUTO TRADE DISPUTE ANALYZED
Differences in Two Industrial Structures
Tokyo ASAHI JINARU in Japanese 11 Jul 80 pp 8-9
[Text] There is a rekindling of movement to limit import of Japanese auto-
mobiles into the United States as evidenced by the resolutions being intro-
duced in the United States Senate and the complaints of the United Auto
Workers Union tc the American International Trade Commission (ITC). When
the American trade representative Askew visited Japan in May, it seemed that
the issue of "friction" between these two countries had been settled for a
while, but this problem seems to have been reopened. This f riction actually
has its background in the problem of differences in the "itidustrial atruc-
tures" which envelope the automobile industries of these two countries. Put
in more concise form, the United States side is in a state of transition to
production of compact automobiles while the Japanese side is overly involved
in export particularly of complete automobiles. As a result, this friction
will not be relieved by minor "situation saving proposals." Only a"struc-
tural innovation" involving considerable time can produce an effec~ive treat-
ment.
Looking first at the American situation, the incorporation of energy conser-
vation is under way. The first oil crisis of 1973 was the opportunity for
the United States Government to start to disengage itself fr om overseas
dependence on energy, mainly oil. What became tlie target of attack was the
large automobile which guzzles gasoline. Wl~ere the fraction of the national
oil used for automobile gasoline was but a 1{tci~ ~ver 10 percent in Japan,
the United States used the very high rate of close to 50 per cent. Aa a
result, the "energy conservation law" formulated by the Ford administration
in 1975 strongly urged the various American automobile maker s including
_ General Motors (GM) to promote "small car plans."
The "energy conservation law" established standards for the average fuel
consumption (miles per gallon) for the entire fle~t of cars produced by a
given automobile maker, and any maker not conforming to thes e standards
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became li.able to fines. These standards become stiffer by the year, and the
1985 models which are the last to be covered by this law require the fleet
average to be 27.5 miles per gallon.
The American Industry in Desperate Miniaturization Plans
While fuel efficiency can be improved by improving the engine and lightening
the vehicle through the use of aluminum a~loys, the most rapid method for
realizing this f~;~i efficiency is to design an automobile which is "even
smaller." The situation is that the automobile industry headed by General
Motors is fever.ishly wnrking on "miniaturization plans" involving their
entire fleets fi-om full size to compacts and subcompacts. While this does
not mean that the large automobile will disappear from the highways which
traverse this broad country, small automobiles with total displacement of
- less than 3,000 cc are beginning to appear in greater numbers. In other
words, automobiles to compete with the Japanese products are being produced.
It may be said that ttiere would have been no friction with the Japanese auto-
mobile makers had the American makers continued to be occupied with the large
cars. The situation, however, is the exact opposite. Not only is the Amer-
_ ic~n automobile industry being turned toward small car production by law, the
marlcet demand has been for the small cars even beyond the makers' expectations
as the result of the ever rising cost of gasoline. For example, the small
passenger automobile "X-car" series which GM started to produce after plough-
ing in vast development cost has experienced such great response that pr.oduc-
_ tion is not keeping up with demand. On the other hand, the large cars are
e;cperiencing extreme sales resistance, and many plants have been shut down
while about 300,000 workers have been laid off and are on relief. At the
same time, some large car plants have been shut down in order to replace
facilities and macr,inery for tr~e conversion to small car production, and the
employment picture is deteriorating.
The American makers have made clear their policy to market small passenger
cars starting th~s fall and exteriding to next spring as evidenced by GI~'s
"X car" to be followed by its "J Car," Ford with its "Erica," and Chrysler
with its "Omni," "Horizon," and "K Car." The American market has seen sharp
_ rise in the sales share of small cars imported from Japan with this share
increasing to 23 percent of the total sales this last May. This has demon-
strated the inade4uacy of rhe small car production system of the American
industry in transient manner.
Now, this large loss in business is a serious situation, and the gross take
of these makers is decrP~~~r~g because the production and sales of the large
cars which net mtich more pe~ vehicle are down. To make matters worse, there
is a sharp cooling off in the economic picture, and the sales market itself
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is shrinking. This is why the cries of the legislative bodies and the United
Auto Workers Union to "limit the introduction of Japanese automobiles" is
not necessarily unreasonable.
- The American market has been extremely wide open to foreign car exports. Be-
cause the socalled "Big Three" companies of GM, Ford, and Chrysler had been
actively exporting their products primarily to Europe, it was difficult for
them to go on record to establish protective policies. In any event, the
"import car" including both Japanese and European models were "small cars"
_ while the domestic product involved a"large car," and there was a distinct
difference in the sales picture. This is what is threatening to blow away
the "free trade" standard.
Onset of a"World Automobile Conflict"
On the other hand, no matter what form of restriction is adopted, there is a
situation on the Japanese side which has to bear the brunt of these export
restrictions into the United States which stands against any simple conforme-
tion. Ever since the oil crisis of 1973, the Japanese automobile industry
had been casting sideward glances at the other Japanese industries which were
in depressed state because it alone has been enjoying prosperous times. This
was because i~ could export its product to compensate for its depressed sales
at home. Lookit~o at the one year record for 1979, there was a total produc-
tion of 10 million a;:tomobiles produced including trucks of which a half or
500,000 cars was disiributed overseas. 0: these exports roughly 40 percent
was shipped to the United States which represented 20 percent of its total
output.
There are some voices raised in opposition to such an excessive dependence
- on exports even within the industry itself. vot only is the business exper-
iencing some instability due to the fluctuations in the exchange rate but
there is the fear that this present course will sooner or later bring on some
application of the protectionist principle as evidenced by the present
Japanese-American friction.
On the other hand, the actual situation does not allow such a move. Mass
production i.s aimed at lowering cost, and any decrease in exports is bound
to create severe reverberations within the production structures of the
various makers who have been continuing expanded production.
The reason here, first of all, is that .*.he "automobile society" in Japan has
matured, and the domestic demand is not expected to undergo any ma~or in-
crease henceforth. In the face of this situation, the overseas market is
also not one of great promise. With the exception of West Germany, the
European market presents an array of import restrictions. At the same ~ime,
the developing countries face limitations to expansions as long as the income
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oE their peo;~le does not increase. If exports to the United States were to
be limited on top of all this, there will be no room for expanded production. -
The reason the 11 Japanese makers have been able to coexist thus far has
been the orderly expansions of the domestic and foreign markets. If the
future of such a pattern becomes cloudedy there is no guarantee that the
_ Japanese automobile industry will be free from some hard times.
The Japanese-American automobile friction is a product of direct confronta-
tions of the situations of both sides. The American makers have ventured
- into what had be~~n an exclusive small car area of the Japanese automobile,
and this picture has been augmented by the entry of the European makers in
what is a c~r.flict amounting to a"worldwide automobile war." The true
in*_ent of the American automobile industry seems to be "lay off for a while
until we have a chance to put our small car production system ~.n order." In _
addition, the Republican Party hds nominated Reagan who is a strong protag-
onist for a protectionist policy, while the high unemployment in the auto- -
mobile industry is a source of considerable headache to President Carter who
is seeking reelect~ion. ~.ven in such a situation, he cannot bring himself
to lower the standards of "free trade." In any event, it now seems that this
situation will result in the Japanese side adopting export restriction or -
some sort of self restraint. On the other hand, will this friction be dis-
persed and disappear once the presidential election is over? While it may
be possible to limit export of complete cars, there can be no drastic meas-
ure which will prevent production of passenger vehicles in the United States
as contemplated by Toyota and Nissan, the likelihood is great that this
chronic "Japanese-American friction" will continue. -
Collision of Two Different Cultures
Tokyo ASAHI JANARU in Japanese 11 Jul 80 pp 10-17
[Ar.ticle by Akira Kubota, Professor of Political Science at the University _
of Windsor, Canada, and Guest Lecturer at the Sociolog~cal Reseatch Center,
Un:Cversity of lokyo]
_ [Text] Akira Kubota: Born in 1932 in California. He
- went to Japan when he was 4 years old and earned a Iaw
_ degree at the University of Tokyo. He was granted a
doctorate from tne University of Michigan in 1966, and
he has been a professor at the University of Windsor in
_ Canada since 1970. He is now a guest lecturer at the
Sociological Research Center of the University of Tokyo.
He is an Elmerican citizen.
The automobile indsstry of the United States which once prided itself as
being the world's foremost automobile industry is now in a state of retreat
as the result of an onslaught by foreign made small r.ars. Spearheading
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this onslaught are the Japanese rorces, and the American aucomobile worker
has come to regard this Japanese counterpart as his ~nemy and is calling
loudly for pretective trade. While President Carter has not lowered his
standards for free trade, this Japanese-American automobile friction seems
- likely to develop into a major political problem between these two coun-
- tries. On the other hand, this automobile. problem is not simply an eco-
, nomic problem but can even shake the props of Amer.ican culture. Where the
- Americans are concerned, this situation is akin to the arrival of foreign
ships. (Editorial Section)
Douglas Frazier, President :-f the United Auto Workers Union of the United
States visited Japan ear~y this year to confer with the heads of Toyota and
Nissan and strongiy requested that the Japar~ese automobile companies set up
assembly plants in the United States. The Japanese autom~bile industry
' while treating President Frazier with the utmost courtesy refrained from
- giving him a clearcut answer with regard to this all important invitation
to put up assembly plants. When Frazier returned to the United States, he
went straight to Washington and proposed the enactment of a law to restrict
import of Japanese automobiles to the joint congressional bodies. His
basic outlook is to protect the jobs of the Amer.ican automobile worker. In
- this regard, he envisions the creating of Japanese assembly plants in the
United States to create newjobs for Americaa workers or to restrict export -
of Japanese automobiles to the United States and thereby increase the pro-
= duction of American cars and bring about reemployment of the American work-
ers who are now unemployed.
_ While the reaction of the Japanese side is another story, the general Amer-
ican and particularly the automobile worker considers Fra2ier's approach a
highly desirable one. It is said that unemployment among the ranks of the
automobile workers presently runs between 200,000 and 250,000 which is
equivalent of Z/7 to 1/8 of all the automobile workers. What should be
noted here is that this Japanese automobile problem is not limited just to
unemployment in a single industry but represents one end of basic changes
- in the economic relationships between Japan and the United States. There
is the major problem of Japanese-American economic conflicts standing in
_ the background of this problem, and there is the problem whether the United
States can stop tliis economic attack on the part of the Japanese.
The Japanes~ automobile problem is presently a major economic problem in
the United 5tates, and the American mass communication media is giving this
_ sub~;ect full attention. The radios, TV, newspapers, and magazines partic-
ularly in those areas of Michigan, Ohio, and Indiana which are the automo-
bile production areas cenltered in Detroit play out this information night
and day. The nearly 300,000 unemployed workers of the automobile industry,
the almost weekly announce,-nents of plant ciosings and loss of jobs by work-
ers, the 20 year low in American automobile sales, the American automobile
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companies cah.`ch ull ar~ bein~; heavily ouireted, Chrysler which is said to
be almost sure of collapse, and the depressed situation in the steelmaking,
glass, and rubber induGtries are all front page items. The principle fac-
tor responsible for this distressed state or the American automobile indus-
try is nearly always ~iven as t';:e export of Japanese automobiles to the
United States.
[,ihen automobiles become such a large economic problem, they inevitably be-
come a politica]_ problem. f1s evidenced by the television appearance of the ~
legislators ~a'rio -_~resent tne states bordering the five Great Lakes, restric-
tions in the rc~rn or quotas or large import duties are being proposed and
G~orge Bush rorrler liv envoy who failed in his bid to obtain thP Republican
nomination as presidential candidate took up a quota system in his platform.
The politician who is most actively working on this Japanese automobile
~roblem is Senator llonald Liegel (democrat from Micnigan), and Senator
Liegel and Sen;~tor Howard ~ietzenabum (democrat from Ohio) have formed a
group with presidents or the auto companies, union leaders, and several
senators to p~it pressure on the federal government.
On the other hand, the problem of export of Japanese automobiles to the
United State, is not a situation which follows a formal diplomatic route when
the internatic~nal aspects are considered. There are no differences in opin-
ion between the administrati.ons of these two countries, and 1) both adminis-
trations try to persuade the Japanese automobile ;.ompanies to set up assembly
plants in the linited States but are unable to force such a move and 2) they =
have no intent of assigning quotas to the number of Japanese automobiles
allowed into the Lnited States or limit the number entering. The two govern-
ments are in agreement on these two points.
Prime Minister Ohira visited Washington in early May to confer with President
Carter. The subiects for discussion at that time were the Iranian hostage
problem, the Afghanistan probl~m, the reinforcement of Japan's self defense
force, and Japanese-American scientific research cooperation, and the automo-
bile problem did not seem to have played a central role. President Carter
had already spoken to reporters before Prime Minister Ohira's visit and
stated that no quotas would be imposed on Japanese automobiles.
Nok=, there is ~;reat differences in opinion between the federal government and
a fraction of the legislators, automobile company executives, and the labor
organizations. At the present time, President Carter has adopted a policy of
ciisregarding tlzis confrontation in his administration, but there is consider-
able doubt whether he can pursue such a course to the end. The unemployment
problem, the distress of the automobile companies, and the effect of this
situation on the election all are expected to eventually come into play, No
_ matter how much President Carter explains the role of efficiency, speciali-
zation, free competition, GATT /General Agreement on Tariffs and Trade/ and
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other international trade agreement roles to the general public, there are
limits to the economic losses which the American public can take such that a
quota system for Japanese automobiles cannot help but develop into a self
imposed restriction on the part of the Japanese automobile companies should
the present trend co,ltinue.
'I'he American Businessman 'Iakes No Attempt To Understand the Japanese Position -
If a country with meager resources and fuel such as Japan is to promote its _
industrialization, it naturally has to i~port large quantities of raw mate-
rials and fuel. At the same time, it must exporr large quantities of indus-
trial products to pay for these materials. This is why Japan's production
facilities, cireulation structure, financial str~icture, tax systen, and all -
the oLher administrati~e policies have to be structured on the basic prin-
ciple af ~ust how to keep exports at the m::ximum level,
On the other side of the picture, the United States is blessed with ample -
resources and fuel and is further advantaged by a large d~cnestic market. It
is a country which can depend on its domestic sources to provid~ its raw
materials and fuel and to absorb the sales of its industrial products. As
a result, foreign sales assume secondary or tertiary roles, Such a country
has historically developed production facilities, circulation structure,
= financial structure, and governmental fiscal policy which, generally speak-
ing, are not attuned to promoting trade. The production of goods slated
for foreign consumption is particularly difficult, and any investment in
ventures to produce such goods is perilous. It is not in a position to en-
gage in practices such as dumping which leaves it as a disadvantage in price
wars.
The next item is the cultural problem. The Japan-Canada Trade Roundtable
Report ~May 1979 edition) describes this situation admirably. To be sure,
this article relates to the situation with regard to Canada, but it is a
problem which essentially applies equally well to the United States or
Canada.
Leaving aside purely business problems, the item that presents the greatest
obstacle to close understanding between Japan and Canada is the psychological
problem. In other words, it is the problem of the individual's preconception
or attitude. For example, there are still some Canadians in high positions
who still retain emnity against the Japanese for the beatings the Canadians
suffered from the Japanese during World War II. While not associated with
emnity against the Japanese, there are some who have superiority complex with ~
respect to the Japanese. The superiority complex which the Canadian business-
man has stems from his feeling that the Asian is unable to exploit the fruits
of the capitalistic system and Pree market which the people of European stock
originated better than the Canadian. This is why the Japanese economy which
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has perforn~~e.j so brilliantly over the past few years is sor~ewhat of an engima
to the Canad ~~an businessman. Such a r~cord surely must have been achieved
bv dishonest�y , trickery, or ruse. And the ones who through their own ignor-
ance, arrogance, or ne~ligence Eailed in their dealings with the Japanese
are the ones who tervently broadcast such false information with missionary .
ardor. Preconceptions and atti..*.udes are decisive fact~rs even in the case
of Europe and the United States. What is interesting here is that an unfa-
vorable evaluation becomes even more uniavorable the more fierce the compe-
tition in the domestic market. What should actually be a reasonable criticism
- can be altered to an abusive attack.
The author reccn~ly read in a llutch economic magazine the statement that
"should Japan suddenly sink beneath the sea, there may be no country in the
world which would shed a tear."
It may be overstating tY;e case to say that the line of thought described in -
this article i.s one that is shared by the greater numbe r of the financia.l
people of the Unl~ed States. On the oth~r hand, an important lesson from
this article should be that it is diff icult f or the Ame rican businessman to
_ accurately grasp the nature of the quality and strength of the Japanese
economy, and there is a segment of American f inancial people who despite its
influential nature has no desire even to understand the Japanese economy.
It is unthit.kable that Japan's first line economists do not comprehend the _
basi~ of the American economy. Conversely, the average American economist
has a very limited understanding of the Japanese situation, and this weak
~ level of understanding is hindering any reduction in the present economic
friction between Japan and the United States. In addition, this nroblem in
degree of understanding is a factor which is delaying any formulation and
development of American policies with respect to the Japanese economic on-
slaught.
The Fadin~ Standards of the Free Trade Principle
~+Then the American mass communication media discusses the problem of the
Japanese au tomobile, it concentrates on the nomestic viewpoint and practi-
ca11y ignores the international aspects. That is to say, the argument is
centered on unempioyment policies or measures to rescue those companies in
danger of going under.
There is a trend to forget the concept of free trade which the United States
government had been stressing for a long time. The basis for free trade ar.e
efficiency and diversification in which the industries of different countries
can compete Ereely in the international market almost the same as in its
domestic market. The reason the United States actively supported free trade
on the inter-?ational scene during the postwar period was because it had
assumed a protectionist trade policy before the war which had been a factor
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responsible for worid-wide depress'on as a result of which there was some
criticism that this depression had driven the international society to war.
At the same time, there may have been a feeling among some of America's
- leaders which may have been involuntary that American business was beyond
competition from foreign industry.
There are splendid arguments for the principle of free trade, and the United
_ States proudly propounded this concept consistently at the postwar interna-
tional conferences. The linited States proposed great reduction in tariffs
at last year's roundtable held in Tokyo. The United States is now about to
make an 180 degree turn in its basic international economic policy, but it
- finds it difficult to make a complete change to the protective trade prin-
ciple. Whether viewed from the standgoint that the United States is the
world's protagonist of the free trade pri;.c~r?e or from the viewpoint simply
_ of preserving its face in the international area, the politicians and high
ranking officials of the United States are not about to make such a simple
change in policy. What the federal government is saying at the domestic
political discussions is that each country has its strong and wea~: industries
which compete on the international scene where natural selection enters the
scene. There are plus and minus aspects of free trade to the United States,
and this is still a des~rable approach if both ends are put together. Carter
is saying that Detroit's downfall arcae from the fact that it had not heeded
his warning a f ew years ago to place emphasis on small car production. '
On the other hand, such a stand on the part of the federal government is
faced with two difficulties when seen from the viewpoint of domestic admin-
istration. One of these is the fact that the federal government had not
- adequately explained the aforementioned international economic and political
aspects through its mass co~ur~ication facilities. On the other side of the
picture, the people are essentially ignorant of these aspects. The unem-
:_7 ploye~i automobile worker seems to be completely unaware of the international
nature of the automobile problem. Frazier has sa~d, "the Japanese automo-
bile companies are irresponsible when they export large numbers of automo-
biles to the United States," and the "United States government has not taken "
up the problem of unemployment of the automobile worker in earnest." The ^
worker who hears such statements is placed in a situation in which he fee.ls
that this international aspect can be disregarded. There is nobody ~aho
stresses the need to look at the international picture.
The other difficulty is the federal government's policies and intentions
which involve a reexamination of the free trade principle. No matter how
much it stresses free trade, the Japanese fibers, cameras, motorcycles, ~
color television, tape recorders, ir~n ar.d steel, and automobiles which
are causing great comotion in the American market are facing considerable
ecanomic attack. No matter how large the American economy may be, it seem,
that the endurable limit is being approached. It is possible that there is
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_ some movement , possibly in secrecy, ~vitnin the federal gover~lment to study
a new direclion in the form of a revised free trade or protective trade.
There wili be a pr~sidential election i.n November in the United States, and
~~ressure on the tederal government to do something about the Japanese auto-
mobile is cnounting dai.ly.
~lnerican ~cholars icith Little Interest in Enlightening the Public
The number ot s~~holars who specialize in Japanese economy or Japanese trade
has become consi~..Y'1~IC.' even in the United States during the past few years,
but these sclz~la~~ never display their findings L-hrough the American mass
communication media. In tact, the line of thought of these American schol-
~irs seem~ to be to shut themselves up iri ivory towers and limit themselves
to some very specific economic problem--for example, the price of wheat--
_ wh ich they exp:~ ain cait-h highly mathematical reasoning. These studies are
= rE~ser.ached in ~chol;lrl,~ manner, and the findings are published in scientific
� jozlrr.als. They seem to think there is no need to inforn: the general public.
Th~re is certainly some truth in the oeliefs of conventional scholars, but
the quantity and quality of American mass communicatioc~ material with regard
to lapanese related subjects are somewhat low. It goes without much emphasis
th~lt the manner in which the scholars stick to their uld fashioned modus
_ onerendi is considerably wanting today when the automobile situation is such
a naj or political problem.
There are consi_aerable funds in tre United States for enlightenment of things `
JaF~anese through the mass communication pathway. There are the Japanese-
Am~:rican Friendship Fund and the International Interchange Fund. There are
also the Social Science Research Council, th2 National Endowment on the
Fiumanities, and the National Science roundation funds which are particularly
dr,signed to support scientific research on Japanese subj ects. The use of
~ even a srriall fraction of such funds st~ould provide some effective public -
Enl.ightenment on many Japanese-Ameri_can problems such as the automobile
~~rcblem.
_ 1dou~, this has not been done. Many of these organs are managed by scholars
ir~~m the elite American universities, and most of these funds are being
- used in scientifi.c research in a very narrow sense. The fund which presents
� a special problem in this respect is the Japanese-American Friendship Fund.
~ If the purpcse of this fund is to promote better Japanese-llmerican relation-
~ shi_ps, it shculd be more active in trying to gain ~~ie understanding of i e -
' Am~rican public through the mass communication media with regard to subj~~ts
- such as the Japanese automobile. There seems to be no such effort at the
prF sent time.
Th~.re is a possibility that the problem of Japanese automobile exports to
th~: United States will become much worse in the next 1 or 2 years. At the
prE:sent time, Japanese automobiles account tor about 20 percent of the
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American market, and there is possibility that this number may increase to
30 percent or even 40 percent. If such becomes the case, the American auto
industry will fall into a stare of "chronic dang2r" as predicted by Frazier.
At the same time, the anti Japanese automobile policy movement championed
by Senator Liegel will receive even greater public support, and the scale of
this problem will go up one atage as a domestic problem. There will be
direct and 3ndirect cracke formed in Japanese-American relationships. It
seems that Mitsui, riitsubishi, Sumitomo, Toyota and Nissan have been donat-
ing large sums to American economists as research funds, but the scholars
who are the recipients of these funds have been essentially silent as far
as policies to ease these economic and political crises are i:oncerned.
We next look at Japanese-American economic conflicts. These can be grossly
classified under two categories. The first relates itself to the automobile
problem while the second is the problem of the relative p~sitioning of the
overall economy. _
Turning our attention first to the automobile, the Japanese automobile seems
to be giving the American automobile considerable competition not only in
the American market but in the world market as well. The market share of
Japanese automobiles of the American market is 20 percent which in 2 or 3
years has the potential of increasing to 30, 40, or even 50 perceat. In
contrast, the American automobile has real competitive strength in the for-
eign marketa, and the American automobile ~annot compete with the Japanese
automobile in the world market outside the American market. When the total
Japaneae automobile production is expected to exceed 10 million this year,
the total American production is expected to be but 7-800,000. There is
also considerable possibility that in the next 2 or 3 years Japan will sur-
pass the United States and become the world's leading automobile producer.
Countermeasures Inadequate To Meet the Japanese Challenge
When the economy of a single country is considered, there is cor.siderable
possibility that by the year 2000 the gro3s national product of Japan (GNP)
will come up to the GNP of the United States as was predicted by Hermari
Kahn in 1970 in "the Challenge of the Super Country Japan." Th~ following
apecific factors can be cited to support this view. 1) Japan's rate of
economic growth continuea to be very large as before, 2) productivity
continues to increase (productivity in the United States is declining),
3) savings are high on A world-wide scale, 4) it is better able to control
inflation and interest rates, 5) the yen has gained in value, and its
exchange rate is thought to have stabilized, 6) there is the comprehensive
company system unique to Japan which is strong on overseas trade such that
there is amall possibility that Japan will be in the red in its future
international trade balance, 7) the Japanese-American international balance
i~~rade hae favored Japan almost yearl:y during the recent years, 8) Japan's
foreign economic movements extend to Asia, Latin America, Afric~, Oceania,
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Europe, North Africa, and the communist countries thereby e~tending to all
.corners of the earth to rivai the trade of the United States or.'even more,
9) Japan showa no particular inferiority to the United Statea in its abil-
ity to obtain resources and fuel from overseas compared to the United
~ Statea, 10) Japan competzs with the United States in many areas such ae
automobiles, iron and steel, vehicles, ahipbuilding, machinery, office equip-
ment, e~ectronice, watches, and acientific and medical equipment, 11) there
is a certein degree counterflaw of scientific and industrial technology
directed fnom Japan to tlte United States, 12) the United States seems deter-
mined to adopt a protectionist policy, 13) the Japanese administration seems
to formulate be~ter long term plans providing the country better stability, ~
and 14) Japat: is in a superior position compared to the United States where
c*ime rate and labor disturbance rate are concerned.
When in the 1960s or the 1970s people such as Kahn began to say that "Japan
will soon overtake the United States," most of the people considered such
atatementa to be ~okes. Now as the decade of the 1980's has come upon us,
many more people have come to accept this prediction. Japan's high economic
growth at one time was thought to be an exceptional and temporary occurrence,
but the fact ran counter to such evaluations. For the present time, there
seems to be no reason to think that there will be large decrease in the rate
of Japan's economic growth. To be sure, Japan's absolute rate of economic
growth has been lower than it was 10 or 20 years ago, but this rate is con-
siderable in relative manner particularly compared to those of the various
countries of the western world. In the special case of the comparison with
the American rate of growth--presently a minus value--Japan's growth is
amazingly high.
Let us next study the problem of ~ust how the United States is seeking to
counter this ecouomic challenge on the part of Japan. This sub~ect may be
broken down into three phasea. This problem can be broken down into just
how much the American is aware of this prohlem, the search for counterpoli- -
cies from a domestic viewpoint as has been the American practice in the past,
and the search for counterpolicies not on a domestic basis but on a much
broader international scale and study of countermeasures while learning from
_ Japan and other foreign countries.
We firat diacuss the problem of the awareness of the seriousness of the
problem. There seems to be a considerable number of Americans who are aware
that Japanese economy has enJoyed considerable success, but the leaders and
the general public seem to posaess but limited understanding of Japan. They
have very ehallow insight on Japan's economic quality, strength, and future
potential. Even among the more knowledgeable Americans, there is but a few
percent which is aware of the possibility that Japan's GNP may overtake that
of the United States in about 20 years. It has been said that Japan's GNP -
recently overtook that of the Soviet Union, but it seems that it is a ran.e
American who ia aware of this occurrence. The American mass co~unication
- syetem does not seem to consider such subjects.
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Let us look at a few esamples of the view of the Japanese side shared by the
leadership layer of the United States. :~bout half a year ago, President
Roderick of ~merica's prime iron and steel maker U.S. Steel addressed a
famous economist club in Detroit at which time he accused Japan of dumping
- its automobiles on the American market. It seemed that he had not under-
taken to make sufficient study, and there appeared little hope for any vic-
tory on the part of the ~cnerican auto maker no matter how much he complained.
~s a result, his argument was soon lost. The ~nerican iron and steel makers
have been forced to clese a number ot plants. In addition, they recently
~ signed *_echnolo~ical aid contracts with Japanese companies including ~Iitsu-
bishi. While it may be that this industry is in a distressed situation
� th3t is is now reactin~ in emotional manner, it is clear that the industry
is lacking in its understanding ot the Japanese picture.
Very recently, President Phillip Caldwell of the Ford Motor Company said,
"at least 7S percent of all automobiles sold in the L'nited States should
have been produced in this country." The problem here is that if this re-
strictive method is actually implemented, all the foreign cars presently
baing marketed in the United S~ates will have to be taken off the m~arket.
In other words, this proposal wc~uld mean the cessation of all international
trade as far as automobiles are concerned. ~,t the same time, Michigan �
Senator Carl Levin (democrat) is proposing an equalization duty on Japanese -
automobiles. The gist of this proposal is to levy a duty on Japanese
automobiles being sold on the American market which is equal to the differ-
ence between the cost of an American car on the Japanese market and the
cost of the same car on the ~merican market. What becomes a problem here
_ is that the efficiency of the circulation and transportation process is '
disregarded, there is departure from the objectives of free competition,
- and the cost of such an undertaking has to be made up by this duty. In any
event, the proposals of Caldwell and Levin are not something which the Amer-
- ican envoys at international trade conferences can propose without much
apology..
Need for Widespread Changes in the rlmerican Education System
The quality of the average American's knowledge of the Japanese economic
competition is low where the average :':merican is concerned. Let us cnnsider
nere three examples of television broadcasts which were recently aired in
the Detroit area. An r~merican automobile sales outfit placed a Japanese
automobile in a parking Iot and gave a customer a sledge ha~ner to batter
down the Japanese automobile while onlookers applauded this action. Pickets
were placed in front of a sales outfit dealing in Japanese automobiles who
exhorted customers not to purchase Japanese automobiles. Radio, televisi~n,
and newspapers were used to call upon the patriotism of Americans as well as
to dramatize the unemployment picture and urge the purchase of American made
cars. '~1hat is common to these different actions is that the intended plan of
resolution is superficial and sensation seeking in principle and does not
come close to depicting the qu3lity and strength of the Japanese economy in
its proper light.
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There are a number of scholars, government officials, reporters, and foreign
service officials in the United States who are well informed on the Japanese
economy, but these people shared the couunon failing of e:ccessively underrat-
ing the rate of growth of the Japanese economy. On the other hand, the
2,merican politician, industrialist, and specialist in international economy
possess a meaningless confidence that "P,merican industry can compete with
any country's industry." As a result, the method of handling international
trade which has been developed is not clearly defined as yet and is inade-
quate.
There are some Americans such as Kahn who are forward looking enough to sense
at an early stage the superiority of the Japanese economy, but such people
_ are ~~cceptions on the ~merican scene. Vow, should the Kahn type line of
thought actually sink into the people wh~ establish rlmerican policy such as
its politicians, foreign trade people, and economists, the United States
presently should not be experiencing the diff iculties it now faces in con-
frontation with the Japanese attack.
It appears that the American leaders in general do not seem to take serious-
ly this Japanese economic attack. To be sure, the foreign trade envoys who
directly handle ,;apanese-American trade negotiations, the heads of tne auto-
mobile companies, the legislators who represent the auto~,obile producing
belts, and other people who are directly atfected by the Japanese economic
attack are completely embroiled in this matter. On the other hand, those
people who are not as intimately engaged have but hazy awareness of the prob-
_ lem even though they may be in fairly responsible positions, and they are ~
- certainly not aware that there is any crisis. This is to say that the solu-
tion to this problem would not require some revolutionary approach. It can
be said in a general manner that the American to date has not attempted to
study the examples of other countries and thereby improve the lot oi their
country. Most of the leader stratum at the present time seem to thir~k that
problems can be resolved by applying effectively some method thep select
from their store of knowledge rather than study the systems of other coun-
- tries.
For example, there was a gathering very recenr_ly of about 150 financial peo-
ple, scholars, gover:~ment officials, and politicians at Harvard University
where the subject of discussion was focused on the international competitive
capability of the American economy. According to the account appearing in '
"Time," the following measures were proposed in order that the United States
avoid becoming a second class nation similar to the United Kingdom. 1) There
be closer dialogue between the workers and the capitalists, 2) government
regulations with regard to industry and production processes be simplified,
3) business taxes and individual income ~axes be lowered, and 4) program to
_ enlighten the general public on this type of economic program were some of
the proposals made. This article makes no mention that .:~apan'~ rate of
economic growth far exceeds those or other countries or that Japan's ~s:VP may
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soon overtake that of the United States. There is a reference to Ezra
Bogel's "Japan as Number One," but there does not seem to be any hint of
this gathering considering the possibility of learning from Japan.
' Finally, let us discuss methods by Which the United States can learn from
Japan and other countries. Since the Bogel text already lists in specific
manner some of the items which the United States can learn from Japan, there
may be no need to list these in detail here (some of the items most frequent-
ly listed are Japan's bureaucratic system, police system, and trade policies).
The author himself is in agreement with this line of thought, There may be
a considerable number of areas where the United States can learn from Japan
which the American leaders are not aware. On the other hand, it is the
author's belief that even more important than all this is a revolutionary
alteration of the American educational system. If the United States truly
and sincerely seeks to introduce the various Japanese systems for its use,
there must. be a large scale change in the basic American educational system,
: and the American elementary schools, interr.iediate schools, high schools, and
universities must adopt basic sub~ects such as Japanese history, culture,
economics, and language.
Generally speaking, any attempt to transplant a foreign soc:ial system has -
\ little chance of success if just the administrators, government officials,
~ and scholars work as comparatively small groups to carry out this transfer.
, Such an effort must nflt be confined to a limited iiumber of elite but there
is need to obtain support from the middle class, general public, and public
opinion. At the same time, there is again a need to obtain the cooperation
of society's education system in order that such wide spread support be
obtained. If the United States were to imitate in earnest the many Japanese
systems, there must be reglacements in the ranks of the American educatiunal
philosophers.
Let us look at a specific example, There was an incident in which some
American administrators and government officials considered adopting the
Japanese system of compret~ensive companies (similar event occurred with -
Canada). Where the United States is concerned, it is pre~ently troubled with
_ excessivp imports from Japan making it necessary to sell large quantities of
American products to Japan and other countries such that the comprehensive
, company system of Japan is all the more desirable. On the other hand, it -
seems that a decision has been made not to adopt this system because it was
found as the result of researches on the part of business administration
specialists that such a system will not fit in with the American industrial
system and customs.
There will always be the problem of cultural differences or cultural resis-
tance when there is a shift from one society to another na matter what
system is involved. If now this cultural resistance is relatively small,
the transfer proce~s will be comparatively simple. If, on the other hand,
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this resistance is large, the transfer will be extremely difficult. When
there is extreme difference ii~ culture as is the c~se of a comprehensive
company, there is the inevitable conclusion that the possibility of a success-
ful transplant is very small. On the other hand, what should be noted here
is that any such cultural difference i:, relative, and this difference can be
overcame to a certain degree by will and effort.
Have the Japanese Democratic Principles Taken Root?
It is common talk among political scientists that the administrative system
known as the democratic system which was nurtured i:i the United Kingdom and
the United States will stand little chance of success on Japanese soil. As
is very evident upon a scrutiny of the Japanese democratic principles before
the war, this Japanese democratic system underwent great changes, and the
- end result just before the war was one of failure. With the end of the war,
Japan once more attempted to introduce administration by democratic princi-
ples, and it has put forth great effort in making it work. At the present
time, it is considered that the Japai:e.se democratic system has more or less
succeeded, but there are still a considerable number of people who are still
doubtful that real and permanent success has been demonstrated. In any
event, the introduction and transplant ~f an administrative system which was
developed in a strange cultural sphere is no ordinary feat.
The Japanese people since the war have put forth great effort to convert to
a democratic state. The Japanese were thoroughly indoctrinated with the
true nature of the democratic system through the educational system, and
the Japanese politicians have been functioning under the very strict ey~s
of the mass communication media. snd learned men. At the same time, the road
to democracy was continually advanced through the cea~eless efforts of the
Japdnese leaders and the people in gener_al. It is through such exceptional
determination and effort that it becomes possible to overcome the obstacles
of cultural differences to a certain degree.
= A problem which must not be overlooked is that the general American public
_ considers Asians and Asian culture to be something very foreign. Even those
Americans with no bias toward Japan tend to feel remoteness toward the Japan-
ese when some sg2cific incident involving something very close comes up.
Let us look at a few such examples. These includn_ Japane.se method of ex~pres--
sion--particularly the use of Chinese charac*_ers-�-the special accent when
Japanese speak English and the problem of grammar, the singular taste of
- Japanese food, Japanese etiquette and social relationships, Japanese culture
such as Noh and tea ceremony, and the custom of harakiri practiced by the
Japanese warriors. It is needless to say that a part of Japanese culture
including judo, haiku, and flower arrangement has found great favQr with a
segment of the American populace and is finding considerable expansion. On
the other hand, these trends are limited at the present time. Where the
average Americaxi is concerned, the Japanese and Japanese cuiture are some-
thing completely strange.
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The foreign feeling which stems fram such cultural differences becomes a
consid2rable hindrance when an American s eeks to learn something from the
~apanese. If there is excessive awarenes s of the presence of such an obsta-
cle, there is tendency to simply copy or even lose any desire to learn. The
- most effective way of removing this psychological barrier is to teach things
.Japanese through a basic education approa ch starting at childhood. The
structure of Chinese characters is complex and strange to an adult American.
To understand or to learn such a method of representation not only involves
- great difficulty but may be unthinkable. On the other hand, the situation
is different with children. Even the und erstanding of Chinese characters
will alter the feeling of remoteness a p erson may have toward Japanese cul-
ture.
Should such a line of thought be promoted, rhe end result will be that the
basic problems of the United States at the present time will be the rerecog-
nition of the American situation to accu rately grasp its deficiencies and
problem areas, understand and research good systems found in Japan and other
countries, and seek out solutions to the many problems which face the United
States. That is to say, there is need for a reinvestigation of the self
evaluation system and basic self contemp 1 ation.
_ There is no previous example of such a major switchover in the history of the
_ United States, but his has occurred in Japanese history. One such example is
the arrival of the American fleet under Admiral Perry near the end of the
Tokungawa shogunate. This incident made great impact on Japanese government
and military structures, and this impact was responsible for a reevaluation
of the Japanese situation at that time and a restudy of the Japanese value
system. One of the results of the studie s was the establishment of Japan's
- modern edurational system, and one of the important elements in this educa-
a � tional material was American in origin.
It is probable that at the present time the export of Japanese automobiles
to the United States will not have the impact on the American economic sys-
tem that Perry's arrival to Japan imparted to Japan. In any event, there
- is still very shallow knowledge of Japa~n where the United States is concerned
despite the appearance of texts such as that of Bogel. It may be proper to
_ tY:ink that there is need to alter ~=he bas ic education foundation for Amer-
ica's learned, educational specialists, and general public.
On the other hand, it may be that the present day American may in a certain
sense becoming to recognize the need for such a switchover in involuntary _
manner. The ma~or problems which the Uni ted States experienced over the
_ recent yzars such as the Viet-Nam war, th e Iranian incident, the Watergat~
incident, the FBI and CIA scandals, the worsening international trade
balance, the decline in productivity, the stagnant GNP, the galloping infla-
tion and high interest rates, and the dec lining living standards of the
average American all point to this eventuality. It is possible that the
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Ilnited States may in the near future follow the Australian example and revo-
lutionize its educational system in dramatic manner and introduce Japanese
related material to a considerable degree. The American educational system
may incorporate a degree of flexibility much greater than we anticipate.
A reasonable insurance contract involves the payment of a suitable fixed
insurance premium and the receipt in cash in the event a certain misfortune
should occur. On the other hand, the actual picture is that there is the
possibility that no misfortune will occur. If no misfortune actually trans-
pires, then the premium payments would be wasted. On the other hand, should
a misfortune actually occur, the premium payments will constitute future
looking investment. Where the present Japanese-American economic conflict
is concerned, the United States has wisely insured itself and is not entirely
unprepared. On the other hand, the United States is putting forth only a .
very small premium which is highly xnadequate. This is almost skin to water
on burning rock if based on the lines of thought expounded by Kahn and Bogel.
COPYRIGHT: Asahi Shimbunsha 1980
2267
CSO: 4105
.
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ECUNOMIC
JAPANESE AUTO INDUSTRY'S MOVE TO ALLEVIATE CAR TRADE DISPUTE
Automakers Plan Corrective Measures
Tokyo NIHON I:EIZAI SHIMBUN in Japanese 11 Jul 80 p 7
[Text] In the midst of the deepening Japan-U.S. and Europe car trade dispute,
the large scale Toyota-Ford tie-up has emerged. It is undoubtedly ::elpful
to dissolve the Japan-U.S. dispute, but is seems unlikely th at the massive
chorus of attacks by the U.S, and Europe against Japanese cars can easily be
alleviated. Following the Toyota Motor Company-American Ford tie-up, Honda
Motor Company which had already decided on advancing into Ohio, U.S.A.,
purchased a plant site on the lOth. In addition, Nissan Motor Company start-
ed an investigation on reducing the prodsction of cars to be exported to
England where criticism against Japanes~~ cars has been intensifying. All of r
these measures are being taken as a first move in anticipation of the esca-
lating talks about restricting Japanese cars.
MITI still analyzes: "The friction will not be eliminated unless the Japan-
ese side demonstrates self-discipline in export." The Japanese auto indus-
_ try, however, is moving speedily to avoid friction.
On the lOth, Nissan Motor disclosed that they were in the process of inves-
_ tigating a potential reduction of the production and export of cars to =
England. This step was taken in correspondence to the growing voice for
- restricting imports in ~ngland reflecting thp continuous expansion of
Japanese share (market share) in the auto sales in Englxind since the start-
ing of this year.
However, Nissan Motor maintains "It is presently at a stage of investigating
the base of production. When and how much to be reduced is yet undecided."
They are projecting to make the final decision by the end of this year.
Japan-U.S. trade dispute has been a great problem concerning cars. Recently,
. also in Europe, the rapid increase of Japanese cars is noted and this is
developitig into a problem. Especially in England, the percen tage of Japanese
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cars cutting into the domestic passenger car sales has reached 12.87 percent
this year compared to 10.78 percent in 1979. The Japanese and British auto
industries voluntarily had agreed: "The share of the Japanese cars shall be
contained at an annual 10 percent level." This agreement has been broken
now, contributing to the rising demand for restricting imported cars in
England. Also, there was an incident wherein Lord Privy Seal Gilmore who
_ attended the late Prime Minister Ohira's funeral requested "self-discipline".
Nissan Motors which dominates nearly one-half of. the Japanese cars exported
to England has started to investigate a potential reduction of the export of
cars.
Und.ersecretary Yano of MITI has officially disclosed MITI's view in regard to
the Toyota Ford tie-up issue on the lOth at a regular press interview: "We
welcome with open arms the movement toward coopers*ive production announced
by U.S. President Carter at the Japan-U.S. sunanit conference in May. If any
problems develop duri~g future negotiations, MITI will respond with consul-
tation and assist in putting the negotiations on the right track." However,
considering the present condition that lay offs (temporary dismissal) reached
300,000 workers in the American auto-industry, Undersecretary Yano forecasts
that this movement alone is not enough to appease the complaints on Japanese
cars, and stressed: "I would request each automaker to exercise self-disci-
pline in exporting cars to the U.S. lest the share of the Japanese cars
(market share) shall increase e}:~~~ssively."
Un~'ersecretary Yano also added: "Toyota explains that they are considering
cooperation with Toyo Kogyo on embarking on cooperative production with
Ford," suggesting that there was a good chance that Toyo Kogyo which had
already engaged in a capital tie-up with Ford, would join the Toyota-Ford
- cooperative production. Nontheless, he said: "This would hardly lead to a
reshuffling of the automobile industry in Japan."
Referring, furthermore, to the point that the expected Toyota-Ford coopera- _
tive production may be entangled by the U.S. anti-trust law, he stated: "We
hope they will conclude the negotiations with precautions against such a
development." -
Chairman Shohachi Hanai of Toyota Motor Company made a statement concerning
the Cooperati~Te Production Plan to be operated in the U.S. with Ford on the
lOth: "We discussed what we should do to solve the problems of mutual con-
cern. Concretely speaking, the talk will be bogged down after it shifts to
= the subject of business operations." He stressed that Toyota was willing
to make an effort together with Ford for the consolidation of the plan in
the future.
Concerning the talk between President Peterson of Ford and Toyota Motor
Company and Toyota Motor Sales Company held on 24 June, it is reported that
both sides frankly discussed focussing on the Japan-U.S. dispute. According
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to Chairman Hanai, "We are only in the stage of showing interest in each
other, but haven't reached a decision whether or not to start the relation-
ship," although they discussed the possibility of cooperative production.
He pointed out that there were many issues to be examined in the future.
However, Ford seems to be, from one aspect, interested in a speedy solution
due to belated small car development and the fuel cost restrictions imposed
by the U.S. Government. Fairly pointed talks were carried out at the center
- of the conference, for instance, Ford specified car models demanded in the
U.S. market and the number of cars to be produced.
President Ichiro Isoda of Sumitomo Bank who served as a mediator for the
Toyota-Ford tie-up held a press interview in Tokyo on the afternoon of the
lOth, and disclosed his view oM the purpose of adding Toyo Kogyo in this
tie-up negotiation.
President Isoda disclosed: "In order to avoid any arrangement which would
leave out Toyo Kogyo who has already been tied up with Ford, Ford and Toyota
agreed to form a joint concern comprising the three companies including
Toyo Kogyo."
Furthermore, "Participation of Toyo Kogyo is inevitable since those concerned
fear that the Toyo Kogyo-Ford tie-up would be weakened if Ford supported
Toyota as a partner more wholeheartedly." He added that the Sumitomo Bank,
acting as the main bank of Toyo Kogyo, injected its influence fmr the rebuild-
ing of Toyo Kogyo's business operation.
- He envisions that the concrete details of the tie-up "will be decided no
sooner than one year," and concedes: "The definite role of Toya Kogyo in
the three-company joint management will be defined after Ford and Toyota
mutually decide upon their functions first." However, "In the future, if
Toyota appro�aes, Toyo Kogyo may possibly have a share of the production area
to some extent," says Ishida, who emphasized the great significance of the
presence of Toyo Kogyo in the overall picture of the present tie-up negotia-
tion.
Move To Alleviate Car Trade Dispute
Tokyo NIHON KEIZAI SHIMBUN in Japanese 3 Jul 80 p 8 -
[Article: "Japanese Car Import Restriction by U.S. Inevitable"]
[Text] "I wonder if the U.S. Government who affirmed until very recently -
that they would restrict the import of f oreign cars will really change its ~
policy. There is nothing we can do now but watch its next move for a while
and wait for the decision of ITC (US International Trade Commission)"......
Leaders of seven Japanese autamakers who export to the U.S. such as Toyota
Motor Company and Nissan Motor Company, held a"Presidential Confer~nce" on
the 2nd to discuss Japan-U.S. automobile problems. According to the
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explanation of Managing Director Toshio Nakamura of the Association of Auto
Industry, who was among those who attended the conference, the climate of
the presidential conference was as follows: Compared to the recently accel-
_ erating auto-related anti-Japanese situation in the U.S., ~he Japanese
response was rarher "leisurely".
Of course, it is not a wise policy for the Japanese auto industry to put
itself forward to enforce voluntary restriction when the U.S. Government has _
nut yet indicated a definite request to Japan. Such a highly calculated
assessment characteristic of the auto industry may have bolstered the atti-
tude of the participants.
Nontheless, the position of the industry represen;:ed by "Not moving (toward
voluntary restriction) for the time being" is strictly facade. Aside from
- this official principle theory, the true feeling of each company is unitedly
expressed by the acknowledgement: "Some measures of restriction of exports
to the U.S. cannot be avoided." Although it is reported: "The question of
voluntary restriction in exports to the U.S. has never been discussed," -
(Managing Director Nakamura) at the presidential conference held on the 2nd,
this statement might have been issued for fear that this type of discussion _
might conflict with the U.S. anti-trust law and the Japanese counter-measures
- might be leaked out to the U.S. before they were required and implemented.
, On the back stage, it appears, there are exchanges of pointed opinions be- ~
tween MITI and the industry concerning the possible restrictive measures and
the corresponding export guideline standards.
On the other hand, the auto industry has its own reason for not intentionally
changing its apparent passive attitude of "waiting for a move by the U.S.
- G~vernment": the U.S. Government's political schedule holds the key to
forcasting future developments regarding this matter. The greatest point
of concern is what President Carter will choose as a policy against Japanese
' cars interpolating from the report c~mpiled by the U.S. Government Special
Task Force for Automobile Problems (Chief: Secretary of Transportation
Goldschmidt).
For the time being, it is not certain which of the following alternatives
President Carter will choose to take: (1) Send signals to the Japanese side
to direct her to move toward voluntary restriction; (2) Make a~move toward
acquiring the presidential right in order to enforce the restriction of -
Japanese cars by means of OMA (Orderly Marketing Practice). No matter which
he chooses or what reasons America gives, it cannot be denied that the
- dominant pr~nciple of the f ree trade doctrine which to date has been embraced
by the Carter administration will collapse. In consideration of the position
that has been taken, some in th.e auto industry hopefully expect that the
president might not go so f ar as to abandon the principle of free trade.
However, it seems America will undoubtedly press some sort of restriction
on Japan as they change their conventional trade policy, when considering
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heresay that the rival presidential candidate Reagan will choose to talk
about automobile problems and attack the Carter Administration at the Repub-
licar~ Party Convention on the 14th, June.
It is forecasted that President Carter's statement on automobile problems or
high request to Japan through diplomatic channels will be delivered in the
middle of this month. MITI and the Foreign Ministry are planning to start
investigating definite steps in expectation of the U.S. move. The auto
industry judges it to be extremely improper to move indiscriminately before
the go~ernments of both nations consolidate their attitudes from the point
of commercial negotiations. Moreover, MITI also seems to have reminded
- leaders of each company: "Even a proposal based on individual cooperation
such as self-discipline in exports shall be preferably restrained."
A leader of the industry admitted: "I can understand the hardship of Mr
Carter and the frustration of the U.S. auto industry which submitted to a
mass lay-off. Restrictions on exports to the U.S. are inevitable." This
_ leader also believes that the following conventional view will not change:
The share of Japanese cars in the U.S. (market share) will fall without fail
and the great ground for criticizing Jagan will disappear in the air when
the American 't~ig three' start to sell new small car models around the begin-
_ ni'ng of autumn. He emphasized that the measures taken now are strictly
temporary treatment ur.til then. Also, although some say that the ITC which
accepted the case presented by UAW (United Auto Workers Union) intends to
speed up the investigation of the damages inflicted by Japanese cars, the
results of the investigation will come out at earliest in the middle of
October. If President Carter moves toward restr~ction like OMA after the
return of the ITC investigation results, his action will be too late for
the schedule of the presidential election. Even from this poin~ of view, -
he definitely needs some measures to fill up the time.
- "Restriction is inevitable" is the mood prevailing at this time in the auto
- industry which has always issued aggressive announcements on this problem
although jeered as "ignorant of the political situation". This feeling is
partly attributable to the industry's preference to avoid the worst situa- `
tion like OMA. With any of the measures, exercise of a Trade Control Order,
restriction based on Import and Export Trade Law or MITI's administrative _
guidance, the operation of each company will not be greatly rocked if it is
handled through the form of voluntary restriction. The number of cars
exported to the U.S. in 1978 and 1979 were practically stabilized to
1,800,000 and 2,070,000. However, as an export level, they were very high.
It is estimated that this year's export to the U.S. will be the same as
last year, which is, however, a f igure that can only be achieved if each
company produces at full capacity. All of the companies are confident that
they can somehow manage this squeeze if the period for restriction is about
one year, assuming compliance with the export restriction guideline or 1978
or 1979.
~
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_ The question is what form will be taken to enforce export restrictions.
There are some ways to restrict exports, but each one has good and bad poin~.s
and may likely bring a scene where conflicts of interest disturb the industry
from within. For instance, the trade control order once exercised in 1973 -
might have been interpreted to have no limit to the number of export cars,
_ and the import export trade ~aw might have made the inauguration of the ex-
port cartel itself vulne-rable to the law suit by U.S. dealers charging for
_ nonfulfillment of supply. The voluntary restriction led by administrative
guidance of r1ITI and enforced in 1979 (hold down the exports to England and
the U.S. to the level of the preceeding year), is the mildest measure, but _
it is too optimistic to believE that this can win the consent of the American
side.
In the days to come, the auto industry will try to take more steps for re-
. striction through MITI's advice and guidance after Carter's announcements. ~
_ At any rate, their unanimoL~.s opinion is that they would like to avoid at all
costs the OMA which is h ighlv likely to prolong the restrictive period
_ (normally 3 years) and to affect the European nations.
~ COPYRIGHT: NIHON KEIZAI SHIMBUNSHA 1980
89 40
CSO: 4105
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h�U?: ur~Flc:iAt, uti~~; c?N~,v
ECONOMIC
TOYOTA'S COOPERATION WITH THE U.S. ANALYZED
Well-Calculated Decision Described
Tokyo NIHON KEIZAI SHIMBUPI in Japanese 11 Jul 80 p 1
- /Text/ The tie-up of Toyota Motors, the largest auto maker in Japan, and
- Ford, the world's second largest auto maker, and the cooperative production
plan for passenger vehicles to be pursued by the ~oint concern composed of
_ three companies, Toyota, Ford and Toyo Kogyo, sent shock waves through the
world's automobile industries. In the world's small car trade war which
triggered Japan-U.S. automobile friction, various forms of tie-ups and coop-
erative relations have been proved beyond the previous limits of capital and
national boundaries. The Toyota-Ford tie-up can be said to be the peak of
these trends. Therefore, let us look into the wily calculation of Toyota
which played the major role in the present tie-up drama, the direction of
the current Japan-U.S. automobile friction and a sketch of the international
scale reshuffling of the auto industries.
"Japanese automobiles will never be deemed guilty as a result of the lawsuit
presented in the ITC (International Trade Committee of the U.S.)" boasted
- Chairman Shoichi Hanai who acknowledged himself to be the "head clerk" of
Toyota Motors after tlie late Taizo Ishida (former president), and he has not
changed his inherent positive disposition even immediately after there
abruptly appeared a feeli:~g that an "Orderly Marketing Agreeznent is unavoid-
able", in conjunction with the instruction issued by President Carter in
Detroit immediately before t~~~ visit to Japan to the effect that ITC should
promote an investigation. His p:onouncement sounded as if "Toyota's dic- -
tionary contains no letters such as OMA".
Chairman Hanai's bullish attitude was not at all a bravado. His affirmative
expression was backed up by the tie-up with Ford. Ford has been way behind
not only rival GM (General Motors) but also European and Japanese auto
makers in the development of small cars, and their North American Division
has dropped into the red since last year.
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~ Ford, under the circumstances, started to indicate their intention to pre-
sent a case to the ITC working with the UAW (United Auto Workers Union)
aiming to regulate the import of Japanese automobiles. If Ford with their
- hidden influence over U.S. politics helped in appealing to the ITC, President
Carter could not ignore the case. Toyota had been secretly negotiating with
Ford for a tie-up, and those concerned in Toyota believe that Ford will not
join the signatories to the appeal.
- The Toyota side restricted the information relating to the tie-up agreed to
at this time. However, both MITI and Ford asserted that, "Toyota requested".
The story being told by the parties concerned in Japan and overseas goes
like this: Ford asked Nissan and Toyota if they were interested in buying
Ford Mahway Plant in New Jersay which was recently closed. Nissan imme-
diately declined this offer, but Toyota indicated interest in this deal and
sat down at the negotiation table. Toyota's cleverness is shown after this.
First, they attracted Ford by showing their interest in the deal, then they
counter-proposed the production of passenger vehicles through a~oint concern
during the process of the negotiation. They carried the negotiation at
Toyota's pace. Joint management is said to have been suggested by President
Eiji Toyoda. _
The story of the parties concerned continues even more. Toyota initially
planned to involve Ford in two-party ~oint production in the U.S. However,
the Sumitomo Bank who acted as a mediator for the capital tie-up between Toyo
Kogyo and Ford, strongly opposed this idea. Finally, Toyota compromised and
the deal was agreed upon under the condition that Toyo Kogyo would be in-
cluded in the joint venture. The Sumitomo Bank cautiously aborted the nur-
turing of the imperssion that Toyo Kogyo's influence would be lightened and,
in the long run, the impression that "Ford cut off Toyo Kogyo" by the ~oin-
ing of Ford with Toyota.
_ "In order to maintain free trade and friendship between Japan and the U.S., -
- Toyota should produce passenger vehicles in the U.S."..... MITI leaders
reiterated this rhetoric more often than we can remember, aiming to serve
as a trouble-shooter in the Japan-U.S. automobile friction. They tried again
and again to persuade Toyota, at one time, by inviting Toyota's "brains" to
MITI and at another time, by visiting Toyota's headquarters in Nagoya. Every
~ time they met, Toyota defiantly shook their head on the strength of "business
management theory and profit supremacy doctrine", and they did not change
their position of all-out resistance even when being criticized as "ignorant
of political situation" and slandered as a"hillbilly".
Finally, stubborn Toyota suddenly turned around. The timing was also excel-
lent. President Carter was in Japan to attend the funeral of the late Prime
Minister Ohira. The stage effect was perfect, and the title of the play
would be "Magnificent Turn of Toyota". However, this stage-show like trick,
they say, ma.terialized by a well-calculated assessment which could be only
attaifled by Japan's number one profit organization, and by the excellent
stage-management of MITI and Sumitomo Bank who saw through the ~ituation
Toyota was in. -
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The U.S, market is Toyota's life line. Some 617,000 cars, almost half of
Toyota's total export of 1,384,000 cars (1979) were exported to the L'.S.
Speaking of contribution to profit, it was far in excess of 50 percent. If -
a new plant with a monthly production of 10,000 were to be built~in the U.S.
by investing a huge sum of 200-300 billion yen, the export cars to the U.S.
would be reduced to three-fifths of the current figure by means of a simple
calculation. Taking into consideration the depreciation cost of the new
plant and the reduction in productivity due to unfamiliar overseas produc-
tion, the profit which had been realized in the U.S. would be further reduced.
"Toyota really thought of a tactful measure," said speechless President
Takashi Ishihara of Nissan Motors who in this rivalry had decided one step
ahead to make small size trucks in the U.S. Joint management requires only
half of the fund obligation, and the product quality will not deteriorate
- significantly if essential parts are sent from Japan. The greatest benefit
is that "few risks in labor management" which Toyota takes the most precau-
tioris against "is expected". (President Ishihara)
A source related to the business world pointed out, "In order to supress U.S.
pressure on Japan, we must first bring Ford over to our side, although the
securing of help from UAW and congress is equally important." Ford is the
acude cat's paw of criticism against Japan, and also suffers from aggravating
business performance. Because of these circumstances, the union between
Ford and Toyota with superb small car technology can demonstrate its effect-
_ iveness as serving two purposes, helping Ford and opening Japanese plants in
U.S. It is evidenced that President Ichiro Isoda of the Sumitomo Bank, an
old friend of the leaders of both Ford and Toyota, started to prepare the
ground work since May and MITI produced the timing and momentum for the
"announcement". At the beginning of this year, President Toyoda anticipated,
"I might be pressured into making an economically unreasonable decision,"
_ and his hunch turned out to be true.
It is not at all new for large industries to enter into joint management
among themselves. In the case of color TV sets which were driven into the
OMA due to the trade friction developed before the presidential election
~~~st as automobiles are ~he ptesent Ltme, Hitachi, Limited who's invest-
ment in the U.S. was initiated following tliat of rival makers, ~oined hands
with GE (General Electric) as a measure for their revival, and applied to
the U.S. Department of Justice for the establishment of a~oint concern.
However, due to entanglement.by the anti-trust law, this ~oint venture was
rejected and tragically cancelled.
The Toyota-Ford joint venture also must climb over the wall of this anti-
trust law. Nontheless, even if the venture is obstructed by this wall, the
effort will firmly implant in the minds of American~ the impression that
"Toyota is willing to invest money in the U.S."
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Toy~ta also has a plan ready in case the idea of the joint venture turns into
nothing not because of the anti-trust law but because of a possible disagree-
ment with Ford in future negotiations. Toyota has not withdrawn the investi-
~ gation commissioned to three Japanese and American think tanks in order to
obtain information useful in deciding whether or not to bring their business
operations into the U.S. If worse comes to worse, it can advance into the
U.S. independently based upon the results of this investigation. This report
is useful for future negotiations with Ford even without considering the
worst that could happen. The fee for the investigation amounts to one mil-
lion dollars, but the money will not be wasted whatever happens to the deal.
HIST'ORY OF TOYOTA-FORD RELATIONSHIP
1933 autumn: Founder Kiichiro Toyoda started to make trial models of ,Tapan-
ese automobiles, using Ford automotive parts.
1935-38: Negotiations for a Toyota-Ford tie-up were held repeatedly, but
none of th~m worked out.
1950, June: Shotaro Kamiya then president of Toyota Motor Sales (currently
honorary president) visited Ford. He started negotiations for technical
_ cooperation, but the negotiations were interrupted by the start of the
Korean War.
1950, July-Dec.: Executive Director Shoichi Saito (current consultant) and
Director Eiji Toyoda (current president) went to Ford Company in the U.S.
to attend a training course.
1951, February: 5 year plan for "Production Equipment Modernization" was
projected based upon the learnings from the inspection tour of Ford _
Company.
1951, June: "Idea and Device Proposal System" was introduced with reference -
to "Ford's Suggestion System".
1957, October: Toyota Motor Company, Toyota Motor Sales Company and U.S.
Toyota Sales Company were established.
1958, July: Passenger car export to U.S. started.
1960: Encouraged by the free trade policy of the government, negotiations
for business tie-up were pursued, but collapsed owing to unnegotiable
conditions.
1977: Ford Company contacted Toyota affiliated parts maker for purchasing
of Ford small car parts.
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1978, June: Chairman Ford II of Ford visited Toyota Motor Company (Toyoda
city) for the first time.
- 1980, June: Both companies basically agreed upon Toyota-Ford tie-up.
Global Strategy, Its Impact
Tokyo NIHON KEIZAI SHIMBUN in Japanese 13 Jul 80 p 1
~ /Text/ "Advocating protectionism is not what is needed to cope with the
situation. America must learn from Japan who is an expert in exporting manu-
factured products, and compete against her efficiency in the international
, market. Otherwise, America will drop to third among industrial countries in
the 1990s following Japan and West Germany".........
Thomas A. Murphy of the world's greatest auto-maker GM (General Motors) who
~ renewed his overseas sales record for a continuous 4-year period stated the
_ above at the end of an announcement of its remarkable achievements in the
spring of this ~ear. Last year, GM sold 1,870,000 cars in the overseas
markets alone, excluding the U.S. This figure is just about equal to the
number of cars exported from Japan to the U.S. GM's willingness to discard _
protectionism and to stand for free trade attributes to nothing but the
logic of the strong.
Taking advantage of the first oil crisis, GM initiated a massive a~gressive
attzck in the international market. The company gave chase to American Ford
who had been one step ahead in international strategy, and attempted to
sweep Japanese and European auto-makers who mutually shared the control of
~ the international small car market. "World Car Concept", which is supposed
to assemble one million cars per one model by delivering parts from GM fam-
ilies scattered in every nation in the world, has become the target. Need-
less to say, the challenge by the giant GM shook Japanese and European
auto-makers. This threat made Toyota Motor Company utter, "It may not be
as threaten~;ng as to wipe us out, but GM is truly devilish" (Chairman Shohachi
Hanai), and even former Chairman Ford II was astounded, "The GM cyclone is
_ acting up".
The GM attack further escalated. Chairman Murphy proclaimed at t~e general
meeting of shareholders in late May: we will expand equipment investment
in the next 5 years from 38 billion to 40 billion dollars (approximately 8
trillion yen), and increase the small car production capacity approximately
S times over the current figure to over 6 million cars by 1983". This move-
ment is a good contrast to that of Ford suffering from dei:eriorating business
performance which, on the contrary, forced the company to take a sizable
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reduction in equipment investment relating to development and production of
small cars. It is truly a wonder (menance) that GM shows an attitude and
_ composure enabling it to go for an all-out attack with its mighty capital
power during this unprecedented auto-market slump.
- "In order to survive against GM, ther~a is nothing we can do but join hands
with one another beyond the realm of nationalities" (president Yoshiki
Yamazaki, Toyo Kogyo). This notion has become a common understanding of
the world's auto-makers. It also becomes the chart of the international
scale auto-~ndustry reorganization.
Toyota-Ford Small Car Cooperative Production Plan has great significance as
the peak of an international reorganization drama in addition to its impor-
tance as a first step toward the solution to the Japan-U.S. trade friction
and the multinationalization of Toyota. Realization of the large ~ize tie-up
between the world's second and third companies, will ignite an immediate
surge of ripe opportunity for tie-up among the Japanese and European auto-
makers. Especially European makers cannot quietly overlook the marriage
between American and Japanese companies. -
Chairman Giovanni Aniel of Fiat, the largest Italian auto maker, recently
disclosed that they are promoting a"Cooperative Parts Production Plan for
six European makers". The six companies include BL (former British Leyland)
of England, VW (Vo~kswagon) of West Germany, Renault Public Corporation of
France, Peugeot Citroen of France and Volvo of Sweden in addition to Fiat.
The six companies just finished concluding a"Joint Research and Cooperation
Agreement" in the spring of this year. The new plan is intended as an
expansion of the said agreement.
"If parts like speed change gears are standardized and mass-produced among
the European makers, the price can be reduced. Without solidarity in such
an aspect, European makers cannot cope with the aggression by Americ~ and
Japan" (Chairman Aniel). This sense of threat lies in the root of such a
_ "EC (European Communities) Aliiance Plan". To the European makers, not only
GM but also Ford ana their current enemies, and the greatest threat is the
aggressive export tactics used by the Japanese makers. The Japan-U.S.
alliance will be an undefeatable competitor.
Here is an interesting story. This March, a secret document compiled by a
certain investigation company was distributed to the leaders of West German
auto makers. In the text, a following shocking report was said to have been
contained, "There is no guarantee that the West German auto makers can
continue to exist in the latter half of the 1980's. It is because the
Japanese makers will conquer the international market by 1990." An influ-
ential West German paper which printed this story analyzed lt as, "Aggres-
_ sion of Japanese cars in Europe is also a result of the "expatision of
armaments" by the giant American makers."
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Some tie-up dramas were played in Europe in the past year. Renault Public ~
Corporation concluded a capital tie-up agreement with American AMC (American
Motors) and American Mack Company, and it also made a capital participation
agreement with Sweden's largest industry, Volvo. The world's number five
Peugeot Citroen extended their hand to help the dying American Chrysler.
Nissan granted emission gas technology to Peugeot. Additionally, Fiat and
Peugeot are presently negotiating for a tie-up. There is no question that
greater tectonic movements will occur in the future.
The Toyota-Ford tie-up also had a severe impact on the domestic automobile _
- industry where 11 finished auto-makers are competing against one~another.
, Nissan Motors concluded a capital participation agreement with the Motor
Iberica of Spain, and is negotiating for a tie-up with Italian A~fa Romeo.
A leader of Nissan Motors commented with a serious look on his face when
he heard about the Toyota deal, "It's hard to believe." President Takashi
Ishihara managed to lighten the importance~of the news, "Toyota goes her
way, and we go our way", but his true feeling may be, "Why above all with
- Ford? I thought Toyota was a champion of nationalism....."
Although the automobile industries experienced a large scale reorganization
due to the rough waves caused by the liberalization of capital transactions, -
it is again fn the same mud, "we cannot predict what happens in 1980's. We
cannot see an inch ahea~l." (a.leader of a maker with foreign capital) It
is possible that the current following chart may be repainted: The two
strongest, Toyota and Nissan, in the center, Honda Motor Co. gofng her -
' itidependent way on ths periphery, three companies, Toyo Kogyo a~filiated
e~ith foreign capital, Mitsubishi Motors and Isuzu Motors in the third power,
and two companies, Daihatsu Kogyo and F'u,ji Heavy Industries in the Toyota
and Nissan groups respPctively.
Toyo Kogyo and Mitsubishi Motors will be in the eye of the hurricane. The
position of Toyo Kogyo turned extremely delicate after the Ford-Toyota
alliance. Although Toyota (President Eiji Toyoda) places Toyo Kogyo as "a
member of Ford group", the relationship between Ford and Toyo Kogyo cannot -
be said well established only in a year or so after the capital tie-up. It
is understandable that the Sumitomo Bank, the main correspondent Bank of
Toyo Kogyo is strongly cautious about Ford's liberation from Toyo Kogyo.
"~~so, Mitsubishi Motors shaken hy the Chrysler's operational crisis will
have difficulty in fu*ure steering. They have intensely followed Toyota
and Nissan in both domestic and overseas markets, but now they are at a
standstill harmed by the relation with Chrysler. They tried to find a way
to operate without Chrysler, but it is not certain whether or not they can
survive the future merciless small car war even if they can find their own
way, Honda style.
31
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It is highly calculable that second and third tie-up dramas following Toyota-
- Ford will be staged on an international scale. From now on, the Japanese
automobile industry for the first time after the war will enter into an era
of troubles both at home and abroad, specifically, "Sales tapering-off in
the domestlc market, and sales stagnating in tt.~ international market".
Giant GM stands in cur way, the EC alliance line against Japan and the na-
tionalization policy of the developing countries which aim to block the
finished car exports, a specialty of Japan, are actively in mation. The
environment that surrounds the Japanese automobile indusr.ry is starting tec-
tonic fluctuations which cannot be coped with by any existing cor.cepts.
If the 1980's auto industry is the place where makers join hands with one
another beyond na~ional boundaries and the fenses of capital affiliations
and the iron-clad rule of winning or losing is girsued in this grouping
- process, the Toyota-Ford tie-up has truly opened the curtain for an inter-
national reorganization.
INTERNATIONAL RELATIONSHIP CHART OF AUTO MAKERS
_ - - _
~~-~i-o~ti1l~A~IE~ ~a~~: (5)~
~3~ � ~ G M F V W:~~4
~ ~I~~~
(2 h 39 ~ 7x-K ~ 7"�i3 (~4) h~ ~
(
g e~@1~. !i./- (!l.) ~ 11)
~ ~~1! ~ g) e L 12)
I' ~ - _ ~ -
~ ~ _ ~1{,~ ~~t~i- ~'I (~7 f 15)
i~ * ~ ' I~I' _r~tG _ 1 t~ 7TTih (~8)
~ I
' ~1~77 � 0,~7r � ~
19 ~ I (f~3 ~
' - .-`-~J j ~ P-~ ~ -f~c?h� ,
-
- ~~~~~rl) 21~
(2 t~~~~ - - ` 'Sr7.(~1'~�rSr} .(22)
,
~
~~~~t f~iIP~~4' 0 4F;~ (~tl~Ptt9~EplY~~. ~I,~,
(24) (25) (2b) (27) (28)
KeX~
1. Japan
_ 2. Cooperative Production Plan
4. America
S. Europe
6. VW (West Germany)
7. Ford
8. Nissan
9. Japanese automatic speed exchange gear
10. Peugeot Citroen (France)
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11. Renault (France) 21. Motor Iberica (Spain)
12. BL (England) 22, Doff (Holland)
13. Toyo Kogyo 23. Yamaha -
- 14. Chrysler 24, capital tie-up
15. Volvo (Sweden) 25, business tie-up
16. Mitsubishi 26, technical tie-up
17. Honda
18. Fiat (Italy) 27� ]oint venture
19. Isuzu 28~ Each arrow indicates the direction
20. Alfa Romero (Italy) of capital subscription and tech-
nology given.
COPYRIGHT: Nihon Keizai Shimbunsha 1980
89 0
CSO: 4105
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ECONOMIC
JAPAN'S CA.~ EXPORT RESTRAINT WILL NOT HURT ITS ECONOMY -
Tokyo SHUKAN SHINCHO in Japanese 10 Jul 80 p 27
[Article: "The State of the Economy and "Japan-U.S. Friction" Relating to
the Auto Industry: Some Hold That a Limited "Recession" May, in Fact, be
Beneficial"]
[Text] A sudden collapse ~f the auto industry would undoubtedly lead to
devastating disorder on a major scale.
Last year, at any rate, the industry produced one million cars, and that,
combined with the output of related industries such as rubber and gasoline
as well as subcontractors in the iron and steel area, makes it by far the
largest industry in Japan.
Things may not reach the tragic levels of the 20's and 30's when families
were forced to sell off their own daughters, but there is little doubt
that unemployment would become rampant and society would be plunged into
tumult.
- Of course, a panic of such dimensions is not likely to occur overnight, but
for the time being a major intensification of tensions has occurred within
the auto industry because of the question of Japanese exports to ~he U.S.
Newspapers are alive with headlines reading, "Japanese-U.S. Friction Over
Auto Exports: An Atmosphere of Unrest;" "Self Regulation Inevitable," and
weekly news journals print articles projecting, "Unemployment figures of
50,000 workers." ~
"For all that, we do not forsee any panic," an official of a certain auto -
maker said, l.aughingly. But then, a concerned expression on his face, he
added, "It's an emotional issue for the U.S., so it is possible a govern-
ment level agreement on export figures may be reached by the end of the
year. Such an agreement made three ye~rs ago with respect to color televis-
ion exports zesulted in reductions in exports of about 30 percent. Any
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reduction in auto exports would have to be absorbed directly because domesti.c
sales over the last 4 months are dowi~ from last year, and other export mark-
ets will not help because we have friction with Europe and the Middle East
market is limited." -
Still, some now seem intent to reprimand the Japanese Government for its
tendency to empnasize the crisis and to acquiesce to U.S. demands. One
wonders, nevertheless, what would happen were exports to the U.S. cut by 30
- percent. At present, slightly under 50 percent of automobile production is
- for the export market, and of that some 40 percent is destined for the U.S.
In short, there would be an overall reduction of some 6 percent.
In the words of the executive quoted above, "A reduction of 30 percer,t over
a 1 or 2 year period would be devastating. But with determination we could
survive. We are far from calling for voluntary retirement. We are now
operating at full capacity, so there is roam for a fall in productivity, and
some of the fat we tri~ned during the oil crisis has reappeared. We can
afford to drop that."
Economic experts generally, however, anticipate no need for governmental
agreements resulting in large scale reductions in exports.
At any rate, Japanese automobiles are at a premium among U.S. consumers,
causing dealers who handle Japanese cars to threaten Japanese makers with
breach of contract suits if they reduce supplies. Besides, economic condi-
tions in the U.S. will hardly allow for tk~e locking out of the inexpensive, _
fuel efficient Japanese auto, whether fram the standp~int of anti-inflation-
ary cneasures or the preservation of energy.
Thus, experta-believe a self-imposed reduction of about 10 percent in exports
to the U.S. will be sufficient to placate the U.S.
Consequently, that reduction, coupled with the general decline in exports
to the U.S. brought on by the economic recession there, will likely make a
slowdown in the Japanese economy unavoidable. Neverth eless, through unem- -
ployment rolls will swell, there is little chance we will see any ma~or -
recession.
"Indeed, such a slowdown may be ideal economically," the chie� of research
at a metropolitan bank has said. "Currently, willingness to invest in
equipment is strong, with many induatries operating at full capacity. Con-
tinued activity on the current level could lead to inf lationary conditions
fed by a diminished ability to keep up with demand. Hence, an economic
recession is j~ist what we need at the moment because it would bring a
reduction of 2 or 3 percent in the current 6 percent growth rate as well as
_ price stabilization."
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Be that as it may, as long as the Japanese produce a superior product we
can expect a recurrence of Japan-U.S. friction related to auto exports. In
such an event, if we are to continue to stand for free trade, it a~pears
inevitable th at we move in the direction of "international division of
labor," though it means such measures as liberaliiation of food imports or
increased sid to developing countries.
COPYRIGHT: Shinchosha 1980
9369
CSO: 4105
- END -
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