Trade: Blame It On Japan

By Barbara Rudolph

The 11 men and women who sit on the Los Angeles County Transportation Commission had a simple, straightforward assignment: determine which of two competing bidders, Japan's Sumitomo Corp. or Idaho's Morrison Knudsen, would do the best job manufacturing rail cars for the county's new transit system. In mid-December the commission voted 7 to 4 to award $122 million to Sumitomo for the job. But that was before President Bush made his ill-starred trip to Tokyo to wrest trade concessions from the Japanese and a shrill chorus shouting "Buy America" began to drown out all others on the L.A. commission. "No loyal American would hand over that contract to the Japanese," said Nate Holden, an L.A. city councilor. Last week the commission yanked the contract back from Sumitomo in a bald effort to save American jobs, and in a move almost certain to complicate the situation, Los Angeles tentatively decided to get into the rail-car manufacturing business itself, with an option to construct a $49 million factory. All contract winners will be required to keep 70% of the labor inside the U.S. and fully 60% within the borders of Los Angeles County. Crowed city councilman Joel Wachs: "This will reverberate around the country."

When Hiroshi Yamauchi, the president of Nintendo, bid $100 million to buy the Seattle Mariners baseball team last week, baseball commissioner Fay Vincent all but dismissed the offer, saying it was "unlikely that foreign investors" would win approval. Although by week's end Vincent had softened his position, his initial reaction reflected the nation's mood. In Japan- battered Michigan, where antagonism runs deep among autoworkers, U.A.W. Local 900 in Wayne made its own small stand for America last week, pushing foreign cars to a back parking lot at the local Ford plant. Around the nation, companies are offering incentives to workers who buy American cars. Monsanto, for example, will pay $1,000 to every one of its 12,000 workers who buys a car made in North America (or in one of Japan's American factories, such as Honda's Ohio plant or Nissan's Tennessee plant).

Much of the resentment, of course, is fueled by the seemingly endless recession. Bush's Tokyo foray, in which the enduring -- and symbolic -- image was of the American President collapsing into the lap of the Japanese Prime Minister, intensified American feelings of anger and humiliation. Pat Buchanan, whose New Hampshire stump speech includes numerous nods to his isolationist "America First" economic platform, fans the flames. "We're on a wave of Japan bashing that is much more serious than in previous years," concludes I.M. Destler, a visiting fellow at the Institute for International Economics in Washington.

The growing enmity is not entirely one-sided. Yoshio Sakurauchi, a veteran politician who heads the prestigious but largely ceremonial post of speaker of Japan's House of Representatives, said last week that "the root of the ((trade)) problem lies in the inferior quality of U.S. labor. The American worker doesn't work enough but wants high pay. About one-third can't even read." (In fact, about 15% of the adult work force would be considered functionally illiterate, meaning that they are unable to adequately perform in their job.) Stooping to Sakurauchi's level of discourse, Michigan Senator Donald Riegle shot back, "His attitude in slandering American workers was the same view the Japanese held the day their warplanes struck Pearl Harbor. Their arrogance was gone by 1945 when they learned the full measure of America's capability."

The Japanese seem ambivalent about the escalating tensions with America. "Japan's view of the U.S. is in a dangerous balance," says Yukio Okamoto, a former Foreign Ministry official who heads his own consulting firm in Tokyo. "The feeling that Japan needs to cooperate with the U.S. still remains strong, but at the same time there is a sense that the U.S. is being selfish and blaming everything on Japan." To a large extent, Japanese who lived through World War II, now in their mid-50s and older, feel indebted to the U.S. People in their 40s tend to be the corporate warriors, who wonder why they are criticized for working so hard. Only Japanese under 40, who grew up with American rock music and Hollywood movies, identify with American criticism of their country. Says a 30-year-old management consultant: "Even if what the U.S. is saying seems unreasonable, we can understand that we are disliked because we work too hard to go to the head of the class."

The waters between the U.S. and Japan were further roiled by the latest trade statistics, which show a dramatic jump in Japan's overall trade surplus, up 84% to $78.23 billion for 1991. But while the numbers gave some Americans a ready excuse to decry Tokyo's trade practices, in fact Japan's surplus with the U.S. alone increased by a modest 1%, to $38.45 billion. Since 1987, the U.S.-Japanese trade gap has actually narrowed by nearly $14 billion.

While there is little doubt that many Japanese companies continue to pursue an aggressive export strategy, it is far less clear whether their home market is rigged against foreign competitors, as their critics charge. Many American executives argue that Japan's interlocking company relations and complicated distribution system pose an unfair burden to red-blooded American business. Why, they ask, do three Japanese glassmakers control nearly all of the $2 billion sheet-glass market in Japan despite efforts of American producers to sell quality products there? A recent study by the American Chamber of Commerce in Japan concluded that an exclusionary distribution system is just one of many problems facing foreign companies in that country, where real estate is expensive and labor is in short supply. Still, the Japanese market has become increasingly open to foreigners.

) No mainstream economist believes that the kind of full-blown protectionist response demonstrated by Los Angeles last week would do anything beyond saving some jobs in the short run. Ultimately, most contend, consumers would pay the price of a trade war, with scarcer and more expensive imports.

In any event, the American and Japanese economies are inextricably linked. The U.S. could not manage without Japanese capital to help finance its budget deficit. Nor could Japan prosper without an American market in which to sell its high-quality consumer goods. Most American politicians and businessmen understand that a system of free and open trade remains the best bet for global prosperity. But when American workers feel besieged by the Japanese, that rational message is drowned out by a chorus calling for retribution.

With reporting by Dan Cray/Los Angeles and Barry Hillenbrand/Tokyo