The American Debate about Japan

CHAPTER EIGHT

FOR Australians seeking to divine possible directions America may take, the American debate on Japan is a very useful weather-vane.  The Japan debate has become especially important in shaping American foreign policy views.  But more importantly -- judging by the oceans of media ink and of Congressional vitriol that are expended on it -- this debate is forcing an inward re-examination of American domestic policy priorities.  From this premise, several points are worth making.

First, this debate has become a prism that is refracting old ideological alliances.  The debate gives new life to old economic arguments, which have long-term negative consequences.  The primary impetus for this debate is the revisionist school of Japan scholarship.  Authors like former Commerce Department official Clyde Prestowitz, Dutch journalist Karel Van Wolferen, and American journalist James Fallows have popularised a new way of viewing Japan. ⁽²⁶⁾  Gone are the days when Americans viewed Japan as merely a diligent and hardworking country, with very bright bureaucrats planning and leading the way.  Revisionists paint a picture of an almost organic Japan, that preens its élite, fosters vertical and horizontal economic collusion in relentless pursuit of market shares at the expense of individual happiness, and shows little central capability or desire to restrain its economic expansion.  If uncontrolled, this view holds, Japan eventually will gobble us up.

One negative consequence of this debate has been to give intellectual legitimacy to new methods of demonising Japan.  Many revisionists regard economics as Japan's chosen form of warfare, in which few activities are judged to be unfair.  In Washington, DC, this view of a Japan at "war" with the United States gained popularity during a 1988 scandal, involving a Toshiba Company subsidiary selling technology to the Soviets which endangered American submarines.  The trend has grown to include books ranging from Pat Choate's list (in his book Agents of Influence) of Japan's lobbyists, to George Friedman's and Meredith Lebard's book The Coming War With Japan -- a best-seller in Japan. ⁽²⁷⁾  So Japan's image starts to approach that of the former Soviet Union:  it not only seeks to undermine our economic strength and political institutions, but eventually will become a military threat.  American and Japanese differences are so fundamental that they are irreconcilable.

Perhaps the most damaging result of this trend has been to polarise most debate on Japan, especially in the US Congress.  The inevitable result, proven by repeated public opinion polls in America and Japan, has been to increase mutual mistrust.  This trend is most unfortunate because it first appeared at a time when the Bush Administration was pushing Japan to redress an older problem:  the need to have Japan accept a greater degree of the burden of supporting global peace.  Resentment over Japanese unwillingness to share this burden reached a high point during the Gulf War, but had been building for more than a decade, due to the growing trade imbalance, while at the same time American military forces largely insured Japanese security.  It has been hard enough for Washington to push Tokyo to accept greater global responsibility, be it paying for supporting Coalition forces during the Gulf War, or adopting the new Peace-Keeping Operations (PKO) law which now permits Japanese military forces to support United Nations peace-keeping ventures.

ATTACKS ON FREE TRADE

Another problem with revisionist debate is that it has helped accelerate the break-up of Cold War ideological coalitions, which is most evident in the new degree of attacks on free trade in both major American political parties.  Support for a liberal global economic order, once an unquestioned complement to anti-communist containment, is under sharp attack from the Left and Right.  The revisionist alternative to free trade that receives the most attention is called "Managed Trade," and its most forceful advocate is Clyde Prestowitz.  His argument is that a vibrant manufacturing sector is critical to American economic and political security, and that the US cannot allow Japan to dominate market after market.  The fairest solution, in his view, is simply to negotiate, item by item, the percentage of market share Japan and the US will allow each other to have.  He contends that with Japan's agreement to voluntary export limits, the US and Japan already manage trade in automobiles.

Despite the damage caused by these voluntary automobile export restraints -- higher prices, lack of incentives for industry to modernise -- America has survived.  But what about the long-term implications?  In a sense, managed traders are moving in the direction of the failed Comecon of the Soviet Bloc.  And while the US can juggle billions of this and that with Japan, what about the rest of the world that depends on access to the American market?  I shudder to think of the consequences for an ally like Australia, were its economic growth and vitality to be determined by trade bureaucrats in Japan and America.

Now, if Washington were to become seized with a protectionist and managed-trade agenda, the Japanese have an alternative.  They can retreat into an Asian trade zone.  That course of action already has a cheer-leader in the shape of Malaysia.  Such an Asian trade zone would pose a threat.  It would detract from possible American economic growth, and perhaps create the basis for greater political competition between Tokyo and Washington. ⁽²⁸⁾

Yet we have seen lately politicians in both American parties use Japanese economic competition to challenge free trade and begin movement toward managed trade.  The Democratic leader of their House of Representatives wants to legislate specific percentage annual reductions in their trade imbalance with Japan.  As if he can wave a magic wand ...

But perhaps the most interesting challenge to free trade is coming from conservatives like Patrick Buchanan.  His challenge to free trade stems not so much from hard economic analysis as from populist reaction to Japan's economic success and their economic recession.  His view is that free trade does not work when, as he contends, in the case of the North American Free Trade Agreement (NAFTA), American jobs will be exported to Mexico. ⁽²⁹⁾  Ross Perot has also opposed NAFTA, using similar reasoning, as he has also sought to make an issue of Japanese influence peddling in Washington, and of the erosion of the US manufacturing sector.  So, the Japan debate has been an important catalytic ingredient, along with many others -- like the decline of the Soviet Union -- in prompting troubling shifts in the American political landscape.

WHAT WE OWE TO REVISIONISTS

Professor Ivan P. Hall makes the very valid point that the revisionist debate has lifted many veils of secrecy which the Japanese have worked hard to protect. ⁽³⁰⁾  For this service, the revisionists are to be thanked.  Their work makes possible a more honest dialogue with Tokyo.  An early policy conclusion drawn from the revisionist logic was that they must urge the Japanese to begin to change their economic structure.  This is the basic goal of the three-year Structural Impediments Initiative (SII).  SII is making slow progress;  to date Japan has agreed to increase infrastructure spending, customs processes have been speeded up and small store owners can no longer veto large American stores.

These small gains do not yet mean the end of the Keiretsu (vertical corporate alliances) or Dango (collusive bid-rigging);  but, as former Under-Secretary of Commerce Michael Farren has noted, "We have permanently changed the way we approach US-Japan relations." ⁽³¹⁾  Japan will have much more difficulty in using cultural "uniqueness" as an excuse to retain economic barriers.  For example, the Japanese insistence on avoiding litigation for reasons of preserving social harmony is now under scrutiny, as SII-related talks focus on why Japanese judges rarely favour the plaintiff.  In these talks Japanese lawyers are on the side of American lawyers.  Another positive sign that Japan is reacting to this new level of scrutiny can be found in the recent statements by Sony Corporation Chairman Akio Morita, indicating his desire to see mega-corporate Japan increasingly follow profit motives over territorial/market share motives.

There is already much debate regarding the issues to be taken up by Son of SII, or SII-Two.  Also, there is much interest by other countries, like Korea, in joining the SII dialogue with Japan.  Might Australia want to join the process?  The reassuring conclusion is that so far, a sophisticated dialogue is the basic means chosen to resolve Washington's fundamental complaints with Japan.

Another reassuring result of the revisionist debate has been its role in turning the balance of Washington's policy focus toward domestic issues.  The other side of the SII process is that Japan can also criticise America's shoddy infrastructure, low savings rate, and lack of resources devoted to research and development.  Such a domestic preoccupation is correct given serious social and economic problems, though the shift in attention is not entirely due to the SII.  The shift of predominant attention to domestic concerns began in earnest following the collapse of Communism in Eastern Europe.

The danger in this shift of focus is that it has provided new opportunities for American liberals, and most revisionists, to promote big-government policy solutions.  For example, a common revisionist response to the paucity of R&D is that they need a Department of International Trade and Industry, a DITI, to match Japan's MITI (Ministry of International Trade and Industry).  Conservatives, however, have not remained silent.  Three years ago conservatives battled successfully a campaign for heavy subsidies to domestic High-Definition Television (HDTV) industry, to compete with the Japanese.  The issue of whether to subsidise a new domestic industry has faded because the market moved elsewhere;  HDTV is being supplanted by digitalised communication networks, which hold the possibility of linking data banks, telephones, television sets, and computers. ⁽³²⁾  And here, government helps the most by fostering deregulation and otherwise staying out of the way.

A third reassurance worth mentioning is that one of the main themes of the Japan debate -- who is stronger, who is better? -- has received a good deal of attention.  Public opinion polls reflect a growing level of anxiety about Japan, but the debate has also included a fair review of Japan's weaknesses.

THE US-JAPAN SECURITY RELATIONSHIP

The American security relationship with Japan remains strong, despite a decade of criticism.  It became a popular political whipping-boy in the US Congress during the late 1970s and the early 1980s, when Japan's trade surplus began to increase vastly.  The response that for the most part satisfied Congressional critics was for Japan to pay an increasing percentage of the cost of maintaining American military forces in Japan.  Today, Tokyo pays practically all costs associated with keeping American forces in Japan, except their salaries.

Few in Washington think that Japan should be encouraged to seek a military posture beyond its current supporting role for US air and naval forces.  True, libertarians are at the forefront of those advocating American withdrawal from Japan, and also are now suggesting that a nuclear-armed Japan is not a threat.  Yet it can safely be said that they hold a minority view.

And it is a fair observation that the end of the Cold War has not diminished Washington's importance to Tokyo:  quite the opposite.  Japan's neighbourhood has become less secure, with events becoming more fluid on the Korean peninsula, and prospects for increasing instability on the Chinese mainland, not to mention Russia.  American strategic engagement to defuse potential flashpoints in Asia and the Middle East will continue to be the major element of Japanese security.  Finding effective (though less expensive) means to sustain continued American engagement is the current challenge for Washington and its allies.

CHALLENGES FOR AMERICA AND AUSTRALIA

As a conclusion of sorts, it is worth noting that America's debate on Japan poses challenges for Australians and Americans.  First there is a basic need to defend and expand support for free trade.  Australia is doing its part though the slashing of tariffs and subsidies, and by its free-trade agreement with New Zealand.  It would be very helpful for additional pressure to be placed on APEC to consider more radical free-trade agreements.  To begin that process, Australia should lobby to join the NAFTA.  Far from prompting a negative reaction in Asia, excepting Malaysia and Japan, the opposite might pass.  Joining the North American market would, in the short term, turn Australia into an investment magnet of sorts.  It would not be long before others wanted to follow Australia's example.  Such a future would hold much potential.  Australia might get freer trade faster than the GATT promises, perhaps be able to put American agricultural subsidies on a real bargaining table, and avoid becoming a supplicant in a Japanese-led trade zone.

A second challenge concerns devising novel means for strategically enveloping Japan, so that if the level of American military forces in Asia continues to decline, Japan will continue to feel secure enough to forego extensive rearmament.  One possible means of doing so would be to expand co-operation in strategic missile defences.  The same geostrategic reasons that drove Japan to try to isolate Australia 50 years ago would also largely justify the placing of an Asia-Pacific Strategic Defence headquarters in Australia:  Australia remains a strategic redoubt for the West.  Let's envelop Japan with satellites, laser communications and space-based defences.  In time, they might become as comforting as the US Seventh Fleet.

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ENDNOTES

26.  A short list of revisionist works includes:  Clyde Prestowitz, Trading Places:  How We Are Giving Our Future To Japan and How To Reclaim It, Basic Books, New York, 1989;  Karel Van Wolferen, The Enigma of Japanese Power, Alfred A. Knopf, New York, 1990;  James Fallows, "Containing Japan," Atlantic, May 1989, pp. 40-54;  and for "revisionism" as fiction, see Michael Crichton, Rising Sun, Alfred A. Knopf, New York, 1992.

27.  Pat Choate, Agents of Influence, Alfred A. Knopf, New York, 1990;  George Friedman and Meredith Lebard, The Coming War With Japan, St. Martin's Press, New York, 1991.

28.  See "How Bush Can Prevent Creation Of An Asian Anti-US Trade Bloc," Heritage Foundation Backgrounder Update #169, 31 October 1991.

29.  See "Right and Wrong," Far Eastern Economic Review, 20 February 1992, p. 15.

30.  Ivan P. Hall, "Samurai Legacies, American Illusions," The National Interest, Summer 1992, p. 14.

31.  Bruce Stokes, "Losing Steam," National Journal, 27 June 1992, p. 1518.

32.  George Gilder, "The End of the HDTV Debate," Harvard Business Review, March-April 1991, p. 156.