While the U.S. cranks up pressure on Japan to open up its markets to American exports, U.S. companies appear to be missing the boat on an even bigger prize: the dynamism of
Asia's far larger and more rapidly expanding emerging markets.
Already, notes economist C. Michael Aho of Prudential Securities Inc., the Asia/Pacific region accounts for 56% of the world's population. In 25 years, that's projected to grow to 62%--boosting Asia's population by as many as 2.5 billion additional consumers. Moreover, since 1986, many Asian economies have been expanding at a breakneck 6% to 7% annual rate, compared with 2% to 3% in Latin America.
More and more, says Aho, Japan is the dominant player among industrial nations active in the region. In recent years, Tokyo has given the area more than twice the foreign aid provided by Washington. And Japan's assistance has stressed infrastructure and industrial projects--an emphasis that builds ties between its industrialists and local elites.
More important, while Asia's share of U.S. direct investment in overseas regions is around 13%, its share of Japan's overseas investment since 1989 has jumped from 12% to 20%. And Japanese companies have concentrated on factories and distribution, whereas more than half of U.S. investment has been in petroleum, a depletable resource.
The upshot is that Japan's exports to Asia are exceeding America's exports to the region by an ever-widening margin (chart). Indeed, Japan's trade surplus with Asia is now almost as large as its surplus with the U.S.
Given the geographical proximity, it's only natural, says Aho, that the U.S. should seek to expand trade and investment with Latin America. But China alone has more than three times the population of Brazil, Mexico, Colombia, Argentina, Venezuela, and Chile combined. And many Asian nations are already technologically advanced, with highly educated workforces and growing middle classes. "If American businesses don't wake up," warns Aho, "they will lose their chance to cash in on the world's greatest growth market."