Allowing Japan To Save Face And Open Markets
Just when it appeared that Tokyo was giving a firm "No" to the Clinton Administration's demand that it open its markets, the outlines of a possible deal are now visible. The Ministry of International Trade & Industry (MITI) is floating a trial balloon suggesting that a "private" deal can be worked out between the Japanese and U.S. auto industries. It's a face-saving offer the U.S. should seize immediately.
But the Administration must play its cards shrewdly--just as it played its Motorola hand. The U.S. negotiating team achieved its goals of measurable benchmarks and deadlines for expanding Motorola's cellular-phone market share. The Japanese team was able to pretend that the government merely "confirmed" a private agreement between two private companies, even though officials from the Ministry of Posts & Telecommunications and Ichiro Ozawa, a top government politician, masterminded the negotiations.
Autos should afford the next big breakthrough. It's no accident that Toyota Chairman Shoichiro Toyoda happened to say recently that his company is "voluntarily" setting a target for buying more U.S. auto parts. Nissan Chairman Yutaka Kume offered to set purchasing targets as well.
This is good news, and U.S. Ambassador Walter F. Mondale, who played a key behind-the-scenes role in the Motorola talks, is jumping on it. Since autos constitute two-thirds of the U.S. trade deficit with Japan, an agreement, "voluntary" or not, "private" or not, would be a major victory.
The next step is crunching the numbers. Toyota, Honda, and Nissan import more than $6 billion in auto parts and $4 billion in engines into the U.S. today. Since the U.S. is the low-cost producer, they could cut their import costs significantly by shifting to made-in-the-U.S.A. parts and engines.
Much the same is true for their home market. Toyota is offering to boost its imports of U.S. parts by 6% a year. That's a beginning. The U.S. should insist on a 20% annual increase for the next four years. MITI appears willing to unofficially broker the negotiations and oversee implementation.
The U.S. should also push Japanese auto companies to get their dealers to sell American cars. But if Ford, General Motors, and Chrysler really want to sell in Japan, they must establish their own distribution systems.
The Clinton Administration seems to be getting results in its Tokyo talks. This is not the time for Washington to punt.
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