Commentary: Is Japan Getting Set To Zap U.S. Software?

Against the grim backdrop of closed markets and pitched trade battles with Japan, U.S.-made software has been a rare success story. The Japanese snapped up $2.7 billion worth last year, including operating systems. That's 32% of the country's market for all packages sold off the rack.

Now that may change. On July 7, 20 American software-related companies sent a letter warning U.S. Trade Representative Mickey Kantor of an alarming move by Japan's Ministry of International Trade & Industry (MITI). In October, MITI will start requiring that software products entering Japan be certified by agents of the Japan Accreditation Bureau (JAB). The concern: Japanese administrators can rig this system to study how U.S. software is designed. The government could also use certification as red tape to delay bids by U.S. companies on public contracts.

TRADE SECRETS. So far, the U.S. Trade office has remained aloof. That's a mistake. The U.S. government willingly flogs American cars in Japan, though they have no proven appeal there. Why not do the same for software, when demand is exploding? In this case, all anyone asks is that Washington sound a warning.

For years, they have used ingenious means to support domestic industries. With their latest proposal, Japanese administrators are adding a new, sophisticated twist to a familiar protectionist ploy. The dispute revolves around a set of international quality standards, known in tech-speak as ISO 9000. These standards aim to unify different countries' ideas on how products should be manufactured. That's fine, if your company makes vacuum cleaners or radial tires. But software doesn't spring from purely logical or methodical design. It is born of creativity, with a dash of black magic. That's why all countries--until now--have taken a more flexible approach to software certification, with an eye to protecting trade secrets. ISO quality standards--if they have been applied at all--have been voluntary.

At JAB, however, officials have ignored most of these concerns, and created a unique Japanese standard. That action could give the bureau awesome control over the auditing and "registration" of U.S. products. JAB officials insist that their intentions have been misread. They claim that the program is in tune with international norms. But when Japan floated its idea at an international ISO meeting in January, not one other member supported it.

Other countries using ISO standards let their neighbors carry out their own certification. It's done by auditors who inspect a company's manufacturing processes and declare them "compliant." But because Japan's standard will be unique, other governments won't be able to appoint their own auditors, or pre-clear products that are bound for Japan. Japanese auditors will do all the inspections and get unprecedented access to U.S. software secrets--from new versions of Microsoft Windows to the "microcode" in Boeing 747s. Says Dale Misczynski, Motorola Inc.'s vice-president for quality: "People are concerned about Japanese auditors going through their software design process."

PATTERN. Few American electronics executives doing business in Japan are surprised by MITI's move. In the late 1980s, Japan's postal ministry tried to close down IBM Japan's international networking business. The method: Bureaucrats tried to enforce a voluntary international standard, different from the one IBM's customers already used. No other country followed suit, and Japan dropped the plan.

In 1993, the Education Ministry set specifications for public-school purchases of personal computers that uniquely favored NEC Corp. and Fujitsu Ltd., at the expense of Apple Computer Inc. A few months later, the Cultural Affairs Ministry suddenly proposed legalizing the reverse-engineering of software--a move that would facilitate Japan's popular game of technology catch-up. The ministry later backed off.

In the current fight, even JAB officials admit they don't believe software inspection will improve product quality. But they claim their software inspections will further the cause of global manufacturing. If history is any guide, they may withdraw this ill-conceived proposal before it snowballs into a trade skirmish. But it is disturbing that Japanese bureaucrats keep testing regulatory manipulation on poorly defined high-technology frontiers. Even if Japan backs off, trade friction over software is here to stay. Next time, Japan's execution may be more skillful.

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