Seize the Moment (19 page)

Japan's critics point out that Tokyo has exploited its low defense spending to enhance its competitiveness unfairly. In addition, they contend, the Japanese have made a fetish out of keeping foreign goods out of their markets. Japan outlaws some potential imports such as certain fruits and vegetables, inflicts astronomical duties on other goods such as telecommunications and medical equipment, turns a blind eye as domestic cartels vanquish international competitors, and sabotages some imports with red tape. When U.S. pressure builds up, the Japanese do not address our concerns but rather engage, as one critic put it, in an ingenious export shell game, shipping products to the U.S. market not from factories in Japan but from Japanese-owned facilities in such countries as Thailand. As sociologist Daniel Bell noted in a paraphrase of Clausewitz, “Economics is a continuation of war by other means.”

America's critics blame the federal deficit and lagging competitiveness for the trade gap. Japan produces top-quality goods, they argue, while America turns out junk. Japan has a strong work ethic, while Americans are lazy. Japanese save, while Americans spend. Japan's economy grows by leaps and bounds, while America's grows by inches. Energy wasted demanding more open markets in Japan, they conclude,
would be more productively used in undertaking needed structural adjustments in the United States, particularly decreasing the federal deficit, increasing the private savings rate, and ending the obsession in capital markets with shortterm returns.

While those who coined the term
Japan, Inc.
exaggerate, some legitimate concerns exist about Japanese trade practices. Japan's government and business firms often work together so closely that they become virtually indistinguishable. Large industrial groups connected through interlocking directorates, shareholdings, and cartel membership and backed by guidance from government bureaucrats make the Japanese market a political as well as an economic battlefield. Many retail outlets, for example, are not independent but locked into subcontracts and controlled by dealer associations that give the most powerful manufacturers political control over the market. Monopolies, price-fixing, and other predatory economic tactics rule the intertwining business and political spheres. And both officials and manufacturers have a pernicious vested interest in maintaining this unfair system.

These individual power clusters operate internationally as well. The Ministry of Finance coordinates the important international moves of banks, security houses, and insurance firms. By contrast, rather than working as a partner of major U.S. multinational corporations or at least pursuing a policy of benign neglect, the U.S. government often acts as an antagonist.

Instead of complaining about an “economic evil empire,” we must begin with the recognition that legitimate reasons exist for the trade deficit. Japan, for example, must generate a dollar trade surplus to pay for its huge oil-import bill. Moreover, Japan's tremendous economic success represents an easy scapegoat for American politicians seeking to deflect
attention from our own economic problems. First, the combination of a high federal deficit and a low domestic savings rate requires capital imports, which, in turn, are reflected in a trade deficit in goods and services. Second, many U.S. companies lack the long-term horizons needed to cultivate the Japanese markets. Third, since 95 percent of Japan's young people but only 75 percent of America's graduate from high school, we have failed to invest sufficiently in our human capital. Some studies have pointed out that even if Japan eliminated all its import barriers, the U.S. trade deficit would drop by only $5–8 billion. They suggest that primarily the fault is ours, not theirs.

At the same time, we should not overlook Japan's economic weaknesses because of its great strengths. Japan's population is growing increasingly older. Today, 11 percent of the population is aged sixty-five or over. By 2025, that figure will rise to over 25 percent. More people will be going into retirement than entering the labor force. This employee vacuum must be filled if Japan is to sustain its economic growth. Because much of the generation under the age of twenty-five grew up relatively wealthy, however, they tend to leave jobs they do not like, to marry later in life, and to have fewer children. They reject the grueling work ethic of their elders, opting to spend ninety hours a week in recreation rather than in the workplace.

Women account for 40 percent of Japan's work force, but their talents are left largely untapped. Today, most Japanese women are channeled into traditionally “female” jobs, such as elevator hostesses and receptionists. Some Japanese firms require their female employees to wear uniforms, obey evening curfews, and live in company dormitories. Women are seldom appointed to high-level positions, with only 1 percent of women in the work force involved in management. Even
when a woman holds a relatively prestigious position, she is expected to cater to her male counterparts by serving tea and cleaning the office.

Such subservience perpetuates the glass ceiling that blocks the professional and social advancement of Japanese women. While attitudes are slowly changing, women are strongly pressured to limit themselves to staying home and raising children, which the government encourages through $6,700 grants for women to have a third child. One edge we have over Japan is that we are far ahead in providing equal opportunities for women. Japan's economy would soar to even greater heights if women's capabilities and talents were unleashed by following our example.

The U.S.-Japanese relationship can only be saved if both sides make concessions. The United States can begin by reducing the federal deficit and improving its competitiveness. We should not fear but rather learn from competition. The Japanese can learn from us, and we can learn from them. We should reverse the trend toward retaliatory protectionism because trade barriers always backfire by triggering ever-escalating countermeasures. Broad-based trade retaliation leads to economic isolation. We should pursue carrot-and-stick policies vis-à-vis Japan in coordination with our European allies at the GATT talks and at the annual economic summits. Only as a last resort should we employ selective retaliation if the Japanese refuse to abandon clear and identifiable unfair trade practices.

Meanwhile, Japan must reduce its tariff and nontariff trade barriers. We should insist on structural reforms in the Japanese economic system that will eliminate monopolistic and anticompetitive practices of individual firms and cartels. If the Japanese want access to our markets, we must have access to theirs. Japan has already begun to open up its rice
markets, which were traditionally closed to all imports. While such steps slowly build confidence between our two countries, they must be rapidly accelerated in order to prevent U.S.-Japanese economic competition from escalating into a trade war.

Despite forty-five years of close cooperation as allies, cultural barriers and suspicions compounded by economic antagonisms have fueled “Japan bashing” in the United States and “America bashing” in Japan. On both sides, this stems from the changing dynamics of our relationship: Japan no longer accepts America's tutelage, and America no longer accepts Japan's free ride. As these two great powers search for a new foundation for their alliance, special interests in both countries will seek to turn this friction into an explosion that would serve neither of our long-term interests. Because our natural economic competition spurs greater growth for both countries, we must not allow those who wish to inflame national passions to prevail.

These obstacles cannot be overcome easily, but can be reduced and eventually dismantled only if we curb needless rhetorical attacks and gradually cultivate mutual confidence. Because of the lack of a common heritage and social roots—best typified by America's exultation of and Japan's suppression of individualism—a lack of understanding often leads to mutual incomprehension, which, in turn, creates deep distrust. Despite the many Americans of Japanese descent and the many diverse ties between our two countries, we are still very different peoples. In fact, the greatest cultural link between the two countries is a common love of baseball.

Yet we share values and interests that naturally pull us together. We both believe in democratic government and free-market economics. We both have a major stake in the survival and expansion of global free trade. We both want to
prevent international instability and to develop initiatives to manage environmental problems. We both are fiercely competitive and committed to excellence. Those Americans who feel most threatened by Japanese investments—and whose anxieties are mirrored and exaggerated by their representatives in Congress—work primarily in industries such as automaking, electronics, and textiles that have been most hurt by Japanese imports. Elsewhere, local and state officials compete eagerly for Japanese investment. Polls measuring U.S. attitudes toward other countries reveal that Americans associate the Japanese with qualities they apply to themselves: hardworking, creative, competitive, and peaceful.

While we should recognize our cultural and economic differences, we must find a way to work with them. Cultural barriers should be leveled, but not the cultures themselves. We should not try to be alike. We should respect and learn from our differences. Americans should continue to enjoy sushi, and the Japanese should continue to visit the Tokyo Disney World. Also, the political demands of U.S. and Japanese special interests should be kept in perspective. To allow differences over such issues to poison our relationship would be unworthy of the world's two strongest economic powers. Instead of wasting time chastising each other and instituting self-defeating policies, we must cooperate with each other constructively, maturely, and responsibly. America needs Japan, and Japan needs America. If we contribute from our strengths, our relationship will be even more complementary and mutually reinforcing. Working against each other will weaken us both. Working together we can ensure that the twenty-first century will be not only a century of peace for the Pacific but also a century of the greatest prosperity the world has ever known.

A greater global role for Japan is inevitable. Singapore's
former prime minister, Lee Kuan Yew, foresaw this development twenty-five years ago, long before the Japanese economic miracle was recognized worldwide. He told me, “The Japanese inevitably will again play a major role in the world. They are a great people. They cannot and should not be satisfied with a world role that limits them to making better transistor radios and sewing machines, and teaching other Asians how to grow rice.” The open-ended Japanese debate during the Persian Gulf War was the first tenuous step for Japan toward playing that major role. The next steps will come more easily and quickly. The United States at this time has a major opportunity to work with Japan as it redefines its national purpose internationally. If we seize the moment, our renewed relationship could be a powerful force in solving the problems of today and tomorrow.

•  •  •

China—whose 1.1 billion people represent one-fifth of the world's population—has not only become a key political player but could also become a major global economic power in the coming decades. As one of the corners in the Pacific triangle, China is a voice in the world that cannot be ignored and a force in the world that cannot be isolated. Exactly twenty years ago, we opened the door to China. In the next twenty years, we must keep the door open as China secures its place in and integrates itself into world affairs.

China's emergence as a global heavyweight is inevitable. With a significant nuclear capability and the largest conventional army in the world, it could become a military superpower within decades. Its population has increased by more than 200 million since 1978, a figure only slightly smaller than the entire population of the United States. If its per capita income were to rise to half of Hong Kong's—a feasible
objective over the next fifty years—its GNP would be $5.1 trillion higher than today, an increase about equal in size to the current U.S. economy. If its economic reforms continue, the creative enterprise of its people could make China not only the world's most populous but also the world's richest nation in the twenty-first century.

To understand where we should take the U.S.-Chinese relationship, we must understand where we have been. For a generation after the Communist revolution in 1949, the two countries squared off against each other in angry confrontation. While the United States recognized the Republic of China on Taiwan as the country's sole legitimate government, the Communist Chinese became the junior partner in a close alliance with the Soviet Union under Stalin and Khrushchev. While the United States provided aid and troops to prevent Communist victories in Korea and South Vietnam, the Communist Chinese sacrificed tens of thousands of soldiers—including Mao Zedong's only son—to support the aggression of North Korea and provided indispensable economic and military assistance to the aggressors in North Vietnam.

Despite these profound differences, I had decided before the 1968 presidential election that the time had come for a rapprochement with the People's Republic of China. I did so not because I had changed my views about the Communist regime but because its leaders were in the process of changing their foreign policies. From 1959 to 1963, the Sino-Soviet bloc disintegrated over ideological disputes about whose brand of communism was purest and over geopolitical conflicts about whether China would move from junior to full partner in the alliance. As a result of the split with Moscow, China found itself isolated and surrounded by hostile powers by the late 1960s:

—To the northeast, Japan possessed minimal military forces but posed an enormous potential challenge because of its economic might.

—To the south, India had the world's second-largest population, had an active program to develop nuclear weapons, had crossed swords with China in a series of border clashes, and had the capacity to become a dangerous threat with Soviet support.