Airplanes and Airports: The Subtle Skill of Japanese Protectionism

AIRPLANES AND AIRPORTS:_ THE SUBTLE SKILL OF JAPANESE PROTECTIONISM Richard P. Lawless and Thérèse Shaheen Nc I o single issue more clearly characterizes the complexity of U.S.-Japan bilateral relations, and none more seriously threatens it, than international trade. In the past year alone increasingly serious trade disputes between the two countries have arisen over a variety of industries, from automobiles, to consumer electronics and strategic technology. Although many of the restrictions in these industries have been identified, policymakers often still fail to appreciate the more subtle ways by which U.S. participation in the Japanese economy has been limited. In the United States the legislative and executive debate has focused on the most blatant forms of market restrictions. As a result, more subtle discrimination against the United States has gone unnoticed. The American preoccupation with obvious trade barriers has allowed theJapanese to respond with innovative and seemingly earnest strategies, such as voluntary export restraints and "Buy Foreign" campaigns. Having instituted such policies, theJapanese feel justified in resisting or avoiding continued U.S. calls for "a level playing field" and claim that little more can be done to ensure foreign participation in their markets. The fact is that Japanese government involvement in restricting foreign market access is sophisticated, diffuse, and conducted in a manner that undermines traditional arguments against restrictions. Attempts by the United States to understand and respond on a case-by-case basis to what amounts to a comprehensive Japanese industrial policy are often Richard P. Lawless is president of the U.S. Asia Commercial Development Corporation . He is an international trade consultant and a former foreign service officer who served primarily in Asia. Thérèse Shaheen is director of the U.S. Asia Commercial Development Corporation and was an international trade consultant in Japan for three years. 101 102 SAIS REVIEW ineffective because the pervasive nature of the restrictive policy has been overlooked. This analysis will examine two key cases that illustrate the strategies the Japanese have employed to deny market access while positioning themselves to compete directly against the United States in the world market. In the case of developing the Fighter Support-Experimental (FS-X) fighter plane, theJapanese are using technology transfer to achieve these goals; in the case of the Kansai airport project they rely on dango, a system that has evolved for granting contracts forJapanese projects at home and abroad. In both cases, the persistent government/business collusion found can be interpreted as a genuine attempt by the Japanese to restrict foreign participation in their economy. TheJapanese Air Self Defense Force's (JASDF) next generation fighter aircraft, dubbed the FS-X project, has faded in and out of the political spotlight as trade tensions between the United States andJapan have intensified during 1986 and 1987. Although more complicated and esoteric than those involving commodities or computers, the FS-X dispute is just as significant. It is especially pertinent in the context of the evolving political relationship between the United States andJapan and because of its implications for the long-term competitivenss of the U.S. aerospace industry. Ultimately, the case of the FS-X program is an excellent example of the Japanese ability to deflect or defeat —by tenacity, careful planning, guile, and skill—the uneven American attempts to achieve a solution the Japanese are unwilling to accept. The October 1987 U.S.-Japan "compromise" on the FS-X issue has left the situation far from resolved. Despite Japan's decision to develop jointly the FS-X fighter plane, based on the General Dynamics F-16, there is no indication that this decision reduced in any way the long-term dangers to the U.S. aerospace industry. Although it is still unclear how U.S. interests and technology might be directly compromised as a result of this arrangement, the way the FS-X program has evolved provides insight into the determination with which theJapanese will pursue leadership in a new industry. Although many may have viewed the October decision to cooperate with the United States as a Japanese capitulation, in fact, this new agreement may lull the United States into a false sense of security while the threats...