The Japanese government wants to know why Americans think Japan is a closed market to U.S. exports. So it's hired the well-known consulting firm of Arthur D. Little to find out. Specifically, Arthur D. Little is supposed to uncover practices that Americans think exclude them from selling to Japan.
A good place to start is a talk with Stephen Spragens, the marketing vice president for Plantronics, a medium-sized California electronics firm. Spragens has a good story about the frustrations of dealing with Japan.
And it is an important story. Japan's trade surplus with the United States remains enormous-it's estimated at $13 billion in 1978 against $8.1 billion last year-and the persistence of this lopsided imblance does no one any good.
Japan and United States need each other as political and economics allies, but the trade surplus breeds mounting distrust between the two countries. Each country reaches for theories that minimize its own culpability. Increasingly, the Japanese portray Americans as slow-moving, lazy salesmen unwilling to invest the time and money necessary to penetrate new markets. Americans counter with the cliche that Japan is a closed market.
Cliches often have a maddening habit of being true, and these bits of truth are not mutually exclusive. If many American firms have lagged in promoting exports-and, therefore, don't do it very well-the Japanese should not delude themselves about the openness of their markets. Yo be sure, the most conspicuous vestiges of protectionism (widespread quotas, high tariffs) have disappeared. But the psychology of protectionism, reinforced by traditional Japanese distrust of foreigners, survives, and it translates into a protectionist reality.
Trade depends not only on competitive prices and product quality, but also on trust and expectationa. If Americans have not spent the time and money to grasp the subtleties of the Japanese market, the fault is not ours alone. Success breeds success. Businesses imitate their rivals. And Japan has discouraged enough of the firms willing to make the effort to deter others from trying.
Consider Spragen's story. It belies most of the cliches about complacement American businessmen. His small company has agressively exported its principal product: a light telephone headset-a thin plastic tube worn by receptionists in many large offices-that was accepted by the Bell System in the late 1960s.
Sprangens recognizes that export orders do not materialize quickly. He understands the need for technical modifications. He accepts the inevitability of protracted negotiations. And he has managed to put the patented headsets into most countries with major phone system.
Japan remains his most conspicuous failure, but Spragens tried. He says he attempted to sell Japan's Nippon Telegraph and Telephone Public Corp. (NTT), the government-owned phone company, for four years, ending in late 1975.
He remembers the NTT talks bitterly. "They don't tell you anything," he says. "They nod and serve you tea and sake, and it's all very nice." But nothing ever happens.
Spragens interested potential Japanese customers-major banks and Japan Air Lines Inc.-in the headsets. He even suggested shifting some production to Japan and talked with local firms about handling the assembly of components. "They were enthusiastic, but after they talked with NTT, theyd come back with long faces," he remembers.
To Spragens, technical problems posed no insurmountable obstacles. Although the sets had to be adjusted - interconnection devices altered-in most European countries, the Japanese phone system closely resembled that of the United States.
You come away from a talk with spragens utterly convinced that only Japanese nationalism blocked the sale. Nothing could happen without NTT's approval, and the company simply wouldn't give it. "It took me four years to get through to a young guy in NTT, who had the courage to say, 'It's a fine item, but the problem is that it's not designed by Japanese'."
Were Spragens to return today, he might receive a warmer reception, but whether he could sell his headsets is unclear. In theory, Japanese government agencies (including NTT) have recently pledged open bidding for major contracts, but U.S. negotiators now discussing the NTT situation in Tokyo remain unconvinced. NTT purchases more than $1.3 billion in communications equipment annually, and U.S. firms believe their switching machines, microwave transmission gear and switchboards equal-or better-any in the world.
There are other subtle barriers to U.S. trade. Japan's Ministry of Finance prices foreign cigarettes at about 250 yen a pack-four or five times the landed cost-against 150 yen a pack for domestic cigarettes. Computer firms complain that needless restrictions on data transmission hurt sales of computer services. And U.S. officials believe Japanese firms have been quietly asked to limit purchases of American fertilizers.
The benefits of free trade do not occur unless markets are open. Japan has consistently failed to realize that it makes more sense to encourage American imports than to have the yen appreciate sharply-the logical consequence of the trade imbalance, resulting in overpriced Japanese exports. Both the United States and Japan then suffer, because neither can buy what the other makes best.
The issue here is as much political as economic. No one should think that even the sharpest Japanese concessions would immediately redress the trade imblance. In volume terms, Japanese exports already have begun to drop, but the yen's appreciation means that this smaller volume fetches more dollars. U.S. exports would grow only with time and market development.
But American firms-and politicians-need the right signals. Japan has made concessions, but at every juncture it gives the impression of being dragged and bludgeoned into change that is in its own self-interest. This puts the United States into the role of the heavy. Yo be sure, Japanese special interests are threatened by change. But if Japanese politicians cannot subdue their special interests-their NTTs-they will discover that it is Japan's general interest that suffers.