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Experts Comment on Problems in Selling to Japan : Dropping Barriers Wouldn't Erase Trade Imbalance

April 28, 1985|Associated Press

WASHINGTON — Ask a dozen experts why the United States has so much trouble selling products in Japan and here's what they'll say:

- It's not so much tariffs on foreign products, although Japan has some.

- It's not so much quotas or other restrictions, although Japan has some of those too.

- And it's not that there's a Japanese xenophobia; in fact, they love some familiar American names--Coca-Cola, McDonalds, Kentucky Fried Chicken, Schick, Gillette, even Disneyland.

So why then is the United States buying $37 billion more from Japan than it is selling there? And why is this trade gap prompting desk-pounding in Washington and talk of a trade war, why this undercurrent of protectionism in the United States?

To a person, these experts will say the big problem is the high value of the U.S. dollar. Its strength makes Japanese goods cheaper to buy here, and makes American goods more expensive to buy there.

Second, there's a cultural barrier. The country's web of business relationships and bureaucratic structures can seem impenetrable. For some products, they may be impenetrable.

And the third reason they'll cite is a problem that lies here, with American manufacturers and sellers--a lack of knowledge of what Japan is like and what its consumers want, an impatience to do years of work learning the language and the market and a reluctance to make a long-term commitment in time, money and people.

Dollar Biggest Problem

The dollar is the big problem, the experts say. Next to it, other barriers and questions about American product quality pale.

"The overwhelming thing is the exchange rate," said Lawrence Krause, senior fellow in economics at the Brookings Institution. "The magnitude is so great that nothing is a close second."

Economists say the strong U.S. economy and high interest rates, encouraged by the country's huge deficit spending, have boosted the dollar's value against the yen and other currencies. Foreign money pours into the United States seeking its high interest rates, in part financing the federal government's borrowing and bidding rates up further.

"The strong dollar, in effect, becomes an export tax of 30% to 40%" on American products, said Philip Trezise, also a senior fellow at Brookings. "If you in fact put on a tax of 40%, you're not going to export that much."

The overvalued dollar isn't a problem unique to Japan trade. It hampers American manufacturers in sales to nearly all countries; the United States' overall trade deficit last year reached a record $124 billion.

But Japan is this country's second-largest trading partner, behind Canada, and judging by the cars on almost any street, its most visible.

Wouldn't Hel Much

The dollar problem is so great, experts say, that even if Japan were to open its markets to American products such as telecommunications equipment and agriculture, the trade deficit would only inch down a few billion dollars, if that.

Moreover, Krause contends that the dollar's overvaluation means that even if the United States did export a lot more products to Japan, the United States would find more imports pouring in here too.

"Until we get a decline of the dollar, we're not likely to see any significant diminution of the trade deficit with Japan, even if the Japanese do take major steps to increase purchases of American products," said I. M. Destler, senior fellow at the Institute for International Economics.

"That's the bind we're in," he added. "Because it's trade, we think trade policy ought to solve it. It's a trade problem, but it's not a trade policy problem."

Japanese tariffs aren't the problem, most experts agree; they will be among the lowest in the industrialized world after a scheduled final round of reductions.

Japan places import quotas on some products, notably agriculture, but they are generally in areas sensitive for domestic political reasons, just as the United States has tried to protect textiles and some other sectors, the experts say.

That is not to say Japan's markets are open, though.

Hidden Cultural Barrier

George R. Packard, dean of the Johns Hopkins School of Advanced International Studies, says the Japanese word keiretsu represents the hidden cultural barrier many American would-be exporters run into.

"It's a web of relationships that go back 50, 100, sometimes 300 years in a highly cultured society," he said. "It means an interlocking web of relationships in which a parent corporation has a lot of subcontractors who traditionally supply it with materials or services. The relationships go far beyond contract work."

It means, he said, that distributors and manufacturers in Japan deal with one another over generations. They resist new players, be they American or Japanese. The business relationships are seen as more than contracts, but as continuing obligations.

Krause contends that this is more than a benign network. It is, he said, "reinforced by hardball mechanisms."

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