Seize the Moment

by Richard Nixon

  Japan’s critics overlook the major progress Tokyo has made in providing for its own security. It has increased its support for U.S. forces stationed in Japan to cover 50 percent of their total costs. It has undertaken a sustained military modernization program to develop forces to defend its own territory and to protect one thousand miles of vital sea-lanes. Moreover, with the size of Japan’s economy, the 1 percent of GNP Tokyo allocates to defense approaches in absolute terms the military budgets of Germany, Britain, and France, even though their military establishments receive a higher proportion of their GNPs.

  Iraq’s invasion of Kuwait in August 1990 presented a classic example of the Japanese dilemma. Tokyo, which imports 70 percent of its oil from Persian Gulf countries, could not mobilize itself politically to make a meaningful contribution to protect its vital interests in Operation Desert Shield/Storm. Despite its $30-billion defense budget and its 250,000-man Self-Defense Forces, Japanese soldiers—who have not gone abroad even as part of a U.N. or multilateral peacekeeping force—never left their barracks. Instead, Tokyo contributed by reluctantly reaching into its wallet.

  After sharp criticism of its first offer of a $1-billion contribution in September 1990, Japanese politicians desperately searched for a new policy consistent with international demands and domestic apprehensions. Some proposed a “Peace Cooperation Corps” consisting of troops who would broadly support U.N. goals and work on humanitarian programs but who would remain unarmed and would not participate specifically in the mission of collective self-defense. One legislator demanded that soldiers resign from the Self-Defense Forces before participating in such a corps. When this idea suffered an agonizing death in a prolonged and confused debate in the Japanese Diet, Tokyo offered to toss an additional $l-billion contribution into the pot in December 1990, which most observers derided as paltry. After sustained diplomatic arm-twisting from the United States, Japan finally committed $11 billion in financial support and managed to deploy a small unarmed medical unit and—after the fighting—four minesweepers.

  Japan was paralyzed by its debate about what to do, when to do it, and how much to give. Its factional political system failed to produce a timely decision on an issue that involved its vital interests and that required an immediate response. Tokyo lacked the national will to act when it mattered. When the Japanese did finally act, they did so hesitantly and equivocally, dodging greater responsibilities through legalistic pretexts based on tortured readings of its constitutional provisions. Most significant, the Persian Gulf War demonstrated that Japan simply cannot step up to the military responsibilities inherent in any wider regional role.

  Instead of browbeating Japan to increase its military budget, the United States should work toward increasing Tokyo’s geopolitical role in five ways:

  Enhance cooperative development of defense-related technologies. The link between Japan’s technological advancements and U.S. military development should be strengthened. Both countries would benefit from the integration of Japanese research in lasers, computers, sensors, and space technology into U.S. weapons research. At a minimum, we must prevent rising protectionist sentiments from stifling technological cooperation. At the same time, we should seek to develop major joint projects targeted at high-tech defense requirements, especially SDI-related programs.

  Increase Japanese economic aid to strategic countries. To compensate for its low level of defense spending, Japan should allocate substantially more resources to helping those developing countries in which the West has a strategic stake. Already Tokyo’s foreign aid budget of over $15 billion exceeds that of the United States. But Japanese aid policies have been deeply flawed. Since most of its money has been tied to the purchase of Japanese goods, these programs have sought to advance Japan’s unilateral economic objectives more than our mutual security interests. As one Southeast Asian official observed to me in 1985, “When the Japanese provide foreign aid, they are like semiconductors. They take everything in and give nothing in return.”

  In addition, Japan’s aid has not been channeled sufficiently to strategic countries, such as Egypt or the East European democracies. While Japanese military policies will be debated and possibly changed in the future, Japanese economic strength is a reality today and should be strategically targeted. We should not ask the Japanese to be philanthropists or to flip open their checkbook to fund every faddish idea from Washington. Instead, we should ask that they use their enormous economic power to serve our interests as well as theirs.

  Provide funds to facilitate solutions of regional conflicts. Japan lacks the political muscle to help resolve the world’s difficult regional conflicts, such as the Arab-Israeli dispute or the wars in Afghanistan, Cambodia, and Central America. It should stand ready, however, to provide the financial support needed for the internationally supervised elections, multilateral peacekeeping forces, economic compensation, or follow-up aid packages often mandated as part of wider settlements.

  Subsidize U.S.-led efforts to develop security arrangements for the Persian Gulf. In view of Japan’s dependence on Persian Gulf oil, it should provide economic assistance to help the United States and other Western powers preposition supplies and develop the infrastructure to guarantee the region’s security from Iraq and other potential aggressors. Domestic constraints prevent Japan from taking a more ambitious role. But we are entitled to expect financial support for these collaborative Western security efforts.

  Provide economic aid to the democratic republics of the former Soviet Union as part of a comprehensive geopolitical accommodation. In stark contrast to the U.S. return of Okinawa to Japan in 1971, Soviet governments refused to return the four Japanese islands seized by Stalin in 1945. With non-communist governments now in power in the newly independent Soviet republics, Japan should be able to negotiate a return of the islands and lay the groundwork for economic aid to reformist former Soviet republics, provided that the new governments adopt viable free-market reforms.

  The worst move the United States could make would be to withdraw from its forward bases along the Pacific rim. If we cast aside our security alliance with Japan—which has served as an anchor of stability in the region—Tokyo will confront one nuclear superpower, Moscow, and another aspiring nuclear superpower, Beijing, a few miles off its shores. Without credible U.S. security guarantees, Japan would have two grim options. First, it could develop its own nuclear forces. Second, it could strike a deal—trading economic support for military protection—with either of the other two corners of the Pacific triangle. While Japan would be reluctant to move in either of these directions, it will have little choice if abandoned by the United States.

  The greatest threat to the U.S.-Japanese relationship, however, lies not in security disputes but in economic antagonisms. Many Americans decry the specter of the Japanese “buying up America.” The Japanese, they suspect, are turning America into an economic colony. Yet despite their acquisition of highly visible assets—Universal Pictures, Rockefeller Center, and even Michael Jackson’s $1-billion contract with Sony—Japanese-owned firms and assets account for only 17 percent of foreign investments in the United States, while those of Great Britain represent 30 percent. Ironically, many who strongly support U.S. investment abroad have xenophobically denounced businessmen who happen to be Japanese and who simply wish to invest in America.

  The trade imbalance between our countries is the crux of the problem. The U.S. trade deficit with Japan was $46 billion in 1985, $55 billion in 1986, $60 billion in 1987, and $65 billion in 1990. The most important causes of the imbalance—exchange rates, budget deficits, economic cycles, varied growth rates, and domestic savings and investment levels—have been lost in the emotional melee of finger-pointing on both sides of the Pacific.

  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 impo
rts 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 th
reatened 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.