Celebrating 150 Years of U.S.-Japan Trade Relations: Promoting the Next 150 Years of U.S.-Japan Business Collaboration

May 19, 2010

Business and Technology collaboration between U.S. and Japan for the next 150 years
Shinichi Nishimiya, Ambassador and Consul General, Consulate General of Japan, New York
Edward Lincoln, Director, Japan-U.S. Center, Stern School of Business, New York University
Moderator: Richard Katz, Editor-in-Chief, The Oriental Economist Report

Future Business Collaboration in the fields of Transportation, Tourism and Food Culture
Tadayuki Hara, Associate Dean of Administration and Finance, Rosen College of Hospitality Management, University of Central Florida
Hajime Ito, President, JETRO New York
Moderator: Keiko Tsuyama, Freelance journalist

On May 19, 2010, in observance of the 150th anniversary of Japan's 1860 mission to the U.S., Japan Society convened a group of distinguished authorities on Japanese business to discuss the history and future of trade relations between the two countries.

Keynote Discussion: U.S.-Japan Business Collaboration
"Today is a chance to turn our attention to our next century and a half of relations during this important anniversary year in which we commemorate the arrival of a group of samurai diplomats to America and to New York back in 1860, the first direct encounter between everyday Americans and Japanese" following almost 250 years of self-imposed isolation, said Shinichi Nishimiya, Ambassador and Consul General of Japan in New York.

New York "spared no expense. Streets were cleaned up. Flags decorated every window. Pickpockets were rounded up." It was reported, perhaps with some exaggeration, that half a million New Yorkers turned out to welcome the delegation as they proceeded along Broadway.

"As has been so often the case in our relations since, the heart of the visit was trade," Ambassador Nishimiya continued. "The envoy came to America to exchange ratification documents of the Treaty of Amity and Commerce, and to study American industry and technology. Among the most treasured objects brought back by one ambassador, Tadamasa Oguri, was a simple metal three-inch screw. Oguri would go on to found Japan's first steel foundry, and what would become the Yokosuka Naval Yard."

In the early years, Japan's biggest exports to the U.S. were silk, paper and tea; its biggest imports from the U.S., cotton thread, textiles and sugar. Today, "it is not only end products that cross the border, but also raw material, processed material, parts, components that are used to assemble the end product"; not just goods, "but services, capital, technology and even people. We really should look into all these aspects of the cross-border economic relationship in order to be able to see the future."

"In the immediate term, Japan-U.S. economic cooperation will be a key to fostering sustainable growth, employment and meeting 21st-century challenges like climate change," the ambassador said. The next two APEC meetings, 2010 in Yokohama and 2011 in Hawaii, are good chances for the two countries to work together on regional integration, economic growth and human security, and to join Japan's leadership in energy efficiency and green technology with American strengths in research, medicine and biotechnologies.

"The samurai swords and topknots may have gone, but this historic celebration reminds us again that people are the driving forces behind healthy ties in economic development," Ambassador Nishimiya concluded. "Today we not only share, but also truly enjoy each other's culture," from music and art to food, Disneyland, manga and anime--cultural ties that reflect the ease and comfort that individuals and companies from the two countries have with each other.

"In 1860, the dominant paradigm for organizing the world was imperialism," said Ed Lincoln of NYU. "Japan quickly decided that if that's how the world is organized, that is how it should behave too." It was a system that almost guaranteed conflict at every turn, and after two world wars, it collapsed, though its last traces did not vanish until the end of the Vietnam War or, arguably, the 1997 return of Hong Kong to Chinese rule.

"We can now look forward to the next 150 years I hope in which we are operating under a framework that has been building over the past 60 to 70 years," he continued. The UN, the WTO, the WHO, the Bank for International Settlements and other institutions founded in this postwar period "are in essence equal. Sure the United States gets a bigger voting right at the IMF, but I've always found it somewhat amusing, this notion around the world, that the U.S. controls the IMF. You should go to Washington some time and listen to the discussions and arguments between IMF people and American officials."

The system isn't perfect; "that we are still trying to sort out what to do about Greece is an illustration of how imperfect the rules and operating procedures are," Professor Lincoln said. "And yet I believe very firmly that this is a much better system than the one that we had during those first 150 years."

"The big question going forward is what is the relationship going to be between the U.S. and Japan operating in this system and helping to improve it by changing the rules in a more productive direction going forward. Will we cooperate on this? How effective will we be? And ultimately in having created this system is it going to perform better? I think it will. But is it going to perform better as the world changes? As new nations rise and old mature nations become less important, as environmental climate change issues become more prominent, can this global system adequately deal with the natural tensions that arise in this process?"

Moderator Richard Katz of The Oriental Economist Report asked the two panelists:

During the past 30-odd years, fierce bilateral trade frictions have dominated the economic side of the U.S.-Japan relationship, but that seems to be less true today. Over the next two, three or four decades, will those frictions resume, or is that era over?

"I think it's over," replied Ambassador Nishimiya. "We are not just exporting things to the U.S., which I think was the biggest source of complaint." There's a flow of capital, technology and people. Japanese and U.S. business leaders serve together on corporate boards. "Those kinds of changes in the real economic world have brought about the peace that we enjoy today." Moreover, the WTO "normalized, if you will, trade disputes, in the sense of you can go to the WTO and you can get the ruling there instead of fighting those things on Capitol Hill or elsewhere."

Professor Lincoln agreed, noting that trade frictions have eased as Japan has moved away from the import substitution model, which held that in order to grow and develop, a country has to create high trade barriers to protect domestic industries. Japan's rapid growth in the 1980s and early 90s--which Americans feared was at their expense--has given way to a slower pace. "Now we're just a pair of old mature economies chugging along hopefully generating roughly 2 percent growth in GDP per capita. Not a whole lot for either country to worry about with respect to the other, and I think that helps to put these trade disputes in perspective."

Then there are other countries that are chugging along at growth rates of 7, 8, 9 percent. Thirty or 50 years from now, the U.S. and Japan will be a much, much smaller share of the world's economies. Do U.S.- and Japan-based companies have a competitive edge that they will lose when they're no longer based in the largest economies? How do companies adapt to this?

"Increasingly to be a large, successful corporation you need to be engaged in many places around the world. To do that successfully I think there is some advantage to corporations that manage to be more international internally," responded Professor Lincoln.

There are indeed examples of very large Japanese companies being run by people who are not Japanese, Ambassador Nishimiya commented. And there are major global companies from Switzerland, Holland and other small countries. "I agree with Ed that the challenge really will be for management to be internationally oriented, but it's coming" in Japan.

Do you foresee a change in psychology where a Ford or a Toyota no longer thinks of itself as an American or a Japanese company, but really as this supranational company without borders, with a truly international management? Or is nationalism so built into the system that it's here to stay?

"In the end maybe some national marque may be there for an American auto company, or say a Japanese electronic company," but in any event, in terms of policy companies will need to lobby not for protectionism but for less regulation--"otherwise they won't survive, is how I see it," Ambassador Nishimiya said.

"History matters," Professor Lincoln commented. "It is still I think a little hard to imagine that, say, Ford Motor Company would move its headquarters to Brussels."

In the post-World War era, we enjoyed a world of abundant resources. Now, demand from China, India and other developing countries for energy, water and raw materials is growing much faster than the supply. If this means a kind of resource nationalism, or a techno nationalism, how do American and Japanese companies adapt? If technology is the answer, which as an economist I'm obliged to believe, does technology then become the key competitive edge for these companies?

Professor Lincoln said he's "relatively optimistic" that technology ultimately will overcome resource shortages, oil in particular. The big questions relate to the model of "competition and/or cooperation between American and Japanese firms," and to "the roles of the respective governments in supporting fundamental research and development."

Collaborative efforts are also needed to deal with "export protectionism," and to address food shortages by creating food stockpiles along the lines of the International Energy Agency's program on oil, the ambassador said.

As China grows, will the U.S. and Japan become less important for each other, or more important?

"The world is a big place, and we are not the most rapidly growing parts, therefore Japanese and American companies will find increasingly prospective partners from other countries that may have the technology that they want or their marketing expertise," Professor Lincoln replied. "It doesn't necessarily mean that that bilateral relationship is not important, but that in the context of the world, it will look relatively less critical."

Recognize, too, that "what comes from China actually incorporates a lot of Japanese technology or parts components and vice versa," just as Japanese products include microprocessors from the U.S., Ambassador Nishimiya said. "We need to be careful in jumping to conclusions from a slightly over-simplistic view of the world that China is becoming bigger, the U.S. and Japan are becoming smaller." U.S. and Japanese companies and governments should press for better IP protection in China; the U.S.-Japan security relationship "remains paramount, and the fact that we share common values is very, very important. And that's fundamentally why I think our companies do feel comfortable with each other."

Is Britain a metaphor for the future of our relationships, including the country's broader role as its share of the global economy has shrunk?

Professor Lincoln agreed that Britain is to an extent a model: "One hundred and thirty years ago it was the preeminent economy in the world. It is no longer." The UK "drifted through much of the 20th century dealing with a variety of problems: dismantling their empire, creating a somewhat unworkable welfare state. But they've gotten along, and that's what we will do."

London and the UK have the ability "to invite the entire world to them," Ambassador Nishimiya said. Financial firms in the City of London hire personnel from many countries; Rolls-Royce is now owned by a German automaker. "That kind of openness to anything that would maximize their own national interest, including an economic interest, and their ability to communicate, their ability to negotiate, it's still a great source of inspiration for Japan."

Most Japanese companies don't want to be bought, and they have the tools to prevent it. So the percentage of foreign ownership is tiny by international standards. To what extent do you see that changing?

"The government generally is trying to encourage foreign direct investment in Japan. Now, how things evolve in the individual companies is a slightly different matter," Ambassador Nishimiya said. "As a matter of policy, as Ed suggested earlier, the days of trying to resist, if you will, investment and takeovers are more or less behind us. But I don't know when we will reach your stage" in the U.S. and Europe.

"It may be slow. It may be still small. But something is changing. Things that I would have thought were impossible in the early 1990s, like a foreign organization buying a Japanese financial institution, would have been unheard of" until very recently, Professor Lincoln reflected.

Panel Discussion: Future Business Collaboration in Transportation, Tourism, and Food Culture

In 1868, shortly after the delegation of samurai were welcomed in New York, Japan's principal exports were silk, tea and fishery products, and even in 1930 the picture was much the same, though textiles had replaced tea, Hajime Ito of JETRO New York said. After 1945, Japan's main export items shifted to steel, ships, chemicals and by 1980, autos and electronics. The country built up huge trade surpluses. More recently, Japan's trade surplus on the goods side has shrunk considerably, though the trade deficit in services shows little change.

One source of the service-sector deficit is travel, Mr. Ito noted. The modest increase in American tourism in Japan is strongly outweighed by Japanese tourism in the U.S. Another is transportation, which "means that a lot of the tourists between Japan and the United States are mainly using American airline companies."

A third area that bears a closer examination is food. Japanese cuisine holds a special place in the U.S., which today has 14,000 Japanese restaurants, 624 in Manhattan alone. "Why is Japanese food so popular in this town?" he asked. American friends praise Japanese food as delicious, beautiful, healthy and faithful to the fundamental flavors of each ingredient. They also, and somewhat surprisingly, praise it as expensive: If you treat someone to a Japanese meal, it demonstrates your commitment to the relationship.

How can companies capitalize on Americans' love of Japanese food culture? They must think in terms of solutions and systems, and look beyond food and restaurants to cooking utensils, cutlery, and even furniture and interior design, Mr. Ito said. They can also look to tourism, with which food has a natural connection. In a recent survey of foreign tourists in Japan, some 37 percent of respondents said they came to Japan because they wanted to enjoy genuine Japanese cuisine in Japan. Comprehensive marketing strategies developed jointly by the food and tourism industries should be very useful in realizing the potential of these connections.

The link between tourism and transportation is likewise manifest. Improvements in Japan's tourism infrastructure include direct flights from JFK to Haneda airport, due to begin this October, and a new rail line that cuts down travel time from Narita to the center of Tokyo to 36 minutes.

Train travel represents 29 percent of domestic personal transportation in Japan, but only 1 percent in the U.S., Mr. Ito said. The Shinkansen takes travelers nearly everywhere in Japan and is much more energy efficient and eco-friendly than automobile and air travel. With the Obama administration planning to offer $8 billion in subsidies for high-speed rail routes in California, Florida, Texas and other states, an alliance of Japanese business interests, backed by the Japanese government, "is now putting in every effort to participate in these projects."

High-speed trains represent, again, a solutions or systems business, he said. "In addition to railroad cars, a successful total system requires a railroad track, a signaling system, related infrastructure, a controlling system, project finance, risk management and business coordination. And frankly speaking, compared with the manufacturing of excellent products, Japanese companies are not very good in this business--the solutions business or systems business. So, I think that we have a lot of things that we should learn from Americans."

Business-promotion efforts by Ishikawa prefecture touch on all three service sectors: food, travel and transportation, Mr. Ito concluded. Officials invited three prominent New York chefs to visit Kanazawa, the principal town of the prefecture, to study with its chefs and bring back what they learned to their respective restaurants in the U.S. Ishikawa is working to raise awareness of local eco tourism sites, including Yamanaka Onsen, a hot springs resort that dates back to 700 AD. And it's publicizing the newest Blue Train, which starting in 2014 will shorten train travel from Tokyo to Kanazawa from almost four to two and a half hours.

Japanese government promotion of travel in the earlier postwar period concentrated on inbound travel, switching to a focus on outbound travel in about 1970, said Tadayuki Hara of the University of Central Florida. Since 2003, the government has stressed the strategic importance of inbound tourism as a way to blunt the economic impact of Japan's aging demographics and the increased global competition in its traditional manufacturing base.

Some 6.3 million travelers a year come to Japan, about 10 percent from Europe, 12 percent from North America and most of the rest from Asia. Of these, latest figures show about 1 million travel to Japan for meetings, conferences and events--about the same number as visit Orlando, where he teaches, Professor Hara said. In research studies, Japan ranks high in terms of each of the top three factors that meeting planners look at when choosing a site: safety and security, reliability of the transportation network and availability of luxury hotels.

Tourism generates about 1.9 percent of Japan's GDP, 2.6 percent of U.S. GDP, but 11 percent of Spain's. In Japan, 2.6 percent of the workforce is employed in tourism, versus 6.8 percent in Norway. "I do not show this [chart] to be pessimistic. But I just want to show this to convince you that there is a huge output potential of utilizing tourism as an industry in Japan," he said.

Of total tourism spending, two-thirds represents Japanese residents who are traveling overnight in Japan. Another 20 percent comes from Japanese residents on day trips, for example to a hot springs. About 7.4 percent is spending by Japanese residents who are on traveling abroad; this is the domestic portion of their trip, for example to Narita. The smallest fraction, 5.8 percent, represents spending by foreign visitors within Japan. Given Japan's demographics, spending by foreign visitors "is the only segment in the tourism sector which we can expect double GDP growth."

The biggest barrier to Americans taking a vacation trip to Japan is the perception that transportation costs are too high, concluded Professor Hara. This is a belief that's widely shared by those who haven't been to Japan. Those who have visited Japan, however, do not share this perception. "So I guess we really need very good marketing to update those perceptions with the real numbers."


Moderator Keiko Tsuyama, a freelance journalist, asked the panelists:

Does the open sky policy improve airline competitiveness and bring additional tourists to the U.S. and Japan?

Overall, the impact on Japanese private aviation is positive, Mr. Ito answered. Some experts do voice concerns that turning over route-setting authority to the private sector worsens the oligopolistic structure of the airline industry. The open sky policy isn't in effect everywhere: where an airport such as Haneda has little capacity for international flights, the government has retained control over routes.

When Haneda begins regular international flights this coming October, how will other Asian countries modify their policies to compete with Japan?

"I think that everyone knows that Japanese neighboring countries, particularly China, Singapore and Korea, are putting every effort to make their international airport the number-one Asian hub," Mr. Ito responded. Incheon airport's landing fees are much lower than Narita's, and Korean airlines have added flights to some 30 small Japanese airports to attract rural residents who may then fly to the U.S. or Europe on Korean airlines.

Opening Haneda to international flights represented a controversial change in long-held government policies to allocate international business to Narita. What's your view?

It's not a question of one or the other, Mr. Ito said. Opening up Haneda to international flights is a positive, and especially deciding to keep Haneda open 24 hours. It's important however to integrate the management of the two airports.

How is the Shinkansen system different from other systems like France's TGV, and how is it being marketed to those who are looking to install high-speed rail systems in the U.S.?

The Shinkansen is very, very reliable, Professor Hara said. From its inception to today, the number of fatal accidents related to Shinkansen stands at zero. Capacity is much greater than in France and Germany: Japan can run 12 or 13 trains per hour with up to 16 cars each, for a capacity of 1,300, twice the load of a 747 airplane. The average delay on the 600-mile run from Tokyo to Hakata--"I'm talking about average, per day per year--everything included, day of rain, day of thunderstorm, day of the earthquake--the average delay is 30 seconds."

One of the keys to marketing the system is financing, he added. This is something that competitors such as Bombardier, Alstom and Siemens currently provide to buyers, and the Japanese government has now authorized Japanese banks to offer this as well.

To alleviate concerns about job creation for U.S. workers, Mr. Ito said, Japan will propose that the U.S. have Japanese companies manufacture the trains and other equipment in plants located in the U.S.

What is being done to promote American interest in Japanese food culture?

On the business-to-business side, JETRO co-sponsored the Japanese Pavilion at the recent International Restaurant and Food Service Show held in New York. The event brought 95 Japanese companies and groups to the Javits convention center and yielded 334 new business contracts and 153 agent applications, Mr. Ito said.

Based on his research, Professor Hara said, "if you want to attract or address the general public in America, use food, because people's perception about food is already high." Japanese government and business can do more to capitalize on Japan-related themes in popular culture. A vehicle such as Iron Chef could be used to promote travel to Japan, just as Australia engaged the star of the Crocodile Dundee movies to promote travel to Australia.

What's the most important barrier for American tourists thinking about a trip to Japan?

Though there is indeed a perception that Japan is expensive, "I think that price level is not a problem. The problem is the lack of information, or the lack of the system to deliver the useful information for foreigners," commented Mr. Ito. If you stay at the Mandarin Palace and ask the concierge to recommend a restaurant, you will end up at a very expensive place, whereas you can get a fine meal at Midori Sushi for about $20. The Japan-Guide website is a good beginning but needs to be expanded.

How would you assess the strength of tourism studies in Japan?

Japan has comparatively few tourism studies programs, and in contrast to the American curriculum, which is very business oriented, Japan's programs emphasize tourism culture, history, anthropology, sociology and the like, Professor Hara said. When he and his colleagues invite people from the industry to talk about what the industry needs, the business leaders explain that what they need is "the student who understands financial statements, who can do five years of marketing strategic planning, who can do the operational analysis of a restaurant given the last three years of operating performance... So, we teach these things to the students."

The audience joined in the conversation:

What about the language barrier? Doesn't that play a big role in limiting inbound tourism?

His research suggests a somewhat wide range of attitudes on the part of people who had never been to Japan, with some considering it a big problem and others saying no, Professor Hara said. Further academic research would be needed to explore this in greater detail. It may be that English signs are plentiful enough for those traveling from Tokyo to Kokura, for example, but not beyond.

Are there more government-agency efforts to make sure that there's adequate information on the Internet in English for people thinking about visiting Japan?

Individual destinations may have excellent web pages in English, but an English-language gateway could be effective, Mr. Ito replied.

Japan's tourism community may want to consider having small cities such as Hirosaki, Shimonoseki, Hagi or Beppu host a conference for tourism agencies from all over the world, with presentations from the host city and other localities in Japan, all of which could be modeled on the very successful International Pow Wow held in Orlando, Professor Hara said.

--Katherine Hyde
Topics:  Business, Policy

Calendar of Events

September 2020

S M T W Th F S
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30      
All content © 2020, Japan Society, unless otherwise noted. |
333 East 47th Street New York, NY 10017 Phone: 212.832.1155 |
Credits | Press | Contact Us | Privacy Policy