Agents of Influence (Choate)
Here are some excerpts from the 1990 book
Agents of Influence:
How Japan Manipulates America's Political and Economic System
by Pat Choate.
The emphasis is added.
The following uses suffixes
G = giga = billion = 109,
T = tera = trillion = 1012.
Before giving excerpts from the book proper,
we begin with the contents of the flap
of the original hard-cover edition.
In this explosive, controversial, widely anticipated book, Pat Choate ...
shows how powerfully Japan’s lobbyists in the United States
are affecting the course of our politics and our economy—
and how Japan is spending $400M a year to sway American public opinion
and support a network of well-connected ex-officials and lobbyists.
Choate reveals in startling detail how this money is being parceled out
on pro-Japanese materials for elementary and high schools around the country,
on grants to American scholars and policy institutes,
on lobbyists,
many of whom once held high-level positions in the U.S. government;
and even on funding of political parties.
What makes all this possible?
Among a number of factors:
Washington officials who are cautious in their criticism of the Japanese
for fear of being labeled Japan bashers
and thus losing future opportunities to make big money working for Japan;
the astonishing dependence of the U.S. Treasury on Japanese monies
to finance the federal budget deficit;
bureaucratic red tape that undercuts U.S. efforts to confront
anti-competitive foreign practices such as dumping and cartels;
and the corrupt manner in which America finances its political campaigns.
Choate discloses the nature Japan’s unprecedented political power
[students of the Israel Lobby will surely take exception to that]
in this country—how Japan can, in effect,
veto U.S. legislation inimical to its interests,
politically overwhelm virtually any combination of
companies, unions or other groups it opposes,
shape those key U.S. trade and economic policies that decide
which American industries will grow or decline,
which American jobs will remain or disappear.
He reveals how Japan can reach up to the American presidency itself
or down to the grass-roots level across the nation
and influence political decisions
that allow Japan to advance its national interests
and win market share in the United States for its target industries.
In an Appendix,
Choate identifies some 200 high-ranking American former trade officials,
diplomats, defense officials, ex-members of Congress, and even CIA personnel
who now represent foreign governments and corporations in Washington,
along with the fees they have been paid.
The very existence of this revolving door in Washington, says the author,
breeds cynicism and mistrust
and represents a virulent strain of political corruption—legal, but unethical—
that threatens America’s sovereignty.
Solidly documented and boldly presented,
Agents of Influence is a book of extraordinary timeliness
with profound implications for the United States, Japan and the world at large.
[Now for the excerpts from the book proper.]
[F.1]
Japan is running an ongoing political campaign in America
as if it were a third major political party.
It is spending at least $100M each year to hire hundreds of Washington, D.C.,
lobbyists, super-lawyers, former high-ranking public officials,
public relations specialists, political advisers,—even former presidents.
It is spending another $300M each year to shape American public opinion
through its nationwide local political network.
[F.2]
Better financed, more extensive, and more effective
than either U.S. political party
or any domestic industry, union, or special interest group,
Japan’s campaign for America serves one very important purpose:
to influence the outcome of political decisions in Washington
that directly affect Japanese corporate and economic interests,
decisions where every day hundreds of millions of dollars-
and cumulatively billions of dollars [and literally millions of jobs]—
are on the line.
[F.3]
By knowing about these decisions ahead of its U.S. competitors,
by using its network of well-connected insiders and lobbyists in Washington,
by unleashing its grass-roots political network,
by shaping the coverage of economic issues by journalists, and
by mobilizing its opinion leaders in universities and think tanks,
the Japanese are able to use their purchased political influence in America
as a critical element of their corporate and national strategies.
[F.4]
This political game goes on daily and has for more than two decades.
The victories scored by Japan include consumer electronics, supercomputers, machine tools, ball bearings, optical fibers, satellites, rice, biotechnology, air transport, telecommunications, semiconductors, legal and financial services,
among dozens of others.
No American industry—regardless of how competitive—is safe.
[F.5]
In politics, as in business,
Japanese strategy follows a simple and predictable pattern:
protect your own domestic market from foreign penetration
and capture as much of your competitor’s market share as possible.
The Japanese strategy succeeds largely because of
fundamental political differences between Japan and America.
[F.6]
Japan, for instance, does not tolerate its top government officials
becoming other nation’s top lobbyists.
America does.
[F.7]
Japan does not permit its politicians or its political parties
to accept donations from any foreigner, foreign corporation,
or organization controlled by foreigners.
America does.
[F.8]
Japan does not allow foreign interests
to stage-manage “grass-roots” political campaign among its people.
America does.
[F.9]
Japan does not depend upon other nations
to finance its thinking about Japan’s long-term role in the world economy.
America does.
[F.10]
Japan does not allow other nations
to manipulate the curricula taught in its elementary, high school,
and college students.
America does.
[F.11]
In short,
America tolerates foreign interference in its domestic affairs.
But Japan does not.
This basic political difference is a major reason why
Japan’s trade negotiators and companies succeed,
while America’s fail.
It reflects the cumulative personal and professional decisions
made by hundreds of Americans who constitute
an important segment of this nation’s governing class.
[F.12]
To put the matter in perspective,
when John Maynard Keynes resigned from Britain’s Treasury in 1919
after playing a key role in the negotiations over the Treaty of Versailles,
he was faced with a problem of how to earn a living.
His previous government salary had been ₤1,200 a year,
and Keynes, never in his life averse to making money,
naturally hoped to make more.
He was offered the chairmanship of the British Bank of Northern Commerce,
which was controlled by two prominent Scandinavian industrialists.
For working only one day a week, he would have been paid ₤2,000 per year.
But Keynes felt that he could not accept.
“I am sure they want me,” he wrote his father,
“because they think I shall be of use to them
with the Treasury and the Foreign Office;
whereas in fact I am not at all disposed to play the foreigners’ game
against our own departments.”
In today’s Washington,
such a standard of political rectitude seems hopelessly antique.
[F.13]
The declining civic virtue described in this book
reflects an American weakness.
It is not the result of villainy by the Japanese or any other foreign interest.
America’s foreign competitors merely use
the legal opportunities and services presented in America by Americans
to maximize their economic and political advantage here.
Any indignation about undue foreign influence in America’s internal affairs, therefore,
should focus on those Americans
who have supported the progressive cheapening—even the fundamental corruption—
of the value of national service
that used to guide the conduct of our public life.
[F.14]
Naturally,
many of those who serve as agents of influence for foreign interests—
particularly those who once served in the United States government—
object to any inspection of what they are now doing
and its consequences for America.
Many foreign corporations and governments share those objections.
[F.15]
Their criticism takes three forms.
First, they claim that
the examination of foreign influence
over America’s political and economic system
smacks of “McCarthyism.”
But the issue is not about patriotism or ideology.
It is about systemic, identifiable, virulent political corruption—
all entirely legal and widely tolerated, at least in official Washington.
[F.16]
Second, the critics allege that
the analysis of Japan’s politicking, lobbying, and propagandizing in America
somehow constitutes “Japan bashing,” or even perhaps even “racism.”
[Just as, if you change “Japan’s” in the above sentence to “Jewish,”
you may be labeled an “anti-Semite,” “hater,’ or, again, “racist.”]
Of course, some Americans are racist and some bashing of Japan does occur.
But the vast majority of the accusations of racism and Japan bashing
are little more than cynical gambits offered up
to discredit legitimate American concerns and enforce self-censorship.
[F.17]
Japan’s political efforts are cited herein mainly because the Japanese have
the most extensive, sophisticated, and successful political-economic machine
in the United States.
Other countries are now mimicking it
by establishing similar webs of influence in America.
An examination of Japan’s political activities here, therefore,
provides a convenient guide to the broader trend.
[F.18]
Finally, some protest
the examination of foreign lobbying, politicking, and propagandizing
on the ground that Japanese and other foreign interests
merely “play the game by American rules.”
Their point is that if the “game” permits Washington insiders
to peddle influence to the highest bidder,
foreigners should be allowed to bid.
My point is the “game” itself is harmful to American interests
and requires basic reforms.
[F.19]
Foreign interests are, and should be, entitled to
as much representation in Washington as they can afford.
After all, the political stakes for them are as high—sometimes higher—
as they are for domestic interests.
What is at issue here is the nature and form of such representation.
[F.20]
Any reform of the “game,”
particularly those I propose in the concluding chapter,
must be applied equally to domestic and foreign interests.
The corruption of America’s political principles by domestic interests
is no less destructive than by foreign interests, and no more desirable.
[F.21]
The real issue is whether
the manipulation of America’s political and economic system
by Japanese and other foreign interests
has reached the point that
it threatens our national sovereignty and our future,
and if so, what do we do about it.
[In.1.1]
The Alfalfa Club
is one of Washington’s most exclusive and least known organizations.
The sole purpose of this oddly named group of America’s most powerful men
(and only men [women were admitted starting in 1994])
is to gather once a year at a Washington hotel for a private black-tie dinner
where members exchange political jests [and maybe enjoy some libations :-)].
[In.1.2]
Among the 670 men who attended the seventy-sixth annual dinner in 1989 were
President George H. W. Bush [41], Vice President Dan Quayle,
the Supreme Court justices (absent Sandra Day O’Conner),
the Bush cabinet, the Joint Chiefs of Staff,
congressional leaders, business titans, former federal officials,
and scores of other Washington power brokers.
[In.1.3]
Senator Lloyd Bentsen, chairman of the Senate Finance Committee
and the 1989 Alfalfa Club president,
drew the biggest laugh of the evening.
Bentsen opened with a story about his wife’s reaction that day
when he told her that he was going to meet with
the great political and economic powers
who held America’s future in their hands.
“Oh,” she said, “you’re going to Tokyo?”
[In.1.4]
In truth, Bentsen’s anecdote was no joke.
America is selling its economy to Japan and surrendering to
the political and economic control that always accompanies such ownership.
Between 1980 and 1988,
Japanese direct investment in the United States
increased by more than 1,000 percent.
Already, the Japanese:
[In.1.5]
Of course, foreigners have long invested in the United States.
In the nineteenth century,
British capital helped develop America.
British, Dutch, and Canadian investors still have significant American holdings.
But in the 1980s,
Japan’s investments in America expanded more rapidly than any other nation’s.
By 1995,
Japan will have become the largest foreign investor in America.
By 1999,
Japanese investors will hold more American assets than
Britain, Holland, and Canada combined.
[In.1.6]
To protect and promote their investments,
Japanese proprietors are erecting a complex infrastructure of political influence throughout America.
It is being used to co-opt politicians, shape public opinion,
finance political campaigns, silence or isolate critics,
and blackball appointments to high federal positions.
Already,
Japan’s involvement in America’s internal affairs is so extensive that
U.S. trade policies are often shaped more by Japanese than American interests.
[In.1.7]
Ever since the arrival of Citizen Genet in 1793,
foreign interests have regularly sought to influence
politics and public opinion in the United States.
The Greek Lobby, for instance,
has been able to sway U.S. relations with Turkey, Greece’s neighbor and rival.
For many years,
Chiang Kai-shek’s China Lobby dominated American thinking on China.
The Israeli Lobby has a powerful voice in America’s Middle East policymaking.
The Irish Lobby has long helped influence American policies
on Northern Ireland.
[In.1.8]
But of all nations,
Japan understands best that political power in America
is a commodity that can be acquired by the highest bidder.
Of all nations,
Japan has been willing to pay the most
to shape America’s attitudes and actions.
Of all nations,
Japan wields the most striking power
over America’s economic and trade policies.
And of all nations,
Japan succeeds best at using its political strength in America
to gain economic benefits for itself.
[In.1.9]
One reason that
Japan has such a commanding political presence in the United States is that
it hires so many American lobbyists, political advisers,
and public relations representatives.
While Britain, Japan, the Netherlands, and Canada are—in that order—
the four largest investors in the United States, in 1990
Japan employed one and a half times as many Washington lobbying,
public relations and law firms (92)
to speak on its behalf as Canada (55),
twice as many as Britain (42),
and thirteen times as many as Holland (7).
[In.1.10]
Japan’s political efforts in America also differ substantially in approach
from those of other nations.
Japan’s American political machine is a continuous enterprise
stretching from coast to coast.
Its foundation rests on diplomacy, lobbying, politicking, and propagandizing—
each delicately crafted and systematically integrated with the others.
By contrast,
Canada and the nations of Western Europe
still rely heavily on traditional diplomacy
to influence U.S. economic and trade policies.
Like their American counterparts, most Canadian and European firms
retain Washington representatives
only when they need assistance on such specific matters
as fighting U.S. Customs tariff rulings.
[In.1.11]
While the Japanese have almost unimpeded access
to America’s political and economic system,
their own system remains largely closed to Americans.
Former U.S. trade officials, for example,
can lobby for almost anyone, domestic or foreign.
But former officials of the Japanese government are, for the most part,
simply unwilling to work for an American company.
[In.1.12]
Of equal importance,
the Japanese are reluctant to criticize their government to foreigners.
Paul Krugman, the prominent international economist from MIT, notes that
while everyone knows that Japan’s protectionist policies on rice
are costly to its consumers,
“I have had the experience of finding
Japanese economists from the private sector
refuse to acknowledge that the rice policy is costly,
even in informal conversations.
When pressed hard, they explained that
they did not feel it was their place
to criticize their government to a foreigner.”
[In.1.13]
While Japan claims that its market is open,
foreigners sell relatively little there.
Japanese imports of manufactured goods as a percent of gross national product
are about half that of the United States
and less than a third that of Germany and other members of
the European Community.
Japan also claims that its economy is wide open for investment.
In practice foreign investors face endless hidden obstacles.
Fewer than thirty Japanese companies are sold to foreigners annually,
and most of these are small, insignificant, or in deep trouble.
Although America’s economy is twice the size of Japan’s,
total U.S. direct investment in Japan is less than $17G—
roughly one-fifth the amount of Japanese direct investment in America.
[In.1.14]
In short,
Japanese firms can invest and sell in America,
but American firms find it difficult to invest and sell in Japan.
Japanese companies can actively participate in American politics,
but American companies are unable to do the same in Japan.
Japan can hire Americans to publicly criticize U.S. policies,
but the Japanese are unwilling to do the same for foreigners, even in private.
As a result,
Japan has both a strategic economic advantage
and a strategic political advantage
over American companies.
[In.1.15]
The purpose of Japan’s American political machine
is to preserve these advantages.
Its goals are sixfold:
[In.1.16]
Following Japan’s successful example,
the Koreans, the Taiwanese, and several European countries
are now creating their own political machines in America.
Their goal: to advance their interests in America
and counter Japan’s growing influence over the U.S. government.
[In.2.1]
Although Japan’s American political machine is run from Tokyo,
it is staffed overwhelmingly by Americans.
The cost is more than $400M a year—
an amount roughly equal to the combined total expenditures of
the 1988 House and Senate congressional elections.
At least $100M of Japan’s political outlays goes to
Washington lobbyists, super-lawyers, and political advisers.
The remaining $300M is spent to expand a pro-Japan
state and local political network.
[In.2.2]
These monies finance a variety of activities designed
to shape the attitudes of the American people
and the actions of their government.
To mold the thinking of tomorrow’s leaders, for instance,
Japanese institutions finance
the preparation and distribution of teaching materials
used in hundreds of U.S. grade schools, high schools, and universities
to educate American students about Japan.
Much of this material is nothing but Japanese propaganda.
...
[In.2.4]
To influence the public debate over America’s policies toward Japan,
the Japanese fund a growing number of the policy institutes and scholars
who supply elected and appointed U.S. officials
with ideas and policy positions.
While the integrity of these scholars is generally beyond question,
significant Japanese funding often has the effect of
amplifying one particular set of views
about which policies America should adopt.
Already,
Japan finances virtually all of the U.S.-Japan study programs
operated by American universities and think tanks.
At the same time, it systematically attacks
both the substance of any criticism of its trade positions
and the professional standing of the critics themselves.
[In.2.5]
To shape the positions of American trade associations,
Japanese companies have joined dozens of these organizations
and now, as a matter of course, set their policy and lobbying agendas.
In addition, the Japanese regularly operate front groups
that advocate pro-Japan positions;
they control the operations of these shadowy political coalitions
through a vast network of
American distributors, suppliers, contractors, and local partners.
American companies that need access to Japan’s markets
are told by the Japanese to make a public show of supporting Japan’s positions
in congressional testimony and elsewhere.
[In.2.6]
To influence national politics,
Japan has put on its permanent payroll many leaders from both political parties
and many of the top political advisers to the President,
members of Congress, governors, and mayors.
Japanese corporations now help finance
both the Republican and Democratic parties,
and Japanese business interests make large political action committee (PAC) donations to congressional candidates.
Japanese companies regularly indoctrinate their U.S. employees
on how to vote in elections
and encourage them to lobby Congress
for positions that favor Japanese interests.
[In.2.7]
To influence state and local decision making,
Japan has established a grass-roots network that includes
dozens of Japanese chambers of commerce and
five regional associations of U.S. governors and Japanese business leaders.
In addition,
Japan has sixteen consulates and trade offices strategically positioned
throughout the United States.
At the insistence of their government,
Japanese companies are donating hundreds of millions of dollars
to local civic and social projects
as a mean of influencing Congress
through its constituents, friends, and local supporters.
[In.2.8]
To prejudice the trade and economic decisions
of the President of the United States,
Japan threatens to withhold financing
for the federal government’s huge deficits.
In 1989, this economic blackmail was so obvious
that President G.H.W. Bush [41] publicly cautioned Americans
not to complain too loudly about Japanese investment and trade practices
lest Japan withhold new funds.
[In.2.9]
To sway Washington decision makers,
Japan fields an army of hundreds of lobbyists.
Many of these lobbyists were previously federal officials,
just as any current federal officeholders were once Japanese lobbyists.
The money Japan spends annually on its Washington effort
exceeds the combined budgets of the
U.S. Chamber of Commerce, the National Association of Manufacturers,
the Business Roundtable, the Committee for Economic Development,
and the American Business Conference—
Washington’s five most influential business organizations.
[In.2.10]
Japanese penetration of the American political system is now so deep
that its integrity is threatened
In their own country, the Japanese call this sort of money politics
“structural corruption.”
In this case, it means that
so many advocates of Japan’s position are involved in decision making
that the ultimate outcome is structurally biased in Japan’s favor.
[In.2.11]
Japan now wields so much political power in America that it can, in effect,
veto much legislation that it dislikes.
It can ignore almost any U.S. law or policy that it finds inconvenient.
It can politically overwhelm virtually
any combination of American companies, unions, or other interests
that it opposes.
[In.2.12]
Today,
Japan plays a major role in shaping American public policy
on everything from tariff rates
to federal support for such critical technologies
as semiconductors and high-definition television (HDTV).
Indeed,
[In.2.13]
While no one doubts that Japanese and other foreign interests
are entitled to representation in Washington,
one may raise fair questions about its nature and form:
[In.3.0]
Whatever the answer to these questions,
the central point of this book is that
the ultimate responsibility for any domestic transfer of political power
from American to foreign hands
resides with Americans, not with the Japanese or any other nation.
[In.3.1]
If the standards for post-government employment of high officials
permit a revolving-door corruption that is harmful to American interests,
the responsibility for changing those standards rests with the American people,
and not with the foreign interests that profit from them.
[In.3.2]
If the activities of those in the pay of foreign interests are too hidden,
the responsibility for putting the public spotlight on what they do
rests with inquisitive American media,
an investigative American government,
and a vigilant American public.
[In.3.3]
If the nation invests too little
in educating American elementary- and secondary-school students about
world history, geography, languages, and economics,
the fault lies not with Japan
for filling that vacuum with its self-serving propaganda,
but with us for permitting it.
[In.3.4]
If huge federal budget deficits are forcing America to borrow too much
and to sell off too many of its productive assets,
then the burden for budget reform lies with
American lawmakers, businesses, and taxpayers,
not with foreign lenders and investors.
[In.3.5]
If American business and government are so disengaged from each other
that foreign economic rivals can exploit the resulting political vacuum,
then the responsibility for establishing
a closer and more cooperative relationship
falls on U.S. corporations and American officials,
not with the foreign governments and their companies.
[In.4.1]
In a sense, this book is not about Japan or any other foreign interest.
It is about
[In.4.2]
The responsibility for correcting this problem is exclusively our own.
After all,
America and its government belong to us.
[In.5.1]
Recall Deep Throat’s advice on how to unravel Watergate:
“Follow the money.”
It’s not a bad way to understand Japan’s growing political influence in America.
[In.5.2]
In Part 2,
this book follows Japan’s money to Washington insiders and ex-officials.
In Part 3,
it examines how Japan
now sponsors American trade associations and front-group coalitions,
and helps fund both U.S. political parties.
In Part 4,
it reveals how Japan sustains a massive economic propaganda program in America
that includes efforts to shape the way educators in thousands of U.S. schools
teach our elementary- and secondary-school students about Japan.
[In.5.3]
Japan gets full value for the political money it spends in America.
To illustrate the point,
Part 1 begins with a look at recent Japanese political victories in Washington.
Chapter 1
[This chapter is omitted from this document.]
Chapter 2
[This chapter is omitted from this document.]
Chapter 3
[This chapter is omitted from this document.]
Chapter 4
[Most of this chapter is omitted from this document.]
[5.2.1]
By the late 1960s and early 1970s, the world economy was vastly changed.
As a measure for fiscal discipline at home, the Nixon [37] Administration flirted with wage and price controls and embraced free-floating exchange rates.
[5.2.2]
Equally important, the war in Vietnam had damaged the credibility of America’s foreign policy establishment and altered Congress’s attitude toward the prerogatives of the executive branch.
These changed attitudes culminated in two milestones, one within months of the other: first, the resignation of President Nixon [37]; second, the passage of the 1974 Trade Act.
The Trade Act, clearly the turning point in the modern history of American trade policy, removed some of the executive branch’s discretion on trade policy matters, giving Congress more extensive and direct participation in setting and administering trade policy.
[5.2.3]
Two decades ago [circa 1970], imports from Japan wee beginning to take a heavy toll on dozens of American industries.
In most cases, domestic companies were osing out to foreign goods that were ....
Chapter 5
[This chapter is omitted from this document.]
Chapter 6
[The contents of this chapter are in a separate post:
“The Destruction of the American Television Industry”.]
Chapter 7
[This chapter is omitted from this document.]
Chapter 8
[The last section of this chapter,
dealing with the American company Fusion Systems
and its encounter with Mitsubishi and its hired American lobbyists,
is in a separate post: “Innovation is not enough”.]
Chapter 9
[This chapter is omitted from this document.]
Chapter 10
...
Just how does Japan [influence] America’s leaders and the American people?
In part, through one of the
best-organized, least visible propaganda machines in the world.
The technique is simple:
Japan persuades foreigners, particularly Americans,
to adopt views that are favorable to Japan.
Through propaganda,
Japan has been able to ward off American criticism
about its protectionist economic policies
and has actually shaped the prevailing American view of the Japanese.
...
Although Japan has dozens of excuses to justify its closed markets,
they can be grouped into six general themes.
Each theme has countless variations,
all of which were encountered by Americans in the 1980s
[and in the years since].
Most are little more than rationalizations that give Americans
the means to deceive themselves.
Excuse No. 1:
...
Another powerful variant of the jobs theme is:
“Japan is satisfying customers with better products.”
Certainly, Japanese companies manufacture competitive products.
But so do many American companies.
From a political perspective,
the issue is not whether American consumers will buy Japanese products;
clearly they do.
Nor is it an issue of whether Japanese consumers
are permitted by Japan’s many internal economic arrangements
to buy competitive American products;
usually they are not.
Rather, the issue is
whether American policymakers have the political option of
closing the U.S. market to Japanese imports
as a means of
opening Japan’s closed market to American exports.
The goal of Japan’s “consumer” propaganda theme
is to neutralize that option.
It’s no great challenge.
Many Washington policymakers believe—accurately or not—that
Americans “want it all, and want it now.”
Consequently, few politicians have the courage
to advocate the sacrifices in consumption needed
to increase savings, investment, and productivity.
Still fewer appear willing
to support crucial industries and technologies
through tough-minded trade policies.
Japan’s “consumer” propaganda theme exploits that political cowardice.
During the midst of the congressional deliberations on the 1988 Trade Act,
for instance,
a delegation of leading Japanese business officials
met privately with members of the House Ways and Means Committee.
One congressional participant recalls:
“Ralph Nader,” of course was an all-purpose euphemism for
politically active American consumer organizations.
The Japanese businessman might also have pointed out that
this was no idle threat:
the Japanese help finance many of these groups.
Excuse No. 2
[10.2.1]
“Criticism of Japan is racism” has long been a mainstay of Japanese propaganda.
With no apparent hesitation,
Japanese propagandists automatically label critics “racists.”
Variations include calling critics “Japan bashers,” “Jap bashers,” or even “Japanophobes.”
These ad hominem attacks are so common that examples are superfluous.
By contrast, critics of German trade policies are never labeled “racist” or “Germany bashers.”
And critics of, say, Latin America trade practices are rarely labeled “Hispanophobes.”
[10.2.2]
Of course, some Americans are racist and some Japan bashing does occur.
But the vast majority of the accusations of racism and Japan bashing are little more than cynical gambits by the Japanese to weaken legitimate American complaints, silence Japan’s critics, and forestall U.S. actions that would advance American interests ahead of Japan’s.
[By the way, Eamonn Fingleton made almost precisely the same comments about Chinese attacks on critics of China’s economic policies in his book In the Jaws of the Dragon.]
[10.2.3]
Japan’s habit of smearing its opponents as “racist” is a potent political weapon.
In a March 1990 article in the National Journal Bruce Stokes points out that although 45 percent of the U.S. trade deficit is with Japan,
Democrats find it difficult to speak up about what can or should be done about Japanese protectionism because
“attacking Japan for its trade and foreign investment practices exposes the party to charges of racism.”
[Is it not remarkable how that charge seems so toxic in the American political and social environment?]
Producing self-censorship, of course, is the prime objective of this propaganda theme.
[10.2.4]
In large part, the “racism” propaganda theme reflects Japan’s own obsession with race, foreigners, and its national “uniqueness.”
Even sophisticated Japanese spokesmen praise their country’s racial homogeneity and support policies to maintain it.
[Compare America’s recent insane obsessions with “diversity.”]
...
Excuse No. 3
[10.3.1]
The “it’s America’s fault” excuse promotes the perception that America’s trade problems are entirely homegrown.
If this were true,
America would be hard put to blame the Japanese for any bilateral trade frictions.
[10.3.2]
Certainly, America has many economic shortcomings.
Too many American companies have a short-term view.
Poor quality still plagues many American goods.
Americans save too little and consume too much.
Drug abuse is a national problem.
The American educational system often performs abysmally.
Many American workers are ill equipped to compete in an advanced industrial economy.
[10.3.3]
Still, these inadequacies do not explain why U.S. products that are competitive in both price and quality are kept out of Japan’s market.
Hundreds of American companies produce goods and services that are the best in the world by any measure—price, quality, service, innovation, marketing.
The firms that make these products hire salespeople who speak Japanese.
They work hard.
They take a long-term view of their relationship with Japanese customers.
Yet most make only a token penetration into the Japanese market.
By contrast, these products compete with great success against Japanese goods in Europe and other markets.
In 1989, the Office of the U.S. Trade Representative helped to explain this phenomenon when it listed, in its review of foreign trade barriers, some seventeen pages of governmental, corporate, and cultural barriers in Japan that keep out foreign goods.
[10.3.4]
But Japan’s propagandists prefer to ignore these barriers.
Instead, they point their fingers at America.
A complex variant of the “it’s America’s fault” theme is that almost all of America’s trade deficit with Japan is due to America’s large federal budget deficit—that 85 to 90 percent of the trade deficit with Japan would remain even if all Japanese barriers were removed.
This 10 to 15 percent estimate has been quoted so often that its validity is never questioned.
Japanese negotiators use it as proof positive that their trade barriers are nominal at best.
Both the Reagan [40] and Bush [41] administrations have cited the estimate to justify opposition to tougher trade legislation.
[10.3.5]
Yet work by many scholars and trade analysts suggests that Japanese protectionism, in all its forms, is now responsible for a significant portion of the bilateral U.S. deficit with Japan.
…
Excuse No. 4
[10.4.1]
Once Japanese investors began to buy large chunks of America in the mid-1980s,
Japan’s propaganda machine kicked back into high gear, this time promoting the themes of “globalization” and “internationalization.”
The Japanese sought to convey the idea that national borders are disappearing, along with such “outdated” concepts as national pride and national security.
In their place was emerging a single global market, where dependence and allegiance have no place.
The underlying message: policy sophisticates shouldn’t worry about the Japanese purchases of American assets, or about Japan’s quest for global domination of key industries.
[10.4.2]
Kenichi Ohmae, director of the Tokyo office of McKinsey & Co. and a leading promoter of this line, takes the argument one step further.
He argues that corporations are no longer Japanese, American, or European.
Rather, he says, they are entities separate from nations.
“There are no longer any national flag carriers.
Corporations must serve their customers, not [their] governments.”
[10.4.3]
According to Ohmae’s “globalization” thesis, the dollars Japan has accumulated are Japanese “immigrants”—they come back to America, where they are used to purchase productive holdings.
In the process, an economic alchemy occurs:
“[O]nce these dollars cross the U.S. border, they are American, not Japanese.
Dollars don’t belong to the nation of their current owners, but to the nation in which they are invested… it’s as if they become citizens of that country.”
Ohmae concludes that the
“unfortunate and uneducated bashing [of Japan] will stop” once Americans understand that the money the Japanese make by selling their wares to Americans is reinvested in America when the Japanese buy buildings, factories, securities, land, and other assets.
[10.4.4]
[10.4.5]
The globalization theme also glosses over that fact that ownership of U.S. companies is equal to economic control over such basic decisions as where jobs will be created.
As Jodie Allen and Hobart Rowen point in a 1989 Washington Post article:
“[J]obs don’t float across national borders as easily as capital ….
Fair or not, the impression persists that Japanese targeting of U.S. markets, whether for autos or semiconductors, has cost us jobs.”
[Hobart Rowean and Jodie T. Allen, “Brave New World, Inc.: to Superfirms, Borders Are Just A Nuisance,” Washington Post, 1989-03-19.]
[10.4.6]
The Japanese understand that it does matter who owns a nation’s capital stock-and where companies do their research, production, and service work.
[A point the un-American, Israel-loving editorial page of the Wall Street Journal deliberately avoids.]
Indeed, MITI’s basic purpose is to help Japan in this process.
Other countries also recognize the link between ownership, economics, and politics.
The European Community, for instance, requires foreign firms to locate much of their research and manufacturing in Europe as a condition of market access.
Consequently, many American companies are shifting major portions of their operations to Europe, often under duress; others are voluntarily transferring production and jobs to Europe.
Why?
Because the U.S. government is largely indifferent to the longer-term fate of American industry.
European governments take a very different view.
In Europe, the governments have firm prohibitions against the predatory industrial schemes—such as dumping—that the Japanese have used to undermine competitors in America.
Europeans value their indigenous companies for the jobs, wealth, and taxes that they create.
[10.4.7]
The globalization line has worked well for the Japanese in the United States.
Not only does it offer an excuse for the U.S.-Japan equity-for-consumables swap, it dismisses Japanese protectionism and the consequent destruction of American companies as irrelevant—so long as Americans are spoon-fed a continuous stream of consumer goods.
[10.4.8]
America’s acceptance of the globalization argument allows Japan to deploy the full political force of the United States against Europe.
When the Europeans demand market reciprocity from the Japanese, and refuse to permit the Japanese to circumvent this requirement through low-value-added assembly operations in Europe,
Japan responds by building these “screwdriver” operations (so called because all the workers do is put together kits manufactured in Japan) in the United States.
They then persuade the U.S. government that these are “American” products and use the political muscle of the U.S. government to get them into Europe.
This tactic has met with considerable success.
In February 1990, the USTR announced that products from Japanese-owned facilities in the United States were American products and the U.S. government would aggressively resist European efforts to exclude them
[10.4.9]
Still, for all of the Japanese arguments that national borders are evaporating,
Japan’s own borders remain substantially closed to the rest of the world.
Foreign investors have been so restricted that they own less than 1 percent of Japan’s national assets.
That figure stands in stark contrast to comparable numbers in the United States (9 percent) and West Germany (17 percent).
Japan is notorious for admitting fewer imported manufactured goods than other nations—importing raw materials and unfinished products instead.
In the 1980s, the ration of manufactured imports to GNP was less than 3 percent in Japan compared with roughly 7 percent in America and well over 10 percent for most European countries.
[10.4.10]
[Too bad that Tom Friedman could not point these comments out in That Used to be Us.]
But then, passive acceptance of Japan’s growing role in the U.S. economy—
together with the use of American muscle to fight Japan’s political battles—
is precisely the goal of the “globalization” line.
Excuse No. 5
Excuse No. 6
Chapter 11
...
Japan’s propaganda is effective because
it is delivered systematically by thousands of credible spokespersons.
While some are Japanese, most are Americans.
The motivation of the Japanese is obvious.
The incentive for most Americans is, too: money.
Still,
some Americans reinforce Japan’s positions out of a sincere conviction
that Japan’s positions are right and Japan’s critics are wrong.
Regardless of their motivation,
Japan’s American assets help tilt
much of the debate about U.S.-Japanese relations
in Japan’s favor.
The Soviets have long attempted to smooth their relationships with foreigners
by using spokespersons who serve as
what Karel von Wolferen calls “buffers”—
people who speak the language of the foreign country;
are familiar with that country’s culture, politics, and current thinking;
and can present the Soviet propaganda lines convincingly….
Japan’s buffer system is far larger and far more effective
than that of the Soviets, which reflects the fact that
buffers have had a long-standing role in Japan’s foreign relations effort.
...
[M]any of Japan’s buffers operate government or corporate institutes.
Some are academics and editors from leading Japanese publications.
Others are officials of the Keidanren.
A few—like former MITI Vice Minister Makoto Kuroda—
are retired Japanese diplomats and government officials.
Still others are leading Japanese business leaders.
The best of these buffers spend much of their time abroad
advancing Japan’s positions with the foreign press,
at conferences, and in meetings with foreign opinion leaders.
At nearly every symposium on U.S.-Japan relations held in the United States,
the same people from this small cast of buffers are put forward as
the “face of Japan.”
Within Japan, most foreign visitors are introduced to
a surprisingly small universe of people
who constitute what could be called the “buffer class”—
Japanese notables from business, academia, politics, and government
whose task it is to “handle” foreigners.
Often, foreign visitors are “matched” to meet with members of the buffer class
who have attended the same schools or have lived in the same countries.
...
Since the end of World War II,
the most influential advocacy of the Japanese point of view in the United States
has come from a small coalition of America’s Japan experts and insiders.
Colloquially, their critics call them the Chrysanthemum Club—
after the floral symbol of Japan’s Imperial family.
Membership in this club consists primarily of
those Americans with an intellectual, personal, or business stake
in the present course of U.S.—Japan relations.
First among equals in this club are
those members of America’s foreign policy establishment who deal with Japan.
They try to preserve “the relationship” by defending Japan to Americans.
...
Just as American diplomats want to preserve the U.S.-Japanese relationship,
many Defense Department officials wish to retain the status quo
of American military bases in Japan.
To these officials, any other aspect of the U.S.-Japan relationship
is merely a bargaining chip
to be employed in negotiations over these facilities.
The overwhelming majority of America’s Japan experts in universities and think tanks
depend on the Japanese for hard-to-get access-and often funding—
to conduct writing and research about Japan and U.S.-Japan relations.
…
Other Chrysanthemum Club members are ideologues devoted to
the philosophy of anti-Communism or the tenets of “free trade.”
To them, changes in current U.S.-Japan relations
might push Japan out of the American sphere of influence
and away from a free trade regime.
Still others simply admire Japan—or enjoy criticizing the United States.
More than a few are executives of
American companies with a special niche in the Japanese market,
who doubtless feel that change could threaten their economic standing.
..
Japan has thousands of spokesmen who distribute its propaganda.
When those who are Japan’s employees are clearly identified,
journalists and policymakers can fairly balance their judgment of
the facts and arguments presented to them,
because they know that the spokespersons are in the pay of Japan.
But
the financial ties of the many Americans who speak for Japan
are usually far less visible.
And Congress, federal officials, and the public
are usually unaware of these links
when they hear these people’s comments on U.S.-Japan relations.
Since the mid-1970s, for instance, ex-trade official Harold Malmgren
has advised Japanese corporations and the government of Japan.
Over the past fifteen years,
dozens of journalists have cited Malmgren
as an expert on American trade policies and U.S.-Japan relations.
But the journalists who quote him
rarely identify Malmgren’s money ties to Japan.
In the midst of Zenith’s fight against Japan’s television cartel,
for instance,
Malmgren criticized Zenith CEO John Nevin in a Chicago Tribune story.
To the story’s readers,
Malmgren was just an impartial Washington analyst
who had no personal interest in the particulars of the Zenith case.
But this impression was as incorrect as Malmgren was interested.
Though the Tribune piece never mentioned it,
Malmgren was paid $300K by Japanese television manufacturers
to broker a political deal with the Carter [39] Administration.
The Tribune story also overlooked Malmgren’s contract with the Japanese,
in which he said he might be
“engaged in the preparation and dissemination of political propaganda”
on behalf of his clients.
The Zenith affair was only one of many forums in which
Malmgren has been able to advance his views.
A search by NEXIS reveals that during the 1980s
Malmgren was cited or quoted in
seventy-six stories about trade and economic issues.
As Congress was drafting tough new trade legislation in 1987 and 1988,
Malmgren’s views on the trade bill and its implementation
were printed by many of America’s leading news organizations.
In many of these stories,
Malmgren denigrated the legislation,
particularly those elements that would have strengthened
America’s ability to pry open Japan’s closed markets.
He called the legislation “technical protection” and
“vigilante-style unilateral retaliation.”
And while he was lambasting American trade legislation,
Malmgren was working for Japanese trade interests.
He earned $51K in 1987 and $105K in 1988 as an adviser to the
Japan External Trade Organization (JETRO) in New York.
The articles that cited Malmgren identified him as a
“former U.S. trade negotiator [and] now a consultant,” or
“former trade negotiator,” or “a trade consultant in Washington,” or
“a leading international trade specialist,” or
“president of Malmgren, Inc., and former trade negotiator.”
None of these mentioned that Malmgren was working for the Japanese.
Like Harold Malmgren, dozens of former U.S. trade officials in the pay of Japan,
as well as hundreds of academics
whose work is supported by Japanese funding and access,
write and are regularly quoted on trade matters
without their financial links being revealed.
Most often, these financial links are not revealed
because they are not known.
Gaps in the sort of information largely are attributable to
serious loopholes in federal reporting requirements for foreign agents.
Malmgren, for instance,
canceled his foreign agent registration with the Justice Department
in September 1985.
He is not even listed [as of 1990] in Washington Representative,
the standard reference source on
lobbyists, lawyers, and consultants in the capital.
To find a record of
Malmgren’s relationship with the government of Japan in 1987 and 1988,
a reporter would have to guess that JETRO might be one of his clients.
Then the reporter would have to read through
all of JETRO’s foreign agent activity filings with the Justice Department.
If he was simply providing advice and counsel to Japanese companies,
no public record of his relationship would exist for the reporter to cite,
for the Foreign Agents Registration Act (FARA)
does not require Malmgren to keep registering
if he is not actively and directly lobbying
or attempting to influence public policy.
Nor does it require him to maintain a registration
if his only job is to advise foreign interests
or to conduct research for them.
Perhaps few, if any of Malmgren’s public views
have a connection with the source of his livelihood.
The point remains: readers need and deserve such information
to weigh, interpret, and finally judge comments by
Malmgren and others who work for Japan.
Just as vocal advocates often conceal financial ties to Japan,
other trade experts are frequently bullied into
a pernicious form of self-censorship.
An executive producer of an influential weekly public affairs program
says that
since the early 1980s
fewer and fewer American trade experts
are willing to criticize Japanese policies on the record.
One former U.S. negotiator explains why:
As they do with former trade officials,
the press and federal policymakers
often call upon Wall Street financiers
for comments and policy advice on U.S.-Japan economic relations.
For the most part,
these Wall Street experts reinforce Japan’s point of view.
It’s not surprising.
Japanese investors provide much of the new money
on which Wall Street depends.
And Japanese investors now own an extensive financial stake
in many of America’s leading investment firms.
Nomura Securities, for instance, owns 20 percent of Wasserstein, Perella,
the prominent merger and acquisition (M&A) specialists.
Yamaichi Securities holds 20 percent of the Lodestar Group,
which is led by the ex-vice chairman of Morgan Stanley & Company.
Sumitomo Bank bought a 12.5 percent share in Goldman, Sachs for $500M in 1986.
Former Federal Reserve chairman Paul Volcker works for Fuji-Wolfensohn,
a joint venture to which Fuji Bank contributed $52.5M
of the $55M start-up capital.
Volcker says most of the firm’s clients are Japanese companies
that want to expand their presence in America.
When a Wall Street executive reinforces the Japanese point of view—
in print, in public debate, on Capitol Hill, or elsewhere—
the important money relationships that exist
between the executive, his firm, and the Japanese
are seldom acknowledged.
One of the most prominent Wall Street firms
that broker Japanese purchases of American assets
is the Blackstone Group,
which is 20 percent owned by Nikko Securities.
Blackstone has been the investment banker for many Japanese acquisitions
of prestigious American companies,
including the Sony buyout of CBS Records and Columbia Pictures.
In the process, Blackstone has prospered.
Financial World reports that
Blackstone chairman Peter Peterson earned at least $15–25M in 1988.
To attract more business,
Blackstone ran a full-page advertisement
in Japan’s largest daily business journal, Nihon Keizai Shimbun.
The ad, written in Japanese, encouraged Japanese companies
to continue their acquisitions of American firms.
It extolled the economic advantages of such investments—
entry into a new field, increased capacity in an existing field,
and greater penetration of a foreign market (America).
As the ad makes clear,
Blackstone also offers the Japanese political advice about
how to keep these acquisitions “friendly” ones.
The promise is not hollow.
Three of the firm’s key officers give Blackstone its political leverage:
Peterson, Secretary of Commerce under President Nixon [37]
and onetime head of Lehman Brothers;
David Stockman, who directed OMB in the first Reagan [40] Administration; and
Roger Altman, Assistant Secretary of the Treasury in the Carter [39] years
and an economic adviser to
presidential candidate Michael Dukakis [trying to be 41] in 1988.
Not surprisingly,
Peterson and Stockman are two of the nation’s strongest advocates
for keeping America’s markets open to Japanese exports and investment.
Both men write articles, address conferences, and advise policymakers
on the topic.
At the same time,
Peterson heads both the prestigious Council on Foreign Relations
and the [Peterson] Institute for International Economics—
a Washington think tank that has been most effective
in enforcing a rigid “free trade” orthodoxy over the past decade.
In 1988,
Business Week’s William Holstein asked Peterson
whether Blackstone’s lucrative financial relationship with the Japanese
affected his views on Japan or his role
as head of two of America’s most influential policy organizations.
Peterson responded,
“I’ve been for open trade and open investment since the 1950s,
at a time when it hurt my short-term interests.”
The Japanese are naturally drawn to such laissez-faire advocates as
Peterson, Stockman, and Altman.
They are also attracted by
the prestigious links such men have had with the government,
their unsurpassed access in Washington, and
their commanding influence in prominent policy organizations.
As William Gleysteen, president of the Japan Society in New York, says,
the Japanese “think the Council on Foreign Relations is made of gold.”
The Blackstone Group uses its connections to attract Japanese clients.
It publicizes its relationships with the Council on Foreign Relations
and other prominent U.S. policy organizations.
The Nihon Keizai ad prominently featured a group picture of
Stockman, Altman, Peterson, and two other partners
[Lawrence D. Fink and Stephen A. Schwarzman].
The biographies of the three financiers emphasized their political connections and influence with America’s key opinion leaders.
Peterson, for example, was described this way:
Blackstone has connections in Washington,
has influence in America’s most exclusive foreign policy circles,
and is a part of the powerful American establishment
in which Japan needs well-placed friends.
A number of former Presidents have engaged in
post-presidential commercialism
Until recently, though,
no former President has ever rented out the prestige of the office
or provided a foreign entity with public endorsements.
In October 1989, Reagan [40] hired himself out—for $2M—
to do public relations work for Japan’s Fujisankei Communications.
The Fujisankei conglomerate,
headed by a controversial and conservative tycoon,
owns Japan’s largest radio network, a national newspaper,
and the country’s most successful television chain.
For two of the nine days that Reagan was in Japan,
he was an official guest of the Japanese government.
Emperor Akihito and Empress Michiko
hosted a lunch for the Reagans at the Akasaka Palace in Tokyo.
A Stat Guest House banquet was hosted by Prime Minister Toshiki Kaifu
and attended by three former Prime Ministers.
The Japanese government presented Reagan with Japan’s highest honor,
the Grand Cordon of the Supreme Order of the Chrysanthemum.
For the remainder of his trip, the ex-President worked for Fujisankei.
He made two twenty-minute speeches and attended company-sponsored events.
He gave exclusive interviews to Fujisankei’s television stations and newspapers.
He presided over a concert for 27,000 guests in Yokohoma
to raise money for the Reagan Presidential Library.
He also solicited additional library contributions
from wealthy Japanese industrialists.
While privately seeking Sony Corporation funds for his library,
Reagan defended
Sony’s controversial October 1989 purchase of Columbia Pictures.
The ex-President proclaimed,
“I’m not too proud of Hollywood these days
with the immorality that is shown in pictures, and the vulgarity …
I just have a feeling that Hollywood needs some outsiders
to bring back decency and good taste
to some of the pictures that are being made.”
As for the growing Japanese investment in America, Reagan said,
“The United States still is the widest investor in the other countries ....
So how can we complain if someone wants to invest in us?”
Most important,
Reagan used his tour as an opportunity to blame America
for the U.S.-Japan trade deficit.
At a Fujisankei-sponsored banquet for Japanese industrialists,
he said trade frictions between the two countries
had been caused by “trade protectionists” in Washington—
the people he “had to fight every day I was there.”
It was a perfect recitation of the “it’s America’s fault” propaganda line
that Japan had peddled throughout the 1980s.
Reagan concluded his trip with a brief talk
aired on Fujisankei’s national television network.
With “America the Beautiful” softly playing in the background,
the ex-President thanked Fujisankei Communications
for making his trip possible.
He congratulated Fujisankei for its efforts to improve U.S.-Japan relations.
It is difficult to imagine
Kaknei Tanaka, Helmut Kohl, François Mitterrand, or Margaret Thatcher
providing a similar paid endorsement of an American firm.
Though with less pomp and circumstance,
Jimmy Carter [39] has also used his prestige on behalf of the Japanese—
specifically, to promote the public career of
Japanese billionaire Ryoichi Sasakawa.
On November 7, 1989,
Carter praised Sasakawa and the Sasakawa foundations
in a full-page advertisement placed in the Wall Street Journal.
The ad featured
an enormous picture of the ex-President in the center of the page.
In the accompanying text,
Carter described how Sasakawa’s foundations
had provided financial backing for Global 2000,
the ex-president’s agricultural aid project for Africa,
through the Atlanta-based Carter Center.
Global 2000 consumes much of Carter’s time and has helped rehabilitate
his once less than popular image with the American people.
...
Through his purse, Sasakawa has ingratiated himself
with Carter and other world leaders.
The Sasakawa foundations—with close to $500M in donations outstanding—
underwrite a great deal of the research and policy analysis on Japan
that is carried out in American think tanks, universities, and other institutions.
Many Japanese say that Sasakawa’s contributions
are merely a vain attempt to spend his way to a Nobel Peace Prize.
But much of his money buys nothing more than propaganda that is aimed at
helping Americans “understand” Japan’s point of view.
Carter’s endorsement of Sasakawa gives credibility to the man
as well as his activities.
In recent years,
Sasakawa and other Japanese industrialists
have cultivated incumbent presidents by funding their pet projects.
The Japan Economic Journal reports that Shigeru Kobayashi,
a Japanese real estate mogul worth an estimated $6G,
“donated more than $1M to Reagan projects in 1987 and 1988,
including $100K to Nancy Reagan’s anti-drugs program
and $1M to the Reagan Historical Library in California.”
When the departing president
held a small farewell White House party for his friends in January 1989,
Kobayashi and his son were among the select group of guests.
In the 1980s,
Japanese individuals and companies provided major contributions
to build both the Reagan and Carter presidential libraries.
At $100 per person,
ticket sales from Reagan’s “friendship concert” in Yokohama, for instance,
netted him more than $1M for his library.
The Japanese government contributed an additional $2M to the project.
The Carter Presidential Library in Atlanta
has also received considerable support from Japan.
Together,
the donations of Sasakawa’s Japan Shipbuilding Industry Foundation
and YKK, the Japanese zipper company, totaled more than $1M.
Although it is disturbing to consider,
future incumbent presidents are certain to take note of
the extent to which the Japanese funded their predecessors’ pet projects.
They are certain to recognize
how rewarding Japan’s friendship might be
when they themselves retire.
Someday they themselves will need generous friends to help them support
their presidential libraries and museums,
the only archives for their presidential records
and monuments to their presidency.
The architects of the U.S. Constitution were worldly men.
They anticipated that foreign powers would attempt
to sway the views and decision of the President.
The Constitution therefore forbids incumbent Presidents
from accepting gifts from foreign investors.
But the Founding Fathers did not anticipate that
sitting presidents would seek foreign money to fund their private projects.
They certainly could not have foreseen that ex-presidents
might turn to blatant commercialism after leaving office.
Nor could they have imagined that ex-presidents
would seek funds from foreign powers
to support their post-retirement activities.
Until recently, former presidents were expected to comport themselves
with the dignity befitting America’s highest and most honored position.
For almost two centuries, their behavior met that expectation.
But now former presidents of the United States are available
to do public relations stints for America’s biggest trade competitors.
[Of our five most recent ex-presidents,
at the time Choate’s book was published in 1990
and so are considered in detail in the book.
It would be interesting to see how Choate would describe
the post-presidential activities of the most recent three.]
Chapter 12
[This chapter is omitted from this document.]
The Cold War is over,
and many of the policies and attitudes that it spawned are obsolete.
In years ahead,
America’s influence in the world will be shaped
more by economics, science, and technology
than by the tools of war.
To meet this new challenge,
America urgently needs new policies.
Before the United States can chart a new national direction, however,
some fundamental issues require attention.
The answer to these and similar questions will determine America’s future.
Today, much of the current policy and political debate over these issues
is fundamentally dishonest.
Too many of the leading participants have a financial stake—often undisclosed—
in advocating foreign points of view.
When American and foreign interests are consistent,
the actions of these agents of influence are of no real importance.
It is only when U.S. interests are played against foreign interests
that this power game becomes truly threatening to the United States.
Today, this is the prevailing nature of the game.
Both the game and its rules require basic reform.
Here are eight relatively modest proposals that would do much
to reduce the influence of foreign interests over American affairs.
1
The revolving door is a chronic problem in Washington.
In recent years it has begun to spin faster and with greater frequency.
Partly this is due to the fact that
relatively low federal salaries
discourage many talented people from entering public service.
But there is another, equally important reason:
during the Carter [39] and Reagan [40] years,
public service was made an object of contempt.
Neither Reagan nor Carter seemed to understand that
they could not denigrate government without denigrating public service.
As a consequence, the top positions in agencies and government
now go to a small cadre of insiders
who shift from public office to lobbying and back again.
For them,
public service is a sabbatical from working for the very same special interests
they are supposed to hold in check as federal officials.
When the revolving door involves trade matters,
many of those special interests are foreign-based
and the nature of the conflict pits American interests against foreign.
To stop the Washington revolving door—or at least to slow it—
three actions are required:
First, those who hold the top federal positions,
including the Director of the CIS, USTR, and Secretary of State,
should be prohibited permanently
from becoming a foreign agent or a lobbyist for domestic companies.
Those who would refuse to serve in government because of such a limitation
certainly are not the kind needed to tend the public’s affairs.
Second,
a longer “cooling-off” period is required for lower-level federal officeholders.
Federal law stipulates that as of January 1991,
ex-officials will have to wait one year
before they can lobby, counsel, or advise on trade matters.
This short time period cannot possibly guarantee
the integrity of trade policymaking and administration.
A period of five to ten years
would slow the movement between public service and influence peddling
and help assure the integrity of federal decision making.
Given these tighter rules,
American corporations need to make a concerted effort
to hire former federal officials with trade expertise.
One of Japan’s principal political advantages is that
those who craft and administer American trade policies know that
their best post-government job opportunities lies with the Japanese—
largely because U.S. companies do not hire them.
In theory, this should not be important.
In reality, it is.
Lastly,
the federal program for career public servants needs to be strengthened
to encourage more talented people to work in government and to stay longer.
Japan and other nations have a distinct advantage in trade negotiations
because their side is always represented by
a handful of political appointees
and a staff of competent civil servants.
Because America fills dozens of ambassadorships
and hundreds of key policy positions
with political amateurs,
negotiations with other nations have become akin to
a baseball game between the Oakland A’s and a sandlot club.
Guess which is America’s Team.
2
In politics, sunshine is the best disinfectant.
Although the Foreign Agents Registration Act of 1938
requires those who represent foreign principals
to report in some detail their client relationship to the Attorney General,
the act has many loopholes.
Lobbyists who work for an American affiliate of a foreign company,
for example, are exempted.
So are lawyers who perform legal chores on their clients’ behalf,
even when the same work might be considered lobbying
when done by nonlawyers.
Foundations funded by foreign companies and governments
but incorporated in the United States
are similarly excluded.
If American officials and the public are to possess
the information they need to balance
what they read and hear from foreign interests,
much greater, more stringent disclosure requirements are needed.
The first step is to require that
all those who represent foreign clients—
lawyers, lobbyists, foundations, and others—
provide full disclosure to the Justice Department.
No exceptions.
The second step is to increase the Justice Department’s capacity
to monitor compliance with this law.
Today, a staff of fewer than fifteen people is responsible for
monitoring 3,500 registered foreign agents.
The Foreign Agents Registration Act division of the Justice Department
is so understaffed that
years often pass before reports are audited for accuracy.
Many foreign agents know this, and exploit the situation
by failing to provide all the required information.
3
Today, foreign companies participate in American politics
by making major financial contributions to
national political parties, state political parties,
and state and local campaigns,
and by operating PACs through U.S. affiliates and trade organizations
over which they have effective control.
Japanese and other foreign contributions
to American political parties and campaigns
constitute blatant interference in America’s domestic affairs.
A flat prohibition on such contributions is long overdue.
Money politics is bad enough,
foreign money politics is out of the question.
4
Franklin D. Roosevelt [32] was the only President in modern times
who did not want a physical monument to his presidency. [Cf.]
Presidential libraries serve that purpose for Roosevelt’s successors.
The responsibility for raising private funding for these libraries
has forced American Presidents to become supplicants to monied contributors.
Japan and other foreign interests
have ingratiated themselves with a succession of Presidents
by providing large donations to build these libraries.
The surest way to stop this backdoor politicking
is for the federal government to fully fund their construction.
The cost is trivial compared to what is at risk.
5
The Constitution prohibits incumbent Presidents
from accepting gifts or other compensation from foreign interests.
But it says nothing about ex-Presidents.
The post-presidential commercialism of ex-Presidents
demeans the presidency itself.
By holding out the promise of
multimillion-dollar speaking fees or other remuneration,
foreign interests have a very real means
of exerting undue influence on a President.
The most direct way to eliminate this potential abuse
is to prohibit ex-Presidents from
accepting pay or valuable gifts from foreigners,
perhaps at the risk of their pensions.
6
For many years, states and localities have competed strenuously
to lure investment and facilities that create jobs.
Given the importance of the U.S. market,
the issue for most foreign companies is never whether to invest but where.
As the level of competition increases among states and localities,
so does the abi8lity of foreign investors
to gain increasingly generous state and local tax breaks
and other valuable handouts.
These subsidies can be extremely costly for state and local governments.
In the 1980s, the state of Kentucky gave Toyota
more than $325M in taxpayer-financed incentives
to locate a manufacturing facility there.
Other Japanese companies sit back and wait
while states fight among themselves to offer better deals.
To gain the favor of prospective investors (domestic as well as foreign),
many governors and mayors
constantly lobby Washington and their state congressional delegations
on these investors’ behalf.
During the Toshiba affair,
some of Toshiba’s most effective political advocates were governors and mayors
who either had one of its facilities or wanted one for their region.
The Japanese government and Japanese businesses
take advantage of state and local officials’ intense desire
to attract facilities and jobs.
This political problem is not unique to America.
To keep it under control, the European Community
limits how much member states can bid to attract investment.
Similarly,
Japan also limits how much local governments
can offer potential corporate investors.
America needs the same restrictions,
and it needs them for both foreign and domestic investment.
7
Foreign lenders finance a significant portion of America’s budget deficit.
As a result,
the United States is losing much of the flexibility and independence it needs
to craft its own domestic, trade, and foreign policies.
Each upcoming Treasury auction
prompts a new round of jitters among U.S. Treasury officials.
They fear that the Japanese government and Japanese institutional investors
will decide not to participate.
In their anxiety,
Treasury and other cabinet officials
spend much of their time between auctions
pressuring their colleagues in the executive branch
not to take tax, regulatory, trade, or other policy measures
that might offend Japanese and other foreign investors
and cause them to boycott a Treasury bond sale.
Similarly, the ability of the Federal Reserve to set interest rates
is greatly limited by America’s need to attract foreign capital.
This results in
an upward pressure on the exchange rate and on domestic interest rates,
and reduces the Federal Reserve’s flexibility
to respond to domestic economic downturns.
The deficit continues because both Republicans and Democrats
have put partisan advantage above national interest.
They have refused to cut spending or raise taxes.
The longer this stalemate persists,
the more vulnerable America becomes to foreign political pressures.
8
Twenty years ago [i.e., around 1970],
American business began to take serious note of the skill with which
the Japanese plied the American market.
Almost overnight,
Japan watching became a cottage industry.
Books and articles about the Japanese style of management,
manufacturing processes, quality assurance, resource allocation,
employment practices, strategic planning, and training techniques
became must reading for American managers.
In the end, we came to understand that one secret of Japan’s success was that
the Japanese had adopted fundamental American management techniques
and then applied them more rigorously and skillfully than we.
Likewise,
American businesses have long used a full range of public affairs skills
to strengthen their position in the domestic market.
The Japanese and other foreign interests have studied us closely
and now understand these techniques.
They operate in the same forums as American companies,
abide by the same rules,
and bid for the same talent to guide and represent them.
They have demonstrated that
they can match their American competitors in this critical art
at every step—and outstep them at many turns.
Prowess in molding public opinion—
gaining the credibility to blunt negative sentiments
or to advance longer-term goals—
is the newest, and perhaps most powerful, advantage
in the hands of foreign competitors.
It is an advantage that American firms hand them on a platter.
By remaining largely disengaged from their own government,
American firms create a domestic political vacuum
that the Japanese and other foreign interests gladly fill.
If American companies intend to succeed
in the 1990s and the twenty-first century,
they must pay at least as much attention to public affairs
as a mainstay of competition
as they do to producing first-class goods and services.
Indeed, of the many important lessons
the Japanese have taught American businesses, one stands out:
the political dimension of competition is as consequential as the economic.
[The message contained in Eamonn Fingleton’s 2008 In the Jaws of the Dragon
is rather the opposite:
American businesses are heavily involved in public affairs,
but all too often in the interest of the Chinese or Japanese,
not of the American people.]
In sum, other nations’ campaign for America is completely legal.
It plays the American economic game by American rules.
It uses the campaign tactics and methods of American politics.
It hires Americans to lobby, educate, and influence other Americans.
It is the highest stakes political-economic game in the world today,
affecting whole industries, billions of dollars, millions of jobs,
and ultimately, the wealth and power of nations.
It is also deeply corrosive of America’s political and economic system.
The revolving door of Washington, D.C., breeds cynicism and mistrust,
and represents a virulent strain of political corruption—
completely legal, completely unethical.
The problem, of course, is not in Tokyo or any other foreign capital,
but in Washington, D.C.
Agents of Influence:
How Japan Manipulates America's Political and Economic System
by Pat Choate.
The emphasis is added.
The following uses suffixes
G = giga = billion = 109,
T = tera = trillion = 1012.
Agents of Influence
How Japan Manipulates America's Political and Economic System
1990
Before giving excerpts from the book proper,
we begin with the contents of the flap
of the original hard-cover edition.
In this explosive, controversial, widely anticipated book, Pat Choate ...
shows how powerfully Japan’s lobbyists in the United States
are affecting the course of our politics and our economy—
and how Japan is spending $400M a year to sway American public opinion
and support a network of well-connected ex-officials and lobbyists.
Choate reveals in startling detail how this money is being parceled out
on pro-Japanese materials for elementary and high schools around the country,
on grants to American scholars and policy institutes,
on lobbyists,
many of whom once held high-level positions in the U.S. government;
and even on funding of political parties.
What makes all this possible?
Among a number of factors:
Washington officials who are cautious in their criticism of the Japanese
for fear of being labeled Japan bashers
and thus losing future opportunities to make big money working for Japan;
the astonishing dependence of the U.S. Treasury on Japanese monies
to finance the federal budget deficit;
bureaucratic red tape that undercuts U.S. efforts to confront
anti-competitive foreign practices such as dumping and cartels;
and the corrupt manner in which America finances its political campaigns.
Choate discloses the nature Japan’s unprecedented political power
[students of the Israel Lobby will surely take exception to that]
in this country—how Japan can, in effect,
veto U.S. legislation inimical to its interests,
politically overwhelm virtually any combination of
companies, unions or other groups it opposes,
shape those key U.S. trade and economic policies that decide
which American industries will grow or decline,
which American jobs will remain or disappear.
He reveals how Japan can reach up to the American presidency itself
or down to the grass-roots level across the nation
and influence political decisions
that allow Japan to advance its national interests
and win market share in the United States for its target industries.
In an Appendix,
Choate identifies some 200 high-ranking American former trade officials,
diplomats, defense officials, ex-members of Congress, and even CIA personnel
who now represent foreign governments and corporations in Washington,
along with the fees they have been paid.
The very existence of this revolving door in Washington, says the author,
breeds cynicism and mistrust
and represents a virulent strain of political corruption—legal, but unethical—
that threatens America’s sovereignty.
Solidly documented and boldly presented,
Agents of Influence is a book of extraordinary timeliness
with profound implications for the United States, Japan and the world at large.
[Now for the excerpts from the book proper.]
A JAPANESE VIEW
“Influence in Washington is just like in Indonesia.
It’s for sale.”
—Japan Economic Journal
A BRITISH VIEW
“America has the most advanced influence-peddling industry in the world.
Washington’s culture of influence-for-hire
is uniquely open to all buyers, foreign and domestic ...
its lawful ways of corrupting public policy remain unrivaled.”
—The Economist
AN AMERICAN VIEW
“The real scandal in Washington
is not what is done illegally,
but what is done legally.”
—The New Republic
A DUTCH VIEW
“A big part of the problem is that
Americans can be bought so easily.”
—Dutch writer Karel von Wolferen
“Influence in Washington is just like in Indonesia.
It’s for sale.”
—Japan Economic Journal
A BRITISH VIEW
“America has the most advanced influence-peddling industry in the world.
Washington’s culture of influence-for-hire
is uniquely open to all buyers, foreign and domestic ...
its lawful ways of corrupting public policy remain unrivaled.”
—The Economist
AN AMERICAN VIEW
“The real scandal in Washington
is not what is done illegally,
but what is done legally.”
—The New Republic
A DUTCH VIEW
“A big part of the problem is that
Americans can be bought so easily.”
—Dutch writer Karel von Wolferen
Forward
[F.1]
Japan is running an ongoing political campaign in America
as if it were a third major political party.
It is spending at least $100M each year to hire hundreds of Washington, D.C.,
lobbyists, super-lawyers, former high-ranking public officials,
public relations specialists, political advisers,—even former presidents.
It is spending another $300M each year to shape American public opinion
through its nationwide local political network.
[F.2]
Better financed, more extensive, and more effective
than either U.S. political party
or any domestic industry, union, or special interest group,
Japan’s campaign for America serves one very important purpose:
to influence the outcome of political decisions in Washington
that directly affect Japanese corporate and economic interests,
decisions where every day hundreds of millions of dollars-
and cumulatively billions of dollars [and literally millions of jobs]—
are on the line.
[F.3]
By knowing about these decisions ahead of its U.S. competitors,
by using its network of well-connected insiders and lobbyists in Washington,
by unleashing its grass-roots political network,
by shaping the coverage of economic issues by journalists, and
by mobilizing its opinion leaders in universities and think tanks,
the Japanese are able to use their purchased political influence in America
as a critical element of their corporate and national strategies.
[F.4]
This political game goes on daily and has for more than two decades.
The victories scored by Japan include consumer electronics, supercomputers, machine tools, ball bearings, optical fibers, satellites, rice, biotechnology, air transport, telecommunications, semiconductors, legal and financial services,
among dozens of others.
No American industry—regardless of how competitive—is safe.
[F.5]
In politics, as in business,
Japanese strategy follows a simple and predictable pattern:
protect your own domestic market from foreign penetration
and capture as much of your competitor’s market share as possible.
The Japanese strategy succeeds largely because of
fundamental political differences between Japan and America.
[F.6]
Japan, for instance, does not tolerate its top government officials
becoming other nation’s top lobbyists.
America does.
[F.7]
Japan does not permit its politicians or its political parties
to accept donations from any foreigner, foreign corporation,
or organization controlled by foreigners.
America does.
[F.8]
Japan does not allow foreign interests
to stage-manage “grass-roots” political campaign among its people.
America does.
[F.9]
Japan does not depend upon other nations
to finance its thinking about Japan’s long-term role in the world economy.
America does.
[F.10]
Japan does not allow other nations
to manipulate the curricula taught in its elementary, high school,
and college students.
America does.
[F.11]
In short,
America tolerates foreign interference in its domestic affairs.
But Japan does not.
This basic political difference is a major reason why
Japan’s trade negotiators and companies succeed,
while America’s fail.
It reflects the cumulative personal and professional decisions
made by hundreds of Americans who constitute
an important segment of this nation’s governing class.
[F.12]
To put the matter in perspective,
when John Maynard Keynes resigned from Britain’s Treasury in 1919
after playing a key role in the negotiations over the Treaty of Versailles,
he was faced with a problem of how to earn a living.
His previous government salary had been ₤1,200 a year,
and Keynes, never in his life averse to making money,
naturally hoped to make more.
He was offered the chairmanship of the British Bank of Northern Commerce,
which was controlled by two prominent Scandinavian industrialists.
For working only one day a week, he would have been paid ₤2,000 per year.
But Keynes felt that he could not accept.
“I am sure they want me,” he wrote his father,
“because they think I shall be of use to them
with the Treasury and the Foreign Office;
whereas in fact I am not at all disposed to play the foreigners’ game
against our own departments.”
In today’s Washington,
such a standard of political rectitude seems hopelessly antique.
[F.13]
The declining civic virtue described in this book
reflects an American weakness.
It is not the result of villainy by the Japanese or any other foreign interest.
America’s foreign competitors merely use
the legal opportunities and services presented in America by Americans
to maximize their economic and political advantage here.
Any indignation about undue foreign influence in America’s internal affairs, therefore,
should focus on those Americans
who have supported the progressive cheapening—even the fundamental corruption—
of the value of national service
that used to guide the conduct of our public life.
[F.14]
Naturally,
many of those who serve as agents of influence for foreign interests—
particularly those who once served in the United States government—
object to any inspection of what they are now doing
and its consequences for America.
Many foreign corporations and governments share those objections.
[F.15]
Their criticism takes three forms.
First, they claim that
the examination of foreign influence
over America’s political and economic system
smacks of “McCarthyism.”
But the issue is not about patriotism or ideology.
It is about systemic, identifiable, virulent political corruption—
all entirely legal and widely tolerated, at least in official Washington.
[F.16]
Second, the critics allege that
the analysis of Japan’s politicking, lobbying, and propagandizing in America
somehow constitutes “Japan bashing,” or even perhaps even “racism.”
[Just as, if you change “Japan’s” in the above sentence to “Jewish,”
you may be labeled an “anti-Semite,” “hater,’ or, again, “racist.”]
Of course, some Americans are racist and some bashing of Japan does occur.
But the vast majority of the accusations of racism and Japan bashing
are little more than cynical gambits offered up
to discredit legitimate American concerns and enforce self-censorship.
[F.17]
Japan’s political efforts are cited herein mainly because the Japanese have
the most extensive, sophisticated, and successful political-economic machine
in the United States.
Other countries are now mimicking it
by establishing similar webs of influence in America.
An examination of Japan’s political activities here, therefore,
provides a convenient guide to the broader trend.
[F.18]
Finally, some protest
the examination of foreign lobbying, politicking, and propagandizing
on the ground that Japanese and other foreign interests
merely “play the game by American rules.”
Their point is that if the “game” permits Washington insiders
to peddle influence to the highest bidder,
foreigners should be allowed to bid.
My point is the “game” itself is harmful to American interests
and requires basic reforms.
[F.19]
Foreign interests are, and should be, entitled to
as much representation in Washington as they can afford.
After all, the political stakes for them are as high—sometimes higher—
as they are for domestic interests.
What is at issue here is the nature and form of such representation.
[F.20]
Any reform of the “game,”
particularly those I propose in the concluding chapter,
must be applied equally to domestic and foreign interests.
The corruption of America’s political principles by domestic interests
is no less destructive than by foreign interests, and no more desirable.
[F.21]
The real issue is whether
the manipulation of America’s political and economic system
by Japanese and other foreign interests
has reached the point that
it threatens our national sovereignty and our future,
and if so, what do we do about it.
Introduction
[In.1.1]
The Alfalfa Club
is one of Washington’s most exclusive and least known organizations.
The sole purpose of this oddly named group of America’s most powerful men
(and only men [women were admitted starting in 1994])
is to gather once a year at a Washington hotel for a private black-tie dinner
where members exchange political jests [and maybe enjoy some libations :-)].
[In.1.2]
Among the 670 men who attended the seventy-sixth annual dinner in 1989 were
President George H. W. Bush [41], Vice President Dan Quayle,
the Supreme Court justices (absent Sandra Day O’Conner),
the Bush cabinet, the Joint Chiefs of Staff,
congressional leaders, business titans, former federal officials,
and scores of other Washington power brokers.
[In.1.3]
Senator Lloyd Bentsen, chairman of the Senate Finance Committee
and the 1989 Alfalfa Club president,
drew the biggest laugh of the evening.
Bentsen opened with a story about his wife’s reaction that day
when he told her that he was going to meet with
the great political and economic powers
who held America’s future in their hands.
“Oh,” she said, “you’re going to Tokyo?”
[In.1.4]
In truth, Bentsen’s anecdote was no joke.
America is selling its economy to Japan and surrendering to
the political and economic control that always accompanies such ownership.
Between 1980 and 1988,
Japanese direct investment in the United States
increased by more than 1,000 percent.
Already, the Japanese:
- Own $285G of America’s direct and portfolio assets.
- Control more than $329G of U.S. baking assets
(a 14 percent share of the U.S. market). - Control more than 25 percent of California’s banking assets
and 30 percent of its outstanding loans. - Possess more real estate holdings in the United States
than the members of the European Community (EC) combined. - Routinely purchase 30–40 percent of U.S. Treasury securities.
- Trade up to 25 percent of the daily volume on
the New York Stock Exchange. - Produce
nearly 20 percent of the semiconductors sold in the United States,
more than 30 percent of the automobiles,
almost half the machine tools,
and a majority of the consumer electronics,
among dozens of other goods and services.
[In.1.5]
Of course, foreigners have long invested in the United States.
In the nineteenth century,
British capital helped develop America.
British, Dutch, and Canadian investors still have significant American holdings.
But in the 1980s,
Japan’s investments in America expanded more rapidly than any other nation’s.
By 1995,
Japan will have become the largest foreign investor in America.
By 1999,
Japanese investors will hold more American assets than
Britain, Holland, and Canada combined.
[In.1.6]
To protect and promote their investments,
Japanese proprietors are erecting a complex infrastructure of political influence throughout America.
It is being used to co-opt politicians, shape public opinion,
finance political campaigns, silence or isolate critics,
and blackball appointments to high federal positions.
Already,
Japan’s involvement in America’s internal affairs is so extensive that
U.S. trade policies are often shaped more by Japanese than American interests.
[In.1.7]
Ever since the arrival of Citizen Genet in 1793,
foreign interests have regularly sought to influence
politics and public opinion in the United States.
The Greek Lobby, for instance,
has been able to sway U.S. relations with Turkey, Greece’s neighbor and rival.
For many years,
Chiang Kai-shek’s China Lobby dominated American thinking on China.
The Israeli Lobby has a powerful voice in America’s Middle East policymaking.
The Irish Lobby has long helped influence American policies
on Northern Ireland.
[In.1.8]
But of all nations,
Japan understands best that political power in America
is a commodity that can be acquired by the highest bidder.
Of all nations,
Japan has been willing to pay the most
to shape America’s attitudes and actions.
Of all nations,
Japan wields the most striking power
over America’s economic and trade policies.
And of all nations,
Japan succeeds best at using its political strength in America
to gain economic benefits for itself.
[In.1.9]
One reason that
Japan has such a commanding political presence in the United States is that
it hires so many American lobbyists, political advisers,
and public relations representatives.
While Britain, Japan, the Netherlands, and Canada are—in that order—
the four largest investors in the United States, in 1990
Japan employed one and a half times as many Washington lobbying,
public relations and law firms (92)
to speak on its behalf as Canada (55),
twice as many as Britain (42),
and thirteen times as many as Holland (7).
[In.1.10]
Japan’s political efforts in America also differ substantially in approach
from those of other nations.
Japan’s American political machine is a continuous enterprise
stretching from coast to coast.
Its foundation rests on diplomacy, lobbying, politicking, and propagandizing—
each delicately crafted and systematically integrated with the others.
By contrast,
Canada and the nations of Western Europe
still rely heavily on traditional diplomacy
to influence U.S. economic and trade policies.
Like their American counterparts, most Canadian and European firms
retain Washington representatives
only when they need assistance on such specific matters
as fighting U.S. Customs tariff rulings.
[In.1.11]
While the Japanese have almost unimpeded access
to America’s political and economic system,
their own system remains largely closed to Americans.
Former U.S. trade officials, for example,
can lobby for almost anyone, domestic or foreign.
But former officials of the Japanese government are, for the most part,
simply unwilling to work for an American company.
[In.1.12]
Of equal importance,
the Japanese are reluctant to criticize their government to foreigners.
Paul Krugman, the prominent international economist from MIT, notes that
while everyone knows that Japan’s protectionist policies on rice
are costly to its consumers,
“I have had the experience of finding
Japanese economists from the private sector
refuse to acknowledge that the rice policy is costly,
even in informal conversations.
When pressed hard, they explained that
they did not feel it was their place
to criticize their government to a foreigner.”
[In.1.13]
While Japan claims that its market is open,
foreigners sell relatively little there.
Japanese imports of manufactured goods as a percent of gross national product
are about half that of the United States
and less than a third that of Germany and other members of
the European Community.
Japan also claims that its economy is wide open for investment.
In practice foreign investors face endless hidden obstacles.
Fewer than thirty Japanese companies are sold to foreigners annually,
and most of these are small, insignificant, or in deep trouble.
Although America’s economy is twice the size of Japan’s,
total U.S. direct investment in Japan is less than $17G—
roughly one-fifth the amount of Japanese direct investment in America.
[In.1.14]
In short,
Japanese firms can invest and sell in America,
but American firms find it difficult to invest and sell in Japan.
Japanese companies can actively participate in American politics,
but American companies are unable to do the same in Japan.
Japan can hire Americans to publicly criticize U.S. policies,
but the Japanese are unwilling to do the same for foreigners, even in private.
As a result,
Japan has both a strategic economic advantage
and a strategic political advantage
over American companies.
[In.1.15]
The purpose of Japan’s American political machine
is to preserve these advantages.
Its goals are sixfold:
- To keep the American market open for Japanese exports.
- To smooth the way for additional Japanese purchases
of key American assets. - To prevent discovery or criticism of Japan’s adversarial trade practices.
- To neutralize the political opposition of Japan’s American competitors.
- To influence America’s trade policies toward Japan,
as well as its policies toward Europe and other nations
where Japan has significant economic interests. - To force the integration of the U.S. and Japanese economies to the point
where America will be politically and economically unable
to confront Japan’s mercantile policies.
[In.1.16]
Following Japan’s successful example,
the Koreans, the Taiwanese, and several European countries
are now creating their own political machines in America.
Their goal: to advance their interests in America
and counter Japan’s growing influence over the U.S. government.
[In.2.1]
Although Japan’s American political machine is run from Tokyo,
it is staffed overwhelmingly by Americans.
The cost is more than $400M a year—
an amount roughly equal to the combined total expenditures of
the 1988 House and Senate congressional elections.
At least $100M of Japan’s political outlays goes to
Washington lobbyists, super-lawyers, and political advisers.
The remaining $300M is spent to expand a pro-Japan
state and local political network.
[In.2.2]
These monies finance a variety of activities designed
to shape the attitudes of the American people
and the actions of their government.
To mold the thinking of tomorrow’s leaders, for instance,
Japanese institutions finance
the preparation and distribution of teaching materials
used in hundreds of U.S. grade schools, high schools, and universities
to educate American students about Japan.
Much of this material is nothing but Japanese propaganda.
...
[In.2.4]
To influence the public debate over America’s policies toward Japan,
the Japanese fund a growing number of the policy institutes and scholars
who supply elected and appointed U.S. officials
with ideas and policy positions.
While the integrity of these scholars is generally beyond question,
significant Japanese funding often has the effect of
amplifying one particular set of views
about which policies America should adopt.
Already,
Japan finances virtually all of the U.S.-Japan study programs
operated by American universities and think tanks.
At the same time, it systematically attacks
both the substance of any criticism of its trade positions
and the professional standing of the critics themselves.
[In.2.5]
To shape the positions of American trade associations,
Japanese companies have joined dozens of these organizations
and now, as a matter of course, set their policy and lobbying agendas.
In addition, the Japanese regularly operate front groups
that advocate pro-Japan positions;
they control the operations of these shadowy political coalitions
through a vast network of
American distributors, suppliers, contractors, and local partners.
American companies that need access to Japan’s markets
are told by the Japanese to make a public show of supporting Japan’s positions
in congressional testimony and elsewhere.
[In.2.6]
To influence national politics,
Japan has put on its permanent payroll many leaders from both political parties
and many of the top political advisers to the President,
members of Congress, governors, and mayors.
Japanese corporations now help finance
both the Republican and Democratic parties,
and Japanese business interests make large political action committee (PAC) donations to congressional candidates.
Japanese companies regularly indoctrinate their U.S. employees
on how to vote in elections
and encourage them to lobby Congress
for positions that favor Japanese interests.
[In.2.7]
To influence state and local decision making,
Japan has established a grass-roots network that includes
dozens of Japanese chambers of commerce and
five regional associations of U.S. governors and Japanese business leaders.
In addition,
Japan has sixteen consulates and trade offices strategically positioned
throughout the United States.
At the insistence of their government,
Japanese companies are donating hundreds of millions of dollars
to local civic and social projects
as a mean of influencing Congress
through its constituents, friends, and local supporters.
[In.2.8]
To prejudice the trade and economic decisions
of the President of the United States,
Japan threatens to withhold financing
for the federal government’s huge deficits.
In 1989, this economic blackmail was so obvious
that President G.H.W. Bush [41] publicly cautioned Americans
not to complain too loudly about Japanese investment and trade practices
lest Japan withhold new funds.
[In.2.9]
To sway Washington decision makers,
Japan fields an army of hundreds of lobbyists.
Many of these lobbyists were previously federal officials,
just as any current federal officeholders were once Japanese lobbyists.
The money Japan spends annually on its Washington effort
exceeds the combined budgets of the
U.S. Chamber of Commerce, the National Association of Manufacturers,
the Business Roundtable, the Committee for Economic Development,
and the American Business Conference—
Washington’s five most influential business organizations.
[In.2.10]
Japanese penetration of the American political system is now so deep
that its integrity is threatened
In their own country, the Japanese call this sort of money politics
“structural corruption.”
In this case, it means that
so many advocates of Japan’s position are involved in decision making
that the ultimate outcome is structurally biased in Japan’s favor.
[In.2.11]
Japan now wields so much political power in America that it can, in effect,
veto much legislation that it dislikes.
It can ignore almost any U.S. law or policy that it finds inconvenient.
It can politically overwhelm virtually
any combination of American companies, unions, or other interests
that it opposes.
[In.2.12]
Today,
Japan plays a major role in shaping American public policy
on everything from tariff rates
to federal support for such critical technologies
as semiconductors and high-definition television (HDTV).
Indeed,
Japan now plays a critical role
in devising the policies that will determine
which U.S. industries will survive and which will not,
which parts of the country will grow and which will decline,
which jobs will remain and which will disappear.
[In.2.13]
While no one doubts that Japanese and other foreign interests
are entitled to representation in Washington,
one may raise fair questions about its nature and form:
- Should former high-ranking U.S. officials—
people who are privy to the intimate details of
Washington’s economic and trade strategies—
be permitted to lobby for Japanese and other foreign economic rivals? - Should Japanese and other foreign corporations
be allowed to operate political action committees
and involve themselves in the financing, even indirectly,
of American elections? - Should Japan be allowed to conduct
secret propaganda programs in America? - Has Congress become too susceptible to
the political pressure generated by Japanese corporations? - Does Japanese investment, lobbying, politicking, and propagandizing
threaten the national sovereignty of the United States?
[In.3.0]
Whatever the answer to these questions,
the central point of this book is that
the ultimate responsibility for any domestic transfer of political power
from American to foreign hands
resides with Americans, not with the Japanese or any other nation.
[In.3.1]
If the standards for post-government employment of high officials
permit a revolving-door corruption that is harmful to American interests,
the responsibility for changing those standards rests with the American people,
and not with the foreign interests that profit from them.
[In.3.2]
If the activities of those in the pay of foreign interests are too hidden,
the responsibility for putting the public spotlight on what they do
rests with inquisitive American media,
an investigative American government,
and a vigilant American public.
[In.3.3]
If the nation invests too little
in educating American elementary- and secondary-school students about
world history, geography, languages, and economics,
the fault lies not with Japan
for filling that vacuum with its self-serving propaganda,
but with us for permitting it.
[In.3.4]
If huge federal budget deficits are forcing America to borrow too much
and to sell off too many of its productive assets,
then the burden for budget reform lies with
American lawmakers, businesses, and taxpayers,
not with foreign lenders and investors.
[In.3.5]
If American business and government are so disengaged from each other
that foreign economic rivals can exploit the resulting political vacuum,
then the responsibility for establishing
a closer and more cooperative relationship
falls on U.S. corporations and American officials,
not with the foreign governments and their companies.
[In.4.1]
In a sense, this book is not about Japan or any other foreign interest.
It is about
a fundamental problem with America governance—
one that allows foreign interests
to assume a dangerously large role
in America’s politics and policymaking
through political manipulation.
[In.4.2]
The responsibility for correcting this problem is exclusively our own.
After all,
America and its government belong to us.
[In.5.1]
Recall Deep Throat’s advice on how to unravel Watergate:
“Follow the money.”
It’s not a bad way to understand Japan’s growing political influence in America.
[In.5.2]
In Part 2,
this book follows Japan’s money to Washington insiders and ex-officials.
In Part 3,
it examines how Japan
now sponsors American trade associations and front-group coalitions,
and helps fund both U.S. political parties.
In Part 4,
it reveals how Japan sustains a massive economic propaganda program in America
that includes efforts to shape the way educators in thousands of U.S. schools
teach our elementary- and secondary-school students about Japan.
[In.5.3]
Japan gets full value for the political money it spends in America.
To illustrate the point,
Part 1 begins with a look at recent Japanese political victories in Washington.
Part 1
Japanese Influence
Japanese Influence
Chapter 1
Japan’s Political Victories
[This chapter is omitted from this document.]
Chapter 2
America the Vulnerable
[This chapter is omitted from this document.]
Chapter 3
Japan’s Political Victories
[This chapter is omitted from this document.]
Part 2
Japanese Lobbying
Japanese Lobbying
Chapter 4
Washington’s Revolving Door
[Most of this chapter is omitted from this document.]
[5.2.1]
By the late 1960s and early 1970s, the world economy was vastly changed.
As a measure for fiscal discipline at home, the Nixon [37] Administration flirted with wage and price controls and embraced free-floating exchange rates.
[5.2.2]
Equally important, the war in Vietnam had damaged the credibility of America’s foreign policy establishment and altered Congress’s attitude toward the prerogatives of the executive branch.
These changed attitudes culminated in two milestones, one within months of the other: first, the resignation of President Nixon [37]; second, the passage of the 1974 Trade Act.
The Trade Act, clearly the turning point in the modern history of American trade policy, removed some of the executive branch’s discretion on trade policy matters, giving Congress more extensive and direct participation in setting and administering trade policy.
[5.2.3]
Two decades ago [circa 1970], imports from Japan wee beginning to take a heavy toll on dozens of American industries.
In most cases, domestic companies were osing out to foreign goods that were ....
Chapter 5
Japan Buys Washington
[This chapter is omitted from this document.]
Chapter 6
Japan Takes Television
[The contents of this chapter are in a separate post:
“The Destruction of the American Television Industry”.]
Part 3
Japanese Politicking
Japanese Politicking
Chapter 7
Hidden Interests
[This chapter is omitted from this document.]
Chapter 8
The Politicians’ Politician
[The last section of this chapter,
dealing with the American company Fusion Systems
and its encounter with Mitsubishi and its hired American lobbyists,
is in a separate post: “Innovation is not enough”.]
Chapter 9
Grass-roots Politicking
[This chapter is omitted from this document.]
Part 4
Japanese Propagandizing
Japanese Propagandizing
Chapter 10
Japan’s Six Excuses
...
Just how does Japan [influence] America’s leaders and the American people?
In part, through one of the
best-organized, least visible propaganda machines in the world.
While the United States and the Soviet Union use propaganda
to gain a military/strategic advantage
over each other and their geopolitical rivals,
Japan employs propaganda
to capture an economic/strategic advantage
over its industrial rivals.
The technique is simple:
Japan persuades foreigners, particularly Americans,
to adopt views that are favorable to Japan.
Through propaganda,
Japan has been able to ward off American criticism
about its protectionist economic policies
and has actually shaped the prevailing American view of the Japanese.
...
Although Japan has dozens of excuses to justify its closed markets,
they can be grouped into six general themes.
- “Japan creates jobs for Americans.”
- “Japan’s critics are racists.”
- “It’s America’s fault.”
- “Globalization.”
- “Japan is unique.”
- “Japan is changing its ways.”
Each theme has countless variations,
all of which were encountered by Americans in the 1980s
[and in the years since].
Most are little more than rationalizations that give Americans
the means to deceive themselves.
Excuse No. 1:
Japan Creates Jobs for Americans
...
Another powerful variant of the jobs theme is:
“Japan is satisfying customers with better products.”
Certainly, Japanese companies manufacture competitive products.
But so do many American companies.
From a political perspective,
the issue is not whether American consumers will buy Japanese products;
clearly they do.
Nor is it an issue of whether Japanese consumers
are permitted by Japan’s many internal economic arrangements
to buy competitive American products;
usually they are not.
Rather, the issue is
whether American policymakers have the political option of
closing the U.S. market to Japanese imports
as a means of
opening Japan’s closed market to American exports.
The goal of Japan’s “consumer” propaganda theme
is to neutralize that option.
It’s no great challenge.
Many Washington policymakers believe—accurately or not—that
Americans “want it all, and want it now.”
Consequently, few politicians have the courage
to advocate the sacrifices in consumption needed
to increase savings, investment, and productivity.
Still fewer appear willing
to support crucial industries and technologies
through tough-minded trade policies.
Japan’s “consumer” propaganda theme exploits that political cowardice.
During the midst of the congressional deliberations on the 1988 Trade Act,
for instance,
a delegation of leading Japanese business officials
met privately with members of the House Ways and Means Committee.
One congressional participant recalls:
The Japanese sat on one side of a long table.
We sat on the other.
They spoke English, but had everything translated
so they could have a lag time before responding.
When a member of Congress said that he favored
closing the U.S. market to Japanese imports
as long as Japan kept its markets closed to American exports,
one of the Japanese businessman began a long response.
He would speak for a couple of minutes and stop
to see if the translators had gotten it all written down,
then he would continue.
After a long, concluding statement in Japanese, his final words were,
“Ralph Nader.”
“What the hell is this?” I thought.
The translation was,
“You in Congress just think
you can close the U.S. market to Japanese goods.
If you do,
you will be forced to answer to American housewives
by Ralph Nader.”
“Ralph Nader,” of course was an all-purpose euphemism for
politically active American consumer organizations.
The Japanese businessman might also have pointed out that
this was no idle threat:
the Japanese help finance many of these groups.
Excuse No. 2
Japan’s Critics Are Racists
[10.2.1]
“Criticism of Japan is racism” has long been a mainstay of Japanese propaganda.
With no apparent hesitation,
Japanese propagandists automatically label critics “racists.”
Variations include calling critics “Japan bashers,” “Jap bashers,” or even “Japanophobes.”
These ad hominem attacks are so common that examples are superfluous.
By contrast, critics of German trade policies are never labeled “racist” or “Germany bashers.”
And critics of, say, Latin America trade practices are rarely labeled “Hispanophobes.”
[10.2.2]
Of course, some Americans are racist and some Japan bashing does occur.
But the vast majority of the accusations of racism and Japan bashing are little more than cynical gambits by the Japanese to weaken legitimate American complaints, silence Japan’s critics, and forestall U.S. actions that would advance American interests ahead of Japan’s.
[By the way, Eamonn Fingleton made almost precisely the same comments about Chinese attacks on critics of China’s economic policies in his book In the Jaws of the Dragon.]
[10.2.3]
Japan’s habit of smearing its opponents as “racist” is a potent political weapon.
In a March 1990 article in the National Journal Bruce Stokes points out that although 45 percent of the U.S. trade deficit is with Japan,
Democrats find it difficult to speak up about what can or should be done about Japanese protectionism because
“attacking Japan for its trade and foreign investment practices exposes the party to charges of racism.”
[Is it not remarkable how that charge seems so toxic in the American political and social environment?]
Producing self-censorship, of course, is the prime objective of this propaganda theme.
[10.2.4]
In large part, the “racism” propaganda theme reflects Japan’s own obsession with race, foreigners, and its national “uniqueness.”
Even sophisticated Japanese spokesmen praise their country’s racial homogeneity and support policies to maintain it.
[Compare America’s recent insane obsessions with “diversity.”]
...
Excuse No. 3
It’s America’s Fault
[10.3.1]
The “it’s America’s fault” excuse promotes the perception that America’s trade problems are entirely homegrown.
If this were true,
America would be hard put to blame the Japanese for any bilateral trade frictions.
[10.3.2]
Certainly, America has many economic shortcomings.
Too many American companies have a short-term view.
Poor quality still plagues many American goods.
Americans save too little and consume too much.
Drug abuse is a national problem.
The American educational system often performs abysmally.
Many American workers are ill equipped to compete in an advanced industrial economy.
[10.3.3]
Still, these inadequacies do not explain why U.S. products that are competitive in both price and quality are kept out of Japan’s market.
Hundreds of American companies produce goods and services that are the best in the world by any measure—price, quality, service, innovation, marketing.
The firms that make these products hire salespeople who speak Japanese.
They work hard.
They take a long-term view of their relationship with Japanese customers.
Yet most make only a token penetration into the Japanese market.
By contrast, these products compete with great success against Japanese goods in Europe and other markets.
In 1989, the Office of the U.S. Trade Representative helped to explain this phenomenon when it listed, in its review of foreign trade barriers, some seventeen pages of governmental, corporate, and cultural barriers in Japan that keep out foreign goods.
[10.3.4]
But Japan’s propagandists prefer to ignore these barriers.
Instead, they point their fingers at America.
A complex variant of the “it’s America’s fault” theme is that almost all of America’s trade deficit with Japan is due to America’s large federal budget deficit—that 85 to 90 percent of the trade deficit with Japan would remain even if all Japanese barriers were removed.
This 10 to 15 percent estimate has been quoted so often that its validity is never questioned.
Japanese negotiators use it as proof positive that their trade barriers are nominal at best.
Both the Reagan [40] and Bush [41] administrations have cited the estimate to justify opposition to tougher trade legislation.
[10.3.5]
Yet work by many scholars and trade analysts suggests that Japanese protectionism, in all its forms, is now responsible for a significant portion of the bilateral U.S. deficit with Japan.
…
Excuse No. 4
Globalization
[10.4.1]
Once Japanese investors began to buy large chunks of America in the mid-1980s,
Japan’s propaganda machine kicked back into high gear, this time promoting the themes of “globalization” and “internationalization.”
The Japanese sought to convey the idea that national borders are disappearing, along with such “outdated” concepts as national pride and national security.
In their place was emerging a single global market, where dependence and allegiance have no place.
The underlying message: policy sophisticates shouldn’t worry about the Japanese purchases of American assets, or about Japan’s quest for global domination of key industries.
[10.4.2]
Kenichi Ohmae, director of the Tokyo office of McKinsey & Co. and a leading promoter of this line, takes the argument one step further.
He argues that corporations are no longer Japanese, American, or European.
Rather, he says, they are entities separate from nations.
“There are no longer any national flag carriers.
Corporations must serve their customers, not [their] governments.”
[10.4.3]
According to Ohmae’s “globalization” thesis, the dollars Japan has accumulated are Japanese “immigrants”—they come back to America, where they are used to purchase productive holdings.
In the process, an economic alchemy occurs:
“[O]nce these dollars cross the U.S. border, they are American, not Japanese.
Dollars don’t belong to the nation of their current owners, but to the nation in which they are invested… it’s as if they become citizens of that country.”
Ohmae concludes that the
“unfortunate and uneducated bashing [of Japan] will stop” once Americans understand that the money the Japanese make by selling their wares to Americans is reinvested in America when the Japanese buy buildings, factories, securities, land, and other assets.
[10.4.4]
But Ohmae and others pushing the “globalization” thesis ignore the possibility that the dollars held by Japan could be used to buy American exports rather than American assets.
They also ignore the fact that
by selling its appreciating capital stock (real estate and companies) to buy depreciable foreign-made consumer goods (cars, VCRs, and other home electronics),
America is sure to be a poorer nation in the long run.
For after the consumables are gone and forgotten, foreign investors will still be taking profits and rents from their ownership of equity.
[10.4.5]
The globalization theme also glosses over that fact that ownership of U.S. companies is equal to economic control over such basic decisions as where jobs will be created.
As Jodie Allen and Hobart Rowen point in a 1989 Washington Post article:
“[J]obs don’t float across national borders as easily as capital ….
Fair or not, the impression persists that Japanese targeting of U.S. markets, whether for autos or semiconductors, has cost us jobs.”
[Hobart Rowean and Jodie T. Allen, “Brave New World, Inc.: to Superfirms, Borders Are Just A Nuisance,” Washington Post, 1989-03-19.]
[10.4.6]
The Japanese understand that it does matter who owns a nation’s capital stock-and where companies do their research, production, and service work.
[A point the un-American, Israel-loving editorial page of the Wall Street Journal deliberately avoids.]
Indeed, MITI’s basic purpose is to help Japan in this process.
Other countries also recognize the link between ownership, economics, and politics.
The European Community, for instance, requires foreign firms to locate much of their research and manufacturing in Europe as a condition of market access.
Consequently, many American companies are shifting major portions of their operations to Europe, often under duress; others are voluntarily transferring production and jobs to Europe.
Why?
Because the U.S. government is largely indifferent to the longer-term fate of American industry.
European governments take a very different view.
In Europe, the governments have firm prohibitions against the predatory industrial schemes—such as dumping—that the Japanese have used to undermine competitors in America.
Europeans value their indigenous companies for the jobs, wealth, and taxes that they create.
[10.4.7]
The globalization line has worked well for the Japanese in the United States.
Not only does it offer an excuse for the U.S.-Japan equity-for-consumables swap, it dismisses Japanese protectionism and the consequent destruction of American companies as irrelevant—so long as Americans are spoon-fed a continuous stream of consumer goods.
[10.4.8]
America’s acceptance of the globalization argument allows Japan to deploy the full political force of the United States against Europe.
When the Europeans demand market reciprocity from the Japanese, and refuse to permit the Japanese to circumvent this requirement through low-value-added assembly operations in Europe,
Japan responds by building these “screwdriver” operations (so called because all the workers do is put together kits manufactured in Japan) in the United States.
They then persuade the U.S. government that these are “American” products and use the political muscle of the U.S. government to get them into Europe.
This tactic has met with considerable success.
In February 1990, the USTR announced that products from Japanese-owned facilities in the United States were American products and the U.S. government would aggressively resist European efforts to exclude them
[10.4.9]
Still, for all of the Japanese arguments that national borders are evaporating,
Japan’s own borders remain substantially closed to the rest of the world.
Foreign investors have been so restricted that they own less than 1 percent of Japan’s national assets.
That figure stands in stark contrast to comparable numbers in the United States (9 percent) and West Germany (17 percent).
Japan is notorious for admitting fewer imported manufactured goods than other nations—importing raw materials and unfinished products instead.
In the 1980s, the ration of manufactured imports to GNP was less than 3 percent in Japan compared with roughly 7 percent in America and well over 10 percent for most European countries.
[10.4.10]
American policymakers and opinion leaders have yet to grasp
the nature of the profound economic shifts
now under way in the world.
They still cannot fathom Japan’s economic objectives.
Guided by a laissez-faire ideology,
beguiled by the fuzzy concept of “globalization,” and
confronted by Japan’s American agents of influence,
our policy elites remain studiously neutral
in the struggle of American corporations
with their Japanese competitors.
the nature of the profound economic shifts
now under way in the world.
They still cannot fathom Japan’s economic objectives.
Guided by a laissez-faire ideology,
beguiled by the fuzzy concept of “globalization,” and
confronted by Japan’s American agents of influence,
our policy elites remain studiously neutral
in the struggle of American corporations
with their Japanese competitors.
[Too bad that Tom Friedman could not point these comments out in That Used to be Us.]
But then, passive acceptance of Japan’s growing role in the U.S. economy—
together with the use of American muscle to fight Japan’s political battles—
is precisely the goal of the “globalization” line.
Excuse No. 5
Japan Is Unique
Excuse No. 6
Japan Is Changing Its Ways
Chapter 11
Japan’s Mighty Wurlitzer
...
Japan’s propaganda is effective because
it is delivered systematically by thousands of credible spokespersons.
While some are Japanese, most are Americans.
The motivation of the Japanese is obvious.
The incentive for most Americans is, too: money.
Still,
some Americans reinforce Japan’s positions out of a sincere conviction
that Japan’s positions are right and Japan’s critics are wrong.
Regardless of their motivation,
Japan’s American assets help tilt
much of the debate about U.S.-Japanese relations
in Japan’s favor.
The Soviets have long attempted to smooth their relationships with foreigners
by using spokespersons who serve as
what Karel von Wolferen calls “buffers”—
people who speak the language of the foreign country;
are familiar with that country’s culture, politics, and current thinking;
and can present the Soviet propaganda lines convincingly….
Japan’s buffer system is far larger and far more effective
than that of the Soviets, which reflects the fact that
buffers have had a long-standing role in Japan’s foreign relations effort.
...
[M]any of Japan’s buffers operate government or corporate institutes.
Some are academics and editors from leading Japanese publications.
Others are officials of the Keidanren.
A few—like former MITI Vice Minister Makoto Kuroda—
are retired Japanese diplomats and government officials.
Still others are leading Japanese business leaders.
The best of these buffers spend much of their time abroad
advancing Japan’s positions with the foreign press,
at conferences, and in meetings with foreign opinion leaders.
At nearly every symposium on U.S.-Japan relations held in the United States,
the same people from this small cast of buffers are put forward as
the “face of Japan.”
Within Japan, most foreign visitors are introduced to
a surprisingly small universe of people
who constitute what could be called the “buffer class”—
Japanese notables from business, academia, politics, and government
whose task it is to “handle” foreigners.
Often, foreign visitors are “matched” to meet with members of the buffer class
who have attended the same schools or have lived in the same countries.
...
Since the end of World War II,
the most influential advocacy of the Japanese point of view in the United States
has come from a small coalition of America’s Japan experts and insiders.
Colloquially, their critics call them the Chrysanthemum Club—
after the floral symbol of Japan’s Imperial family.
Membership in this club consists primarily of
those Americans with an intellectual, personal, or business stake
in the present course of U.S.—Japan relations.
First among equals in this club are
those members of America’s foreign policy establishment who deal with Japan.
They try to preserve “the relationship” by defending Japan to Americans.
...
Just as American diplomats want to preserve the U.S.-Japanese relationship,
many Defense Department officials wish to retain the status quo
of American military bases in Japan.
To these officials, any other aspect of the U.S.-Japan relationship
is merely a bargaining chip
to be employed in negotiations over these facilities.
The overwhelming majority of America’s Japan experts in universities and think tanks
depend on the Japanese for hard-to-get access-and often funding—
to conduct writing and research about Japan and U.S.-Japan relations.
…
Other Chrysanthemum Club members are ideologues devoted to
the philosophy of anti-Communism or the tenets of “free trade.”
To them, changes in current U.S.-Japan relations
might push Japan out of the American sphere of influence
and away from a free trade regime.
Still others simply admire Japan—or enjoy criticizing the United States.
More than a few are executives of
American companies with a special niche in the Japanese market,
who doubtless feel that change could threaten their economic standing.
..
Japan has thousands of spokesmen who distribute its propaganda.
When those who are Japan’s employees are clearly identified,
journalists and policymakers can fairly balance their judgment of
the facts and arguments presented to them,
because they know that the spokespersons are in the pay of Japan.
But
the financial ties of the many Americans who speak for Japan
are usually far less visible.
And Congress, federal officials, and the public
are usually unaware of these links
when they hear these people’s comments on U.S.-Japan relations.
Since the mid-1970s, for instance, ex-trade official Harold Malmgren
has advised Japanese corporations and the government of Japan.
Over the past fifteen years,
dozens of journalists have cited Malmgren
as an expert on American trade policies and U.S.-Japan relations.
But the journalists who quote him
rarely identify Malmgren’s money ties to Japan.
In the midst of Zenith’s fight against Japan’s television cartel,
for instance,
Malmgren criticized Zenith CEO John Nevin in a Chicago Tribune story.
To the story’s readers,
Malmgren was just an impartial Washington analyst
who had no personal interest in the particulars of the Zenith case.
But this impression was as incorrect as Malmgren was interested.
Though the Tribune piece never mentioned it,
Malmgren was paid $300K by Japanese television manufacturers
to broker a political deal with the Carter [39] Administration.
The Tribune story also overlooked Malmgren’s contract with the Japanese,
in which he said he might be
“engaged in the preparation and dissemination of political propaganda”
on behalf of his clients.
The Zenith affair was only one of many forums in which
Malmgren has been able to advance his views.
A search by NEXIS reveals that during the 1980s
Malmgren was cited or quoted in
seventy-six stories about trade and economic issues.
As Congress was drafting tough new trade legislation in 1987 and 1988,
Malmgren’s views on the trade bill and its implementation
were printed by many of America’s leading news organizations.
In many of these stories,
Malmgren denigrated the legislation,
particularly those elements that would have strengthened
America’s ability to pry open Japan’s closed markets.
He called the legislation “technical protection” and
“vigilante-style unilateral retaliation.”
And while he was lambasting American trade legislation,
Malmgren was working for Japanese trade interests.
He earned $51K in 1987 and $105K in 1988 as an adviser to the
Japan External Trade Organization (JETRO) in New York.
The articles that cited Malmgren identified him as a
“former U.S. trade negotiator [and] now a consultant,” or
“former trade negotiator,” or “a trade consultant in Washington,” or
“a leading international trade specialist,” or
“president of Malmgren, Inc., and former trade negotiator.”
None of these mentioned that Malmgren was working for the Japanese.
Like Harold Malmgren, dozens of former U.S. trade officials in the pay of Japan,
as well as hundreds of academics
whose work is supported by Japanese funding and access,
write and are regularly quoted on trade matters
without their financial links being revealed.
Most often, these financial links are not revealed
because they are not known.
Gaps in the sort of information largely are attributable to
serious loopholes in federal reporting requirements for foreign agents.
Malmgren, for instance,
canceled his foreign agent registration with the Justice Department
in September 1985.
He is not even listed [as of 1990] in Washington Representative,
the standard reference source on
lobbyists, lawyers, and consultants in the capital.
To find a record of
Malmgren’s relationship with the government of Japan in 1987 and 1988,
a reporter would have to guess that JETRO might be one of his clients.
Then the reporter would have to read through
all of JETRO’s foreign agent activity filings with the Justice Department.
If he was simply providing advice and counsel to Japanese companies,
no public record of his relationship would exist for the reporter to cite,
for the Foreign Agents Registration Act (FARA)
does not require Malmgren to keep registering
if he is not actively and directly lobbying
or attempting to influence public policy.
Nor does it require him to maintain a registration
if his only job is to advise foreign interests
or to conduct research for them.
Perhaps few, if any of Malmgren’s public views
have a connection with the source of his livelihood.
The point remains: readers need and deserve such information
to weigh, interpret, and finally judge comments by
Malmgren and others who work for Japan.
Just as vocal advocates often conceal financial ties to Japan,
other trade experts are frequently bullied into
a pernicious form of self-censorship.
An executive producer of an influential weekly public affairs program
says that
since the early 1980s
fewer and fewer American trade experts
are willing to criticize Japanese policies on the record.
One former U.S. negotiator explains why:
Many of the best-known names [of trade experts]
are those of people on Japan’s payroll.
They would be risking their fees with public criticism.
Many others remain silent because they seek Japanese clients
or are afraid of being labeled a “Japan basher” or “racist.”
As they do with former trade officials,
the press and federal policymakers
often call upon Wall Street financiers
for comments and policy advice on U.S.-Japan economic relations.
For the most part,
these Wall Street experts reinforce Japan’s point of view.
It’s not surprising.
Japanese investors provide much of the new money
on which Wall Street depends.
And Japanese investors now own an extensive financial stake
in many of America’s leading investment firms.
Nomura Securities, for instance, owns 20 percent of Wasserstein, Perella,
the prominent merger and acquisition (M&A) specialists.
Yamaichi Securities holds 20 percent of the Lodestar Group,
which is led by the ex-vice chairman of Morgan Stanley & Company.
Sumitomo Bank bought a 12.5 percent share in Goldman, Sachs for $500M in 1986.
Former Federal Reserve chairman Paul Volcker works for Fuji-Wolfensohn,
a joint venture to which Fuji Bank contributed $52.5M
of the $55M start-up capital.
Volcker says most of the firm’s clients are Japanese companies
that want to expand their presence in America.
When a Wall Street executive reinforces the Japanese point of view—
in print, in public debate, on Capitol Hill, or elsewhere—
the important money relationships that exist
between the executive, his firm, and the Japanese
are seldom acknowledged.
One of the most prominent Wall Street firms
that broker Japanese purchases of American assets
is the Blackstone Group,
which is 20 percent owned by Nikko Securities.
Blackstone has been the investment banker for many Japanese acquisitions
of prestigious American companies,
including the Sony buyout of CBS Records and Columbia Pictures.
In the process, Blackstone has prospered.
Financial World reports that
Blackstone chairman Peter Peterson earned at least $15–25M in 1988.
To attract more business,
Blackstone ran a full-page advertisement
in Japan’s largest daily business journal, Nihon Keizai Shimbun.
The ad, written in Japanese, encouraged Japanese companies
to continue their acquisitions of American firms.
It extolled the economic advantages of such investments—
entry into a new field, increased capacity in an existing field,
and greater penetration of a foreign market (America).
As the ad makes clear,
Blackstone also offers the Japanese political advice about
how to keep these acquisitions “friendly” ones.
The promise is not hollow.
Three of the firm’s key officers give Blackstone its political leverage:
Peterson, Secretary of Commerce under President Nixon [37]
and onetime head of Lehman Brothers;
David Stockman, who directed OMB in the first Reagan [40] Administration; and
Roger Altman, Assistant Secretary of the Treasury in the Carter [39] years
and an economic adviser to
presidential candidate Michael Dukakis [trying to be 41] in 1988.
Not surprisingly,
Peterson and Stockman are two of the nation’s strongest advocates
for keeping America’s markets open to Japanese exports and investment.
Both men write articles, address conferences, and advise policymakers
on the topic.
At the same time,
Peterson heads both the prestigious Council on Foreign Relations
and the [Peterson] Institute for International Economics—
a Washington think tank that has been most effective
in enforcing a rigid “free trade” orthodoxy over the past decade.
In 1988,
Business Week’s William Holstein asked Peterson
whether Blackstone’s lucrative financial relationship with the Japanese
affected his views on Japan or his role
as head of two of America’s most influential policy organizations.
Peterson responded,
“I’ve been for open trade and open investment since the 1950s,
at a time when it hurt my short-term interests.”
The Japanese are naturally drawn to such laissez-faire advocates as
Peterson, Stockman, and Altman.
They are also attracted by
the prestigious links such men have had with the government,
their unsurpassed access in Washington, and
their commanding influence in prominent policy organizations.
As William Gleysteen, president of the Japan Society in New York, says,
the Japanese “think the Council on Foreign Relations is made of gold.”
The Blackstone Group uses its connections to attract Japanese clients.
It publicizes its relationships with the Council on Foreign Relations
and other prominent U.S. policy organizations.
The Nihon Keizai ad prominently featured a group picture of
Stockman, Altman, Peterson, and two other partners
[Lawrence D. Fink and Stephen A. Schwarzman].
The biographies of the three financiers emphasized their political connections and influence with America’s key opinion leaders.
Peterson, for example, was described this way:
He was a Presidential Aide for international economic problemsThe message is obvious:
under Nixon (1971).
He was the U.S. Secretary of Commerce (1972–73)
and later chairman of Lehman Brothers Kuhn Loeb (1973–83).
Recently he succeeded David Rockefeller as
chairman of the Council on Foreign Relations.
He is active in various organizations,
including being a director of the Japan Society.
He has also been given honorary doctorates by a number of universities.
Blackstone has connections in Washington,
has influence in America’s most exclusive foreign policy circles,
and is a part of the powerful American establishment
in which Japan needs well-placed friends.
A number of former Presidents have engaged in
post-presidential commercialism
Until recently, though,
no former President has ever rented out the prestige of the office
or provided a foreign entity with public endorsements.
In October 1989, Reagan [40] hired himself out—for $2M—
to do public relations work for Japan’s Fujisankei Communications.
The Fujisankei conglomerate,
headed by a controversial and conservative tycoon,
owns Japan’s largest radio network, a national newspaper,
and the country’s most successful television chain.
For two of the nine days that Reagan was in Japan,
he was an official guest of the Japanese government.
Emperor Akihito and Empress Michiko
hosted a lunch for the Reagans at the Akasaka Palace in Tokyo.
A Stat Guest House banquet was hosted by Prime Minister Toshiki Kaifu
and attended by three former Prime Ministers.
The Japanese government presented Reagan with Japan’s highest honor,
the Grand Cordon of the Supreme Order of the Chrysanthemum.
For the remainder of his trip, the ex-President worked for Fujisankei.
He made two twenty-minute speeches and attended company-sponsored events.
He gave exclusive interviews to Fujisankei’s television stations and newspapers.
He presided over a concert for 27,000 guests in Yokohoma
to raise money for the Reagan Presidential Library.
He also solicited additional library contributions
from wealthy Japanese industrialists.
While privately seeking Sony Corporation funds for his library,
Reagan defended
Sony’s controversial October 1989 purchase of Columbia Pictures.
The ex-President proclaimed,
“I’m not too proud of Hollywood these days
with the immorality that is shown in pictures, and the vulgarity …
I just have a feeling that Hollywood needs some outsiders
to bring back decency and good taste
to some of the pictures that are being made.”
As for the growing Japanese investment in America, Reagan said,
“The United States still is the widest investor in the other countries ....
So how can we complain if someone wants to invest in us?”
Most important,
Reagan used his tour as an opportunity to blame America
for the U.S.-Japan trade deficit.
At a Fujisankei-sponsored banquet for Japanese industrialists,
he said trade frictions between the two countries
had been caused by “trade protectionists” in Washington—
the people he “had to fight every day I was there.”
It was a perfect recitation of the “it’s America’s fault” propaganda line
that Japan had peddled throughout the 1980s.
Reagan concluded his trip with a brief talk
aired on Fujisankei’s national television network.
With “America the Beautiful” softly playing in the background,
the ex-President thanked Fujisankei Communications
for making his trip possible.
He congratulated Fujisankei for its efforts to improve U.S.-Japan relations.
It is difficult to imagine
Kaknei Tanaka, Helmut Kohl, François Mitterrand, or Margaret Thatcher
providing a similar paid endorsement of an American firm.
Though with less pomp and circumstance,
Jimmy Carter [39] has also used his prestige on behalf of the Japanese—
specifically, to promote the public career of
Japanese billionaire Ryoichi Sasakawa.
On November 7, 1989,
Carter praised Sasakawa and the Sasakawa foundations
in a full-page advertisement placed in the Wall Street Journal.
The ad featured
an enormous picture of the ex-President in the center of the page.
In the accompanying text,
Carter described how Sasakawa’s foundations
had provided financial backing for Global 2000,
the ex-president’s agricultural aid project for Africa,
through the Atlanta-based Carter Center.
Global 2000 consumes much of Carter’s time and has helped rehabilitate
his once less than popular image with the American people.
...
Through his purse, Sasakawa has ingratiated himself
with Carter and other world leaders.
The Sasakawa foundations—with close to $500M in donations outstanding—
underwrite a great deal of the research and policy analysis on Japan
that is carried out in American think tanks, universities, and other institutions.
Many Japanese say that Sasakawa’s contributions
are merely a vain attempt to spend his way to a Nobel Peace Prize.
But much of his money buys nothing more than propaganda that is aimed at
helping Americans “understand” Japan’s point of view.
Carter’s endorsement of Sasakawa gives credibility to the man
as well as his activities.
In recent years,
Sasakawa and other Japanese industrialists
have cultivated incumbent presidents by funding their pet projects.
The Japan Economic Journal reports that Shigeru Kobayashi,
a Japanese real estate mogul worth an estimated $6G,
“donated more than $1M to Reagan projects in 1987 and 1988,
including $100K to Nancy Reagan’s anti-drugs program
and $1M to the Reagan Historical Library in California.”
When the departing president
held a small farewell White House party for his friends in January 1989,
Kobayashi and his son were among the select group of guests.
In the 1980s,
Japanese individuals and companies provided major contributions
to build both the Reagan and Carter presidential libraries.
At $100 per person,
ticket sales from Reagan’s “friendship concert” in Yokohama, for instance,
netted him more than $1M for his library.
The Japanese government contributed an additional $2M to the project.
The Carter Presidential Library in Atlanta
has also received considerable support from Japan.
Together,
the donations of Sasakawa’s Japan Shipbuilding Industry Foundation
and YKK, the Japanese zipper company, totaled more than $1M.
Although it is disturbing to consider,
future incumbent presidents are certain to take note of
the extent to which the Japanese funded their predecessors’ pet projects.
They are certain to recognize
how rewarding Japan’s friendship might be
when they themselves retire.
Someday they themselves will need generous friends to help them support
their presidential libraries and museums,
the only archives for their presidential records
and monuments to their presidency.
The architects of the U.S. Constitution were worldly men.
They anticipated that foreign powers would attempt
to sway the views and decision of the President.
The Constitution therefore forbids incumbent Presidents
from accepting gifts from foreign investors.
But the Founding Fathers did not anticipate that
sitting presidents would seek foreign money to fund their private projects.
They certainly could not have foreseen that ex-presidents
might turn to blatant commercialism after leaving office.
Nor could they have imagined that ex-presidents
would seek funds from foreign powers
to support their post-retirement activities.
Until recently, former presidents were expected to comport themselves
with the dignity befitting America’s highest and most honored position.
For almost two centuries, their behavior met that expectation.
But now former presidents of the United States are available
to do public relations stints for America’s biggest trade competitors.
[End of Chapter 11]
[Of our five most recent ex-presidents,
39: Jimmy Carter
40: Ronald Reagan
41: George H. W. Bush
42: Bill Clinton
43: George W. Bush,
the first two, Carter and Reagan, had already retired40: Ronald Reagan
41: George H. W. Bush
42: Bill Clinton
43: George W. Bush,
at the time Choate’s book was published in 1990
and so are considered in detail in the book.
It would be interesting to see how Choate would describe
the post-presidential activities of the most recent three.]
Chapter 12
Japan on Japan
[This chapter is omitted from this document.]
Conclusion
The Cold War is over,
and many of the policies and attitudes that it spawned are obsolete.
In years ahead,
America’s influence in the world will be shaped
more by economics, science, and technology
than by the tools of war.
To meet this new challenge,
America urgently needs new policies.
Before the United States can chart a new national direction, however,
some fundamental issues require attention.
- Should America’s trade and economic interests
be elevated to the same national priority
as its defense and foreign policy concerns? - Should U.S. antitrust laws be applied to
the affiliates of foreign corporations operating in the United States? - Should foreign access to the U.S. market
be conditioned on American access to foreign markets? - Should conditions be placed on foreign investment in America?
- Should America be concerned that foreign banks
may hold as much as 50 percent of U.S. financial assets
within ten years? - Should American government and business
establish more cooperative relationships? - Should the U.S. government provide assistance
in developing the technologies
that will shape American industries and jobs in the twenty-first century? - Are some industries and technologies
so critical to America’s economic and military security
that they warrant special federal policies?
The answer to these and similar questions will determine America’s future.
Today, much of the current policy and political debate over these issues
is fundamentally dishonest.
Too many of the leading participants have a financial stake—often undisclosed—
in advocating foreign points of view.
When American and foreign interests are consistent,
the actions of these agents of influence are of no real importance.
It is only when U.S. interests are played against foreign interests
that this power game becomes truly threatening to the United States.
Today, this is the prevailing nature of the game.
Both the game and its rules require basic reform.
Here are eight relatively modest proposals that would do much
to reduce the influence of foreign interests over American affairs.
1
Stop Washington’s Revolving Door
The revolving door is a chronic problem in Washington.
In recent years it has begun to spin faster and with greater frequency.
Partly this is due to the fact that
relatively low federal salaries
discourage many talented people from entering public service.
But there is another, equally important reason:
during the Carter [39] and Reagan [40] years,
public service was made an object of contempt.
Neither Reagan nor Carter seemed to understand that
they could not denigrate government without denigrating public service.
As a consequence, the top positions in agencies and government
now go to a small cadre of insiders
who shift from public office to lobbying and back again.
For them,
public service is a sabbatical from working for the very same special interests
they are supposed to hold in check as federal officials.
When the revolving door involves trade matters,
many of those special interests are foreign-based
and the nature of the conflict pits American interests against foreign.
To stop the Washington revolving door—or at least to slow it—
three actions are required:
First, those who hold the top federal positions,
including the Director of the CIS, USTR, and Secretary of State,
should be prohibited permanently
from becoming a foreign agent or a lobbyist for domestic companies.
Those who would refuse to serve in government because of such a limitation
certainly are not the kind needed to tend the public’s affairs.
Second,
a longer “cooling-off” period is required for lower-level federal officeholders.
Federal law stipulates that as of January 1991,
ex-officials will have to wait one year
before they can lobby, counsel, or advise on trade matters.
This short time period cannot possibly guarantee
the integrity of trade policymaking and administration.
A period of five to ten years
would slow the movement between public service and influence peddling
and help assure the integrity of federal decision making.
Given these tighter rules,
American corporations need to make a concerted effort
to hire former federal officials with trade expertise.
One of Japan’s principal political advantages is that
those who craft and administer American trade policies know that
their best post-government job opportunities lies with the Japanese—
largely because U.S. companies do not hire them.
In theory, this should not be important.
In reality, it is.
Lastly,
the federal program for career public servants needs to be strengthened
to encourage more talented people to work in government and to stay longer.
Japan and other nations have a distinct advantage in trade negotiations
because their side is always represented by
a handful of political appointees
and a staff of competent civil servants.
Because America fills dozens of ambassadorships
and hundreds of key policy positions
with political amateurs,
negotiations with other nations have become akin to
a baseball game between the Oakland A’s and a sandlot club.
Guess which is America’s Team.
2
Require Full Disclosure of Foreign Agents
In politics, sunshine is the best disinfectant.
Although the Foreign Agents Registration Act of 1938
requires those who represent foreign principals
to report in some detail their client relationship to the Attorney General,
the act has many loopholes.
Lobbyists who work for an American affiliate of a foreign company,
for example, are exempted.
So are lawyers who perform legal chores on their clients’ behalf,
even when the same work might be considered lobbying
when done by nonlawyers.
Foundations funded by foreign companies and governments
but incorporated in the United States
are similarly excluded.
If American officials and the public are to possess
the information they need to balance
what they read and hear from foreign interests,
much greater, more stringent disclosure requirements are needed.
The first step is to require that
all those who represent foreign clients—
lawyers, lobbyists, foundations, and others—
provide full disclosure to the Justice Department.
No exceptions.
The second step is to increase the Justice Department’s capacity
to monitor compliance with this law.
Today, a staff of fewer than fifteen people is responsible for
monitoring 3,500 registered foreign agents.
The Foreign Agents Registration Act division of the Justice Department
is so understaffed that
years often pass before reports are audited for accuracy.
Many foreign agents know this, and exploit the situation
by failing to provide all the required information.
3
Prohibit Foreign Participation in American Elections
Today, foreign companies participate in American politics
by making major financial contributions to
national political parties, state political parties,
and state and local campaigns,
and by operating PACs through U.S. affiliates and trade organizations
over which they have effective control.
Japanese and other foreign contributions
to American political parties and campaigns
constitute blatant interference in America’s domestic affairs.
A flat prohibition on such contributions is long overdue.
Money politics is bad enough,
foreign money politics is out of the question.
4
Provide Full Federal Funding for Presidential Libraries
Franklin D. Roosevelt [32] was the only President in modern times
who did not want a physical monument to his presidency. [Cf.]
Presidential libraries serve that purpose for Roosevelt’s successors.
The responsibility for raising private funding for these libraries
has forced American Presidents to become supplicants to monied contributors.
Japan and other foreign interests
have ingratiated themselves with a succession of Presidents
by providing large donations to build these libraries.
The surest way to stop this backdoor politicking
is for the federal government to fully fund their construction.
The cost is trivial compared to what is at risk.
5
Prohibit Foreign Gifts on Compensation to Ex-Presidents
The Constitution prohibits incumbent Presidents
from accepting gifts or other compensation from foreign interests.
But it says nothing about ex-Presidents.
The post-presidential commercialism of ex-Presidents
demeans the presidency itself.
By holding out the promise of
multimillion-dollar speaking fees or other remuneration,
foreign interests have a very real means
of exerting undue influence on a President.
The most direct way to eliminate this potential abuse
is to prohibit ex-Presidents from
accepting pay or valuable gifts from foreigners,
perhaps at the risk of their pensions.
6
Limit State and Local Subsidies to Attract Corporations
For many years, states and localities have competed strenuously
to lure investment and facilities that create jobs.
Given the importance of the U.S. market,
the issue for most foreign companies is never whether to invest but where.
As the level of competition increases among states and localities,
so does the abi8lity of foreign investors
to gain increasingly generous state and local tax breaks
and other valuable handouts.
These subsidies can be extremely costly for state and local governments.
In the 1980s, the state of Kentucky gave Toyota
more than $325M in taxpayer-financed incentives
to locate a manufacturing facility there.
Other Japanese companies sit back and wait
while states fight among themselves to offer better deals.
To gain the favor of prospective investors (domestic as well as foreign),
many governors and mayors
constantly lobby Washington and their state congressional delegations
on these investors’ behalf.
During the Toshiba affair,
some of Toshiba’s most effective political advocates were governors and mayors
who either had one of its facilities or wanted one for their region.
The Japanese government and Japanese businesses
take advantage of state and local officials’ intense desire
to attract facilities and jobs.
This political problem is not unique to America.
To keep it under control, the European Community
limits how much member states can bid to attract investment.
Similarly,
Japan also limits how much local governments
can offer potential corporate investors.
America needs the same restrictions,
and it needs them for both foreign and domestic investment.
7
Reduce America’s Dependence on Foreign Capital
Foreign lenders finance a significant portion of America’s budget deficit.
As a result,
the United States is losing much of the flexibility and independence it needs
to craft its own domestic, trade, and foreign policies.
Each upcoming Treasury auction
prompts a new round of jitters among U.S. Treasury officials.
They fear that the Japanese government and Japanese institutional investors
will decide not to participate.
In their anxiety,
Treasury and other cabinet officials
spend much of their time between auctions
pressuring their colleagues in the executive branch
not to take tax, regulatory, trade, or other policy measures
that might offend Japanese and other foreign investors
and cause them to boycott a Treasury bond sale.
Similarly, the ability of the Federal Reserve to set interest rates
is greatly limited by America’s need to attract foreign capital.
This results in
an upward pressure on the exchange rate and on domestic interest rates,
and reduces the Federal Reserve’s flexibility
to respond to domestic economic downturns.
The deficit continues because both Republicans and Democrats
have put partisan advantage above national interest.
They have refused to cut spending or raise taxes.
The longer this stalemate persists,
the more vulnerable America becomes to foreign political pressures.
8
Increase Business Involvement with Government
Twenty years ago [i.e., around 1970],
American business began to take serious note of the skill with which
the Japanese plied the American market.
Almost overnight,
Japan watching became a cottage industry.
Books and articles about the Japanese style of management,
manufacturing processes, quality assurance, resource allocation,
employment practices, strategic planning, and training techniques
became must reading for American managers.
In the end, we came to understand that one secret of Japan’s success was that
the Japanese had adopted fundamental American management techniques
and then applied them more rigorously and skillfully than we.
Likewise,
American businesses have long used a full range of public affairs skills
to strengthen their position in the domestic market.
The Japanese and other foreign interests have studied us closely
and now understand these techniques.
They operate in the same forums as American companies,
abide by the same rules,
and bid for the same talent to guide and represent them.
They have demonstrated that
they can match their American competitors in this critical art
at every step—and outstep them at many turns.
Prowess in molding public opinion—
gaining the credibility to blunt negative sentiments
or to advance longer-term goals—
is the newest, and perhaps most powerful, advantage
in the hands of foreign competitors.
It is an advantage that American firms hand them on a platter.
By remaining largely disengaged from their own government,
American firms create a domestic political vacuum
that the Japanese and other foreign interests gladly fill.
If American companies intend to succeed
in the 1990s and the twenty-first century,
they must pay at least as much attention to public affairs
as a mainstay of competition
as they do to producing first-class goods and services.
Indeed, of the many important lessons
the Japanese have taught American businesses, one stands out:
the political dimension of competition is as consequential as the economic.
[The message contained in Eamonn Fingleton’s 2008 In the Jaws of the Dragon
is rather the opposite:
American businesses are heavily involved in public affairs,
but all too often in the interest of the Chinese or Japanese,
not of the American people.]
In sum, other nations’ campaign for America is completely legal.
It plays the American economic game by American rules.
It uses the campaign tactics and methods of American politics.
It hires Americans to lobby, educate, and influence other Americans.
It is the highest stakes political-economic game in the world today,
affecting whole industries, billions of dollars, millions of jobs,
and ultimately, the wealth and power of nations.
It is also deeply corrosive of America’s political and economic system.
The revolving door of Washington, D.C., breeds cynicism and mistrust,
and represents a virulent strain of political corruption—
completely legal, completely unethical.
The problem, of course, is not in Tokyo or any other foreign capital,
but in Washington, D.C.
Americans have all but lost sight of
some of the most basic lessons of civics—
chief among them the guiding concept of civic virtue.
The value of national service—
for an individual to be of service to the country
and to work on behalf of the country’s interests—
has been cheapened by a more mundane coin of the realm:
personal advancement, self-interest, big money.
As a consequence, the United States is not only
selling corporate assets and real estate to foreign bidders;
also for sale is American integrity and national honor.
It is up to the American people
to demand a higher standard of conduct
from their elected and appointed representatives.
The manipulation of America’s political and economic system
by foreign interests
with the willing and eager participation of Americans-for-hire
threatens our national sovereignty.
It threatens our future.
It continues only because we tolerate it.
[End of Agents of Influence.]
Labels: books, Choate, economy, globalization
posted by KHarbaugh at 21:40
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