Eamonn Fingleton, the author of In the Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony writes at The American Conservative that there is “no such thing as free trade.” Despite endless rounds of negotiations on trade, Japan’s car market it still stacked against American manufacturers. Fingleton explains how this has lead to the gutting of American auto makers.
Detroit carmakers get a lot of stick for their poor showing in Japan. Their Japanese sales have rarely exceeded token numbers and supposedly this is their own fault. They have apparently been so heedless of consumer needs that they haven’t even bothered to build cars with the steering wheel in the correct position for Japan’s drive-on-the-left roads. This “steering wheel” story has long enjoyed considerable credence among leading American opinion makers. Yet it is nonsense and does not stand up to even cursory examination.
The truth is that Detroit’s Big Three have always made plenty of cars configured for Japan. Indeed, as some of the first American corporations to go global, they have long catered to local needs around the world. But they have never been allowed to compete in Japan. In the words of Donald Trump, Japan does “things to us that make it impossible to sell cars in Japan, and yet, they sell cars [in the U.S.] and they come in by the hundreds of thousands on the biggest ships I’ve ever seen.”
Japanese officials have been working since the 1960s to increase Japan’s work-share in every new Boeing plane. Their crowning achievement is the 787, which is so full of advanced Japanese engineering that it is practically as much a Japanese product as an American one. Launched in 2011, it is considered by many to be the most advanced passenger jet ever flown. Officially, corporate Japan’s contribution is put at 35 percent.
In the 1950s and 1960s, as Toyota and other Japanese carmakers laid the groundwork for their ascent to global leadership, Detroit grossly underestimated their efforts. Complacent Big Three executives even welcomed delegations of camera-toting Japanese engineers and allowed them to photograph everything in sight. Neither did Washington officials see the emerging Japanese challenge. Japanese cars, with names like Toyopet and the Nissan Sunny and featuring often ungainly designs, generated plenty of American condescension. Yet within a decade the Japanese were on a roll and today they tower over a fading Detroit.
Last year Toyota produced 10,213,000 vehicles—more than 6 percent more than General Motors, which in the 1980s produced twice as many cars as Toyota. What’s more, Japan’s car exports last year totaled 4.3 million. And, of course, the Japanese produced countless more cars abroad in foreign assembly plants. Though American policymakers congratulate themselves on how many Japanese-brand cars are now assembled on U.S. soil, such cars are full of components exported from the home islands of Japan and thus contribute strongly to Japan’s trade numbers.
How have the Japanese achieved such dominance? The main factor is their protected home market, which provides them with a high-profit sanctuary from which to “target” foreign markets. Although foreign car makers rarely go public with their grievances, they all acknowledge privately that the market is rigged against them.
For every $1 of current-account deficit the United States incurs, it has to sell $1 of American assets to foreign investors. Much of the financing comes in the form of foreigners’ purchases of American stocks and real estate. Foreign governments also help by increasing their holdings of U.S. Treasury bonds.
Indeed foreign asset purchases are becoming an increasingly intrusive feature of the American economic landscape. Foreigners have acquired many of America’s largest corporations, including Amoco, Chrysler, Monsanto, Firestone, Anheuser-Busch, Motorola, and the Reynolds tobacco empire. In 2002, Lucent, heir to the fabled technological riches of Bell Labs, sold its optical-fiber business to Furukawa of Japan. Meanwhile, IBM sold its historic disk-drive business to Hitachi and its PC business to Lenovo of China.
Summing up, America’s trade deficits are out of control and are driving a rapidly growing problem of foreign indebtedness—a problem that is more characteristic of a Third World nation than a First World nation.
Yet Washington doesn’t seem to have any solution.
Read more here.