TIME: Almanac 1990/1990 Time Magazine Compact Almanac, The (1991)(Time).iso/time/042489/04248900.015

Text File | 1990-09-18 | 9.4 KB | 169 lines

BUSINESS, Page 44

Friend or Foe?

The FSX becomes a symbol of mounting strain between the U.S.

and Japan

By John Greenwald


    American television manufacturers were the first to fall. Then
Japanese firms rolled through markets ranging from autos to
semiconductors. Now many Washington politicians fear that U.S.
plans to develop the FSX fighter jet with Japan could give Tokyo
a vital jump start in the aerospace industry, one of the few
high-technology fields in which American companies still dominate.
The growing outcry has transformed the proposed jet, an advanced
version of the F-16, into a powerful symbol of the rising tensions
between two countries that are close military and diplomatic allies
but also archrivals for the economic leadership of the world. "What
we're seeing is the emergence of an entirely new concept of
national security," says Wisconsin Democrat Les Aspin, chairman of
the House Armed Services Committee. "It embraces economics and
competitive, commercial relations."

    Any Japanese inroads in aerospace would be a serious blow to
U.S. industrial might. American manufacturers exported $26.9
billion worth of passenger planes and military aircraft and
missiles in 1988, which gave the U.S. a $17.9 billion surplus in
aerospace trade. These were precious exports, considering that the
U.S. ran an overall trade deficit of $119.8 billion last year; the
gap with Japan alone was $52.1 billion. U.S. trade woes were
underscored last week when the Government reported that the deficit
during February widened to $10.5 billion, up 21% from the previous
month. The major cause: a fresh flood of imports from Japan.

    Mindful of polls showing that many Americans are more fearful
of Japan's economy than of the Soviet Union's military strength,
President Bush has made the FSX an example of U.S. willingness to
get tough with Japan by reopening an agreement that the Reagan
Administration had considered closed. For the second time since he
took office, the President last week demanded that Tokyo clarify
terms of the FSX deal.

    Under the original agreement reached last November, Japan's
Mitsubishi Heavy Industries would design the fighter (top speed:
1,300 m.p.h.) in cooperation with St. Louis-based General Dynamics.
The deal guaranteed U.S. contractors 40% of the $1.2 billion
development budget and allowed access to the secrets of advanced
Japanese radar gear and composite materials. But Bush wants further
assurances that American firms will receive 40% of the $5 billion
to $10 billion in production contracts for as many as 170 fighters,
which are to be deployed in the late 1990s.

    The Administration's hard line has settled a feud between the
Defense Department, which has championed the FSX deal as a
strategic and technological boon for the U.S., and the Commerce
Department, which challenged it as a giveaway of fighter technology
to Japan. Both agencies now support the White House position. Says
Defense Secretary Richard Cheney: "My hope is that we'll be able
to get that clarification and resolve our differences with the
Japanese."

    Yet some congressional leaders insist that the agreement is
nearly beyond repair. Says California Democrat Mel Levine, a member
of the House Foreign Affairs Committee: "I just don't think we
should help Japan build its own jet fighter when the U.S. already
builds the best-quality, best-priced jet fighters in the world.
Japan should buy the product from us." FSX opponents contend that
if Japan wants to retain access to American markets, it should be
willing to buy goods that the U.S. produces at competitive quality
and prices. They claim that Congress will reject the jet agreement
when Bush finally submits it for review, unless the deal contains
major Japanese concessions. Yet the opponents would almost
certainly lack the votes to override a presidential veto of any
blocking legislation.

    The congressional outcry reflects frustration over the U.S.
trade deficit, as well as the feeling among many legislators that
Japan has refused to throw its markets wide open to American goods.
Time and again the U.S. has negotiated trade agreements with Tokyo
only to find Japanese buyers still reluctant to pull out their
checkbooks as often as U.S. politicians would like. In 1986, for
example, Tokyo agreed to help U.S. companies win a 20% share of the
Japanese semiconductor market by 1991. While American microchip
sales in Japan rose sharply last year, thanks to an expanding
market, U.S. companies have increased their share of the total to
only 10.5%.

    Congress paved the way for sharp U.S. retaliation by passing
landmark trade legislation last year that may cause further
friction between the two countries. The law has a provision dubbed
Super 301 that requires the U.S. Trade Representative to identify
by May 30 those countries that systematically restrict U.S. access
to their markets. The Super 301 offenders must then agree to lift
their barriers or face U.S. import restrictions on their goods.
Says Missouri Republican John Danforth, a member of the Senate
Finance Committee: "I would really be startled, and very disturbed,
if Japan were not on the list."

    Ironically, the latest round of Japan bashing comes at a time
when Tokyo believes it has been doing its best to improve U.S.
trade ties. Last year Japan dropped quotas on beef and citrus
imports and began to open its construction market to U.S. firms.
"Through hard joint effort we put a lot of thorny issues behind
us," says Peter Y. Sato, director general of the economic affairs
bureau of the Ministry of Foreign Affairs. "Yet Americans are not
satisfied with the speed." Other leaders see the FSX wrangle as a
dramatic symptom of unreasonable U.S. demands.

    At one point in the mid-1980s, Japan intended to build its own
jet to patrol Pacific sea-lanes and provide air support for its
defense forces. Washington offered instead to sell Japan planes
that could be modified by adding new technologies, but Tokyo
complained that the jets did not meet its military requirements.
After the U.S. pressed the issue, Tokyo and Washington agreed last
year to design the FSX (for Fighter Support Experimental), an
advanced aircraft that would add new electronics and wings to the
F-16 fuselage.

    But the Reagan Administration's agreement ran into turbulence
during two of Bush's National Security Council sessions in
mid-March. Outspoken opponents included White House chief of staff
John Sununu, a former engineering professor, who argued that the
U.S. risked losing the technological edge represented by the
plane's so-called source codes, which coordinate its electronic
features. The doubters were joined by Secretary of Commerce Robert
Mosbacher, who says he wanted to ensure that "this aviation
technology, which has taken so many years of blood, sweat, tears
and money to develop, did not instantly allow our biggest
competitor to catch right up." After hearing the objections, Bush
decided to reopen the agreement and press Japan for safeguards,
including a clearer understanding of what the U.S. would gain from
the project and the technological secrets it could withhold from
the Japanese.

    For its part, the U.S. Defense Department, based on its history
of cooperation with the Japanese Defense Agency, sees few dangers
in the FSX. Pentagon planners say the Japanese will learn little
from the aging F-16 airframe. At the same time, the Pentagon covets
Japan's miniaturized phased-array radar technology, which will use
thousands of tiny, independent sensors to sweep large sections of
the sky. The new radar will provide sharper resolution and greater
range than traditional back-and-forth scanners. In addition, the
Japanese will pay for the development of a larger, stronger and
lighter wing for the F-16.

    Proponents of the deal believe the bulk of technology flow will
be from Japan to the U.S. Edward Bursk, chairman of the Aerospace
Industries Association of America's International Council, told
Congress last month he thought the agreement was fair. Said Bursk:
"The U.S. technology involved in FSX is at a reasonable level and
under U.S. Government control," adding that Japan could build a
comparable plane by itself.

    To those who argue that the FSX will help Japan become a major
power in civil aviation, the deal's supporters reply that Tokyo
already has entered the field with willing help from U.S. aerospace
firms. Japan is developing an advanced jet engine with U.S.,
British, Italian and West German companies and is building a rocket
that may launch a two-ton satellite into orbit by 1992.

    The Bush Administration, in asking for safeguards in the deal,
is not trying to crush Japan's aerospace ambitions or force Tokyo
to buy wholly U.S.-made planes off the shelf. Rather the struggle
over the FSX appears to mark the start of a new get-tough era in
U.S. relations with its trading partners. Armed with the Super 301
weapon provided by Congress, the White House in coming months could
bring actions against Japan if the U.S. determines that Tokyo has
failed to open its markets for everything from weather satellites
to financial services. Moreover, the Administration now considers
U.S. industrial competitiveness to be as essential as tanks or
missiles to American security. "Trade is defense," says Clyde
Prestowitz, a former U.S. trade negotiator. "We must recognize the
nature of the game." George Bush, for one, seems determined to play
harder.