ICBTT2002The 1st International Conference on Business & Technology Transfer Top page in Japanese
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  ICBTT2004 Technology & Society Division, JSME


Jacqueline McGLADE

In 1994, The (American) Conference Board issued a comprehensive profile, U.S. Manufacturers in the Global Marketplace, that charted the multiple dimensions and patterns of American international corporate activity. In a discrete section entitled, "The Special Case of Japan", the report made the enlightening claim that "U.S. firms were more likely to enter into joint-venture or licensing arrangements [with Japan] than in any other industrialized country." The report also went on to note that such "patterns of strategic alliance" also included American overseas R&D activity, of which half was concentrated in only five countries, the United Kingdom, Germany, France, Canada, and Japan. [1] As a potential partner, Japan had assumed a predominant and preferred place above all other non-European countries, and some European countries for that matter, in relation to U.S. foreign business ventures.
By contrast, a government report conducted to support the Export Trade section of the 1979 U.S. Trade Agreements Act identified Japan as America's strongest global export competitor. The report bemoaned the sudden rise and intensity of Japanese competition and warned of the ensuing of a new "competitiveness gap." It highlighted Japan's substantial "competitive advantage" over American manufacturing in such key areas as R&D spending, increased productivity, global market share, and accelerated growth of capital and technological capabilities abroad. As Japan had managed to match U.S. export levels in a number of high-tech products, the study concluded that "competition between the two countries will likely increase in the future."[2]
With these two reports in mind, an intriguing tension between rivalry and cooperation, competitiveness and partnership seems to have marked the post-World War II era of U.S.-Japanese business relations and technology activities. As historians William McClenahan and Alfred Eckes have noted, Japan's initial rise in the 1930s as the first non-Anglo industrial power to challenge U.S. global economic interests prompted discriminatory attitudes and reactionary measures on the part of American policymakers. Aggression and hostility continued to plague U.S.-Japanese commercial relations despite the negotiation of cooperative VERs (voluntary export restraint) agreements between the two countries before World War II.[3] Aaron Forsberg has also shown that U.S. "hostility toward Japanese trade ran deep" in the immediate postwar years but that Cold War security concerns quickly prompted new strategies aimed at re-shaping and then binding Japan as an "economic ally" with the West. [4]
While tainted economic relations certainly contributed to the overall animosity that led the United States and Japan into war, small shifts did occur prior to 1941 that would foreshadow the coming of business cooperation. In commercial negotiations, American executives and government officials began to remark on the sophistication of Japanese business strategies and impressive improvements in technological production and marketing. Technological competition in global markets, both in terms of sales, production systems, and knowledge transfer, was the element that fundamentally changed American corporate attitudes and governmental approaches toward Japan as an emerging business power. The experience of postwar occupation also acted to forge a new path for U.S.-Japanese commercial relations distinguished by growing levels of economic cooperation and diplomatic parity in the midst of escalating global business competition.
The shifting parameters and developing relationship cycles of U.S.-Japanese cooperation-competitiveness has prompted important changes in world technology development since the end of World War II. Intense competition along with close cooperative ventures between the two business powers spurred a fundamental re-ordering of global manufacturing, the development and export of high-tech products, and patterns of foreign technology transfer into the 1980s and 1990s. When taken alongside Cold War technology controls, U.S.-Japanese business competition dramatically altered the geographical dimensions and principal trajectories of world technological development and knowledge transfer in the postwar era.
This study probes then the evolution and impact of American- Japanese commercial relations and business activities as "equal global competitors" in modern technology markets. It will primarily concentrate on the emergence of U.S - Japanese competition in postwar high-tech manufacturing fields especially in the area of consumer electronic and computer goods markets. This work will argue that Japan's emerging parity status as a Western technology power forced U.S. officials and executives to re-examine a wide range of policies aimed at solving problems of industrial competitiveness and trade cooperation, especially in the area of the manufacture and export of consumer high-tech products.
Also, it will look at the consequences of U.S.-Japanese competition in the 1970s and 1980s as high-tech consumer manufacturing gained significant ground over the production of strategic/military items in terms of global market interest and exports growth. This study will argue that the new postwar relationship of the United States and Japan as "rival partners" precipitated an important, non-strategic dimension to the Cold War world of trade. The vigorous phenomenon of U.S.-Japanese competition and cooperation in high-tech consumer products manufacturing and foreign technology transfer also seriously challenged the artificial constraints imposed by Cold War strategic trade controls and containment policies. By the 1980s, the new "rival partnership" of the United States and Japan as business powers also spurred the re-globalization of East-West technology markets bifurcated under the Cold War.


Certainly, American policymakers did not anticipate that Japan, as a defeated power, would ascend to the position of full partner in the Western trade alliance that was forming at the end of World II. Under the Allied occupation government directed by General Douglas MacArthur, Japanese business activities became a target for Western reform and control, not re-empowerment and technical renewal. While U.S. policy shifted in favor of Japanese economic renewal after the rise of Communist China in 1949, protectionism overshadowed partnership as the central objective of American efforts in rebuilding Japanese business.[5]
Despite American efforts to restructure Japan's economy and build trade dependencies that were beneficial U.S. producers, Japanese businesses countered by seeking independent opportunities to recapture first traditional and then new hi-tech consumer products markets even while under occupation. As early as the mid-1950s, Japan had managed to re-penetrate key American export markets important for the revival of such home industries as tuna and crab fishing, cotton textiles, paper products, plywood, stainless steel flatware, sewing machines, glassware and ornaments, leisure footwear, metal toys, bicycles, and earthenware and china products.[6] Since the 1960s, Japanese businesses have emerged as formidable competitors against American and Western European firms involved in hi-tech as well as traditional manufacturing, especially in steel products, machine tools, automobiles, computers and computer components, and color television and radio sets.[7]
But business re-engagement and competitiveness encompasses only one dimension of the economic phenomena that has marked postwar Japan, which historian Aaron Forsberg has called, the eJapanese Miracle." Japan's ascension as a world economic power, along with its achievement of business parity with the United States and Western Europe, actually evolved from a unique confluence of state and private responses to policies, events, and opportunities stimulated by the Cold War and the subsequent East-West re-alignment of world trade. In particular, these special circumstances allowed Japan to gain unparalleled access and advantages in world technology markets, which came in part through the transfer of American industrial know-how and aid, but more importantly through conscious acts aimed at spurring indigenous innovation and greater government-business collaboration. In the area of technology transfer, four postwar developments are particularly noteworthy in tracing Japan's technical ascension: the extension of U.S. aid programs, CoCom policies, national collaborations, and international business ventures and partnerships.


In the immediate years following World War II, American foreign policy experienced a profound, if not permanent shift away from isolationism toward internationalism, driven by interconnecting fears over Soviet aggression, communist expansion, Western economic stagnation, and the spread of atomic weaponry. International economic strength joined with military preparedness and Western alliance as the tri-partite foundation of U.S. Cold War policy. As a first step toward reviving Western economic activity and growth, policymakers passed in 1948 the largest aid package in American history, the Marshall Plan, earmarked to lend $10-13 billion in industrial and technical assistance to the struggling economies of Western Europe.
Over the next ten years, the Marshall Plan, along with other U.S. "mutual security" aid programs extended essential and unparalleled opportunities for European firms to gain access into the laboratories, manufacturing facilities, and educational training centers of top American companies. Though initially unanticipated, Germany followed by Japan joined Western Europe as participants in the Marshall Plan's premier technology transfer program, the U.S. Technical Assistance and Productivity Program or USTA&P. Starting in 1955, Japanese firms began receiving large grants to send managers to the United States to attend business programs offered by such prestigious universities as MIT, NYU, and Stanford and work in notable American companies such as Du Pont, General Electric and Ford.[8]
While Japan had received Western technical assistance prior to World War II, the USTA&P ushered in a new era marked by exclusive exposure to American technology and business methods in a total immersion manner.[9] For the next five years, 200 teams representing technology driven firms in Japan's steel, automobile, and electrical industries participated in the USTA&P and carried back new plans to modernize production processes and standardize product lines through the transfer of American equipment and management.[10] In 1956, the USTA&P also added special missions for Japanese electronics executives interested in computer technologies for business and commercial markets highlighted by visits to R&D facilities at MIT and IBM.[11]
As part of the USTA&P, the Japanese business community also attended special seminars conducted by American technical consultants and experts through the newly formed Japan Productivity Center. The importance of the JPC cannot be understated as it played an important, reinforcing role in spreading American technical know-how and managerial techniques at a crucial time in Japan's postwar era of business revivalism. Through the JPC, Japanese executives acquired prolonged, first-hand exposure to emerging computer hardware technologies and software developments, electronics markets, managerial methods, and production innovations. As Takenori Saito has noted, the advent of the productivity missions and JPC prompted then a ten-year period of close transfer or "direct importation" of American systems, equipment, and methods in to Japanese technology sectors.[12]
Furthermore, U.S. technical assistance programs, along with the State Department's Development Loan Fund, international economic development programs under the World Bank, the Export Import Bank, and the Inter-American Development Bank, provide large grants to modernize Japanese manufacturing operations and plant facilities, facilitate technical knowledge transfers, and stimulate ventures in hi-tech R&D, engineering, and business development. In addition, direct contracts from such sources as the U.S. Army Procurement Agency (APA) stimulated full-scale modernization of technical processes in some industries such as Toyota, which instituted a program of Total Quality Control (TQC) to satisfy American expectations regarding contracted vehicle construction and performance.[13]. The roots of future private business ventures can also be traced to the activities of the Japanese-American Productivity Enhancement Committee, which formed in 1954 linking like-minded U.S. and Japanese executives and firms.[14]
Under its new conduit of Cold War economic assistance then, the United States actively guided and encouraged Japan's postwar interest and activities in Western technology transfer and corporate management. In the case of Japan's involvement in another U.S.-led Cold War technology initiative, CoCom, American policymakers demonstrated less enthusiasm, if not outright obstructionism, in allowing Japanese companies to act upon technological information and opportunities arising out of Western strategic trade controls.


While the least visible of all Cold War economic initiatives, the activities of CoCom substantially, if not permanently, altered the pre-war foundations of world technology development, transfer, and trade. In the throes of a swiftly escalating Cold War, American policymakers rushed to pass in 1949 the Export Control Act to contain technology products and trade with emerging communist countries. To reinforce a Western technology embargo, the United States, along with its Western European allies, also created COCOM, the Coordinating Committee for Multilateral Export Controls in the spring of 1950.
Under the mandate of containing Communist economic strength and expansion, US and European officials began discussing possible frameworks and administration for a world-wide system of business and technology export controls in "an informal" forum which met regularly in Paris to "exchange ... views ... on a more systematic basis." Known only as the Consultative Group (CG), this ex-officio body, which boasted "no direct connection to any U.S. or European government agency, NATO or the OEEC", nevertheless, managed to guide the formal organization and enforcement of a world-wide system of trade controls which endures to the present day.
Initially, COCOM's mandate was a daunting one as the complexities of instituting and managing the largest trade embargo since the Napoleonic era soon overwhelmed the handful of members comprising the Consultative Group. The CG countered by setting up a subordinate "Coordinating Committee" (COCOM) to revise and monitor the new East-West trade controls. Along with COCOM and its technical subcommittees, the CG established an embargo list of "goods of high strategic importance" and an "ICDV system" for foreign import-export monitoring and control, which required all Western Bloc nations[15] to secure an "Import Certificate" (IC) and a "Delivery Verification" (DV) for cargo shipping.[16]
For the next decade, the composition of the ICDV lists became the chief source of contention and conflict between the United States and its European partners. At first, the lists contained items immediately discernable as "strategic" or "militarily sensitive" in importance. The original list or "Class 1A" drafted in January 1950 included 167 items such as "specialized machine tools (40 items), petroleum equipment (15 items), chemicals and chemical equipment (31 items), precision scientific and electronic equipment (42 items), and certain non-ferrous metals (12 items)."[17] After some adjustments following CG and COCOM discussions, the IDCV system was comprised as of January 1950 of three lists, List IA with 144 items which were strictly embargoed, List II comprised of limited exportable items, and List III for items under consideration for restriction and control. As the 1950s wore on, however, the overzealous Mutual Security Administration (MSA) forced an expansion of the COCOM list to over 450 items including such innocuous substances as Chinese hog bristles and the consumer plastic, Bakelite.[18]
Angered by U.S. insistence for strict controls despite Western economic costs, several participating countries, most notably Great Britain and Denmark, began to question the deleterious affects of COCOM embargoes. By the mid-1950s, attempts became more frequent among the CoCom partners to restore pre-war trading levels with the Soviet Union, its Eastern European satellites, and China, especially in such in key sectors as shipping, coal and manganese purchases, railway equipment and aircraft parts, chemicals processing, scientific devices, and machine tools.[19] To offset the growing economic hardships of the East-West trade split, European countries also countered U.S. domination by demanding in 1957 major revisions to the international lists and also looked to diversify and strengthen the representation base of the CG and CoCom committees.
As early as 1951, Denmark, Belgium and France began to pressure the United States to allow Japan to sit as a full partner in CoCom. The establishment of the People's Republic of China (PRC) and outbreak of the Korean War in 1949-50 had precipitated a shift in American thinking about the recovery of Japan due to its increasingly vulnerable position as an industrial capitalist nation in the midst of spreading communism in Asia. At the time of the CoCom discussions, U.S. strategies for Japanese economic recovery had already moved away from protectionism toward liberalization, encouraging the resurgence of independent business activity and the restoration of competitive export production and market development through such programs.[20] Despite American efforts to Japan to bind its economy closer to the West through the USTA&P and JCP programs, the notion of extending full partnership in CoCom revealed the lingering paternalism and hostility still held by U.S. policymakers. Nevertheless, the European representatives persevered and, after a series of special meetings in Washington, D.C. in 1952, the United States acquiesced and extended an invitation to Japan to join CoCom' steering committee, the CG, and its auxiliary policy and technical sub-committees.[21]
The entry of Japan as a full CoCom partner became one of the key factors that prompted the re-configuration of U.S.-Japanese economic and diplomatic relations away from paternalism toward partnership, albeit one marked by increased rivalry as well as cooperation. As a voting member, Japan proved an important ally for the Scandinavian countries, and later the United Kingdom and France, to fight heavy restrictions levied by CoCom on shipping activities, shipbuilding and repair and commercial fishing levied by CoCom during early U.S. dominated discussions in 1949-1950.
Through the technical subcommittees and CG steering committee, Japan also gained strategic information firsthand that led to business advantages over potential competitors involved in shipping and fishing enterprises in Asia, the Baltic Sea, and the Middle East.[22] In particular, CoCom regulations blocked the unlimited manufacture of heavy cargo ships, tankers, and large fishing craft, along with engaging in ship engine, instruments, and repairs contracts between participant countries and the communist bloc. For countries such as Denmark, Norway, and Great Britain, the CoCom embargoes precipitated a dramatic decline in business orders and employment at in key shipyards. While Japan lost lucrative repair contracts it had traditionally held with the Soviet Union, it benefited significantly by the sharp swing in Cold War shipping sales toward non-embargoed light fishing vessels and watercraft. While many European shipyards continued to suffer then in the 1950s and 1960s unable to convert to smaller ship manufacturing, Japan surged forward to capitalize upon the growing new light watercraft markets.
Of all of the business sectors affected by COCOM, high technology realized the greatest amount of change in terms of product development, business management, and supply and transfer. High technology was particularly vulnerable to artificial barriers as it was marked by a dependency on specific chemical and raw materials supplies, integrated circuitry and electronics systems and coordinated components, and advanced production methods. As many of the new consumer hi-tech products, especially in computers and electronics, had emerged first as military innovations, the possibility of reverse engineering led to often stringent CoCom regulations in cross-over markets. As a result, producers struggled to overcome embargoes on certain components, materials, and end-use applications that had been deemed "strategic" yet were also essential for the production of high-tech items for civilian markets. The confusing net of Cold War business controls often forced producers to engage in costly lobbying activities to gain exceptions for their products, or worse, abandon profitable product lines in lieu of CoCom restrictions. Thus, civilian hi-tech business sectors, which held the greatest potential for growth, became quickly endangered by Cold War world economic warfare.[23] As in the case of shipping, Japan, nevertheless, succeeded over many of its CoCom partners in shaping its fledgling postwar electronics, computers, color televisions, and communications products industries to satisfy consumer and non-military business markets from the start and escaping excessive East-West trade restrictions and embargoes.[24]