Trade ties bind Oregon and Japan
Japan needs us. And we need Japan — despite what the rest of the country might think.
That was the message from a panel discussion entitled Impact on Trade, Economy and Community: U.S.-Japan Relations in Portland, Oregon, on Thursday, March 1.
James P. Zumwalt CEO, Sasakawa USA, was the moderator of the group. Having had a 36-year career in the Foreign Service, Zumwalt runs the Sasakawa Peace Foundation USA. It is dedicated to strengthening U.S.-Japan relations through education, programs and research. He was in Tokyo for the 2011 earthquake and coordinated the United States' support for the Japanese Government's response to that crisis.
Starting with the basics, Zumwalt pointed out that Japan and the U.S. have shared values. "They are a democracy, they believe in human rights and, until last year, Japan was on the UN Security Council."
He called the U.S.-Japan security treaty since 1960 a grand bargain whereby the US agrees to defend Japan against attack, and Japan supplies the space for U.S. military bases holding 50,000 military personnel and 50,000 members of their families. A recent show of strength by three American aircraft carriers off the coast of Korea and Japan could only have been accomplished with the help of the Japanese hosts.
It's the people
But Zumwalt added that U.S.-Japan "people ties" were perhaps even stronger than political and military ones.
"I went to Japan at age 17 as a high school exchange student. There was a Japanese host family who agreed to take me and that changed my life." He added that Sasakawa valued the contribution made by local organizations to Japan-U.S. relations, whether it's a Portland-themed ice sculpture in Sapporo or the heavy hitters who raised $35 million to expand the Portland Japanese Garden.
The high powered economic brain on the panel was Stephanie Segal senior fellow and deputy director, the Simon Chair in Political Economy at the Center for Strategic and International Studies. Like Zumwalt, she too expressed her relief at stepping "beyond the beltway" (Washington D.C.) so she could hear the opinions of Pacific Northwesterners and "engage with people who are closer to the real economy."
She showed a graph of global trade as a percentage of GDP. The trend was up until it took a hit in 2008, then recovered, but then flattened out in the last two years.
Who makes the rules
Another factor she honed in on was that in 2000, the U.S., Japan and China accounted for 48 percent of global GDP. In 2017, that was 46 percent, but China's share had grown immensely and the U.S. and Japan's has shrunk. That is not good for either country, as they are losing influence — and to an emerging economy.
"For setting the rules for what is to come, we need to be thinking of that."
She is now measuring trade by looking at current accounts as a percentage of GDP. Trade is usually discussed in terms of bilateral trade balances: with two countries, which one buys more stuff from the other? But this relationship no longer gives an accurate picture of their capacity because supply chains have become integrated.
She showed a bar chart showing that Japan is about twice as dependent on exports as the U.S.
Both the U.S. and Japan have similar amounts of exports to China but it is more important to Japan since theirs are a bigger percentage of their GDP.
In the context of NAFTA, Mexico and Canada are hugely dependent on exports to the U.S. Japan follows NAFTA closely in case it really does get renegotiated by the Trump administration. But in Segal's opinion, at 23 years old, the trade treaty is slightly outdated and needs an upgrade. It should include things like intellectual property protections and trade in digital services. She is worried about poison pills, such as rules of origin, and increasing the domestic content to qualify.
During discussion of the Trans Pacific Partnership and its 12 economies (out of which Trump pulled the U.S.) she said
Japan was watching very closely.
She concluded that on-the-ground investment and coordination between the two countries has made the trade relationship between the U.S. and Japan stronger than ever. The two countries have a dialog at a high level involving VP Mike Pence, which bodes well for getting over disagreements on things like infrastructure and standards.
Shade for China
Satu Limaye, director, East-West Center in Washington, talked about why Japan matters for America and Oregon. Japan is Oregon's eighth largest export destination. There are more than 400 sister relationships, like Sapporo and Portland.
The Portland-Vancouver-Beaverton area is the highest ranked exporter to Japan. Oregon's biggest export right now — bigger than wine or berries — is shade trees to China, where they are still urbanizing quickly in dry, sunny regions.
There are 7,500 jobs with Japanese-owned companies here. Oregon's number one foreign born Asian population is China, followed by Vietnam, Korea and then Japan in fourth place.
Ajinomoto is a large Japanese food processor, based in Ontario, California, but with three plants in Oregon. Paul Taylor vice president of general counsel & corporate secretary, Ajinomoto North America Division, said he landed in Japan 40 years ago and Japan has always been special to him.
"I usually have to start with Ajiwhat or Ajiwho?" said Taylor. "It's a relatively unknown name, but it's the 28th largest food company in the world, in 122 countries around the world.
It was founded in Japan in 1909 and was founded on amino acids.
"Our first product was MSG, an amino acid-based product. Here in the U.S. we usually say MSG very quietly, it's like saying you're a lawyer. So, I've already got two strikes against me." MSG is part of the flavor umami, which he noted western foodies are currently raving about. (It's also the name of the café at the Portland Japanese Garden.)
Ajinomoto also makes industrial quantities of aspartame, the sweetener in diet drinks. "That's three strikes," joked Taylor.
Talking about investment, he said "Japan has been a major player in Oregon and I trace it back to Governor Vic Atiyeh in the 1980s. Part of the impact he had was hiring people to work with the state to bring investment in. Also, he repealed our unitary tax in 1986."
This was a tax assessed on a fraction of the company's worldwide operations, not just those that are located within the state or the country. Atiyeh could see it scared off foreign investors.
The other key development was a Japanese TV show called "From Oregon with Love," about a Japanese orphan adopted by his Japanese aunt and uncle in Oregon. "Many people saw it and it put Oregon on the map." Also, in 1986 Delta started non-stop flights from PDX into Narita, followed by Northwest Airlines.
Another development was Intel, based in the Bay Area but now the largest non-government employer in Oregon. "At one point five of the top six wafer companies had facilities in Oregon."
Top five reasons Oregon is awesome
"So why do companies come from Japan to Oregon? This is a small state, not really on the map. The five factors I came up with are one, the historical factor: it's easier to stay. Two, proximity to Tokyo with daily flights. Three, Portland is known for having a highly educated workforce, and for investors, you're looking for an educated, hardworking workforce. Four, government support is an important part of investment — that includes incentives but also assistance."
He said Ajinomoto recently opened a facility in Missouri, partly because of help from the state of Missouri. "It has an industrial park ready to go, it fast tracked the permits and it helped find the workforce." It beat out Boise, Idaho, for those reasons.
And five, "the people. Oregonians are friendly."
During questions, an audience member asked how comfortable are the Japanese people with Prime Minister Abe now being described as the leader of the free world?
Ambassador Zumwalt said that the history of trade with Asia was the U.S. persuading Japan to come to terms for fair trade and undergo economic reforms, particularly their rural, protectionist lobby. "Suddenly with TPP gone, Prime Minister Abe was faced with the main the benefit of doing all that, the USA, being no longer there. So, Japan had to come forward and fill the void. Along with Australia and New Zealand they had to rescue it (TPP)."
He said the feeling in Japan was that TPP was an insurance policy against China (with its many state-run industries) becoming the domain rule setter in Asia. "The prospect of setting the future rules of the global economic order was very appealing to the Japanese."
Zumwalt added that the Japanese still want the U.S. to come back to the TPP. "They would welcome us with open arms."
"Guest workers" welcome
Japan is still a very different country from America. Someone asked that with its aging population, does the country accept immigrants?
"If you look at the labor force there's a larger proportion of foreign-born workers. It's still small — around 2 percent — but that's three times what it was in the 1980s."
"Most of those workers are from China, Vietnam and Nepal. There also is a 'guest worker program' where they can bring in trainees — just cheap labor, on three-year visas — to work in factories. And they are bringing in people of Japanese ancestry from Brazil and Peru." Women are also being given a bigger role in the workforce. AIG, the insurance company, has done a good job of bringing women into the workforce after they have had children.
The Japanese are not worried about losing their jobs to a robot. They like labor-saving technology. "If you have these labor-saving products, think about bringing them to Japan," said Zumwalt.
The panel was held on the same day that President Trump tweeted he was imposing 25 percent tariffs on foreign steel and aluminum, taking many in Washington by surprise.
Segal explained that in the wake of the world recession the G20 became very important, and it was all about resisting
protectionism. "If the U.S. takes a step
back and nobody else steps up, we could
be in that sort of worst-case scenario. We're not there, but that's the risk people talk about."
Afterwards, Segal told the Business Tribune that "a number of the people in the (Trump) administration have spoken out in favor of fair reciprocal trade, but mixing the idea of looking at the overall bilateral balance. And I think looking at the bilateral balance is not the best measure of whether there's a fair relationship."
She said as an economist she didn't want to get into the politics of when Trump speaks and what he says.
"But," she said, "I think having a United States that is dedicated to the integrity of the international system is something that is in the United States' best interest, and in the interest of all our trading partners."
Reporter, The Business Tribune
Follow us on Twitter, Facebook and Instagram
Subscribe to our E-News