The Push To 'Buy American'

Listen up, Japan. Greece, N.Y., has taken a stand. The Rochester suburb wanted to buy a piece of excavating equipment-but last week the town board voted down a $40,000 machine from Komatsu, hoping to send a message to Japan about unfair trade policies. It voted to buy a John Deere, even though the American company's model cost $15,000 more.

For years, "Buy American" has been the ultimate in bumper-sticker economics. But in the past few weeks the catchy phrase has gathered momentum, crashing through markets-and, sometimes, logic. Many Americans have long resented Japan's mercantile prowess, but recent eventsincluding an inflammatory comment last week by a prominent Japanese politician-have caused the simmering anger to explode. Last week Los Angeles's transit commission canceled a $122 million railcar contract with Japan's Sumitomo Corp. Detroit-area Ford workers announced that owners of foreign cars would have to park in the back of the Wayne Assembly Plant lot-or face towing. Such companies as Monsanto offered incentives for consumers to buy American cars. In Washington, the push for protectionist legislation is on. But the flag-waving could do as much harm as good-especially if it leads Japan to further close markets that the United States has pried open through long negotiation. And just try to buy American. It's trickier than it looks. According to the Associated Press, the folks in Greece, N.Y., were chagrined to learn that the Deere engine came from Japan, while the Komatsu was made in the U.S.A. Now they're rethinking.

Relations between the United States and Japan have grown downright nasty. One Japanese diplomat fretted that the situation was "as serious a deterioration in relations between our two countries since the war." Coming just after George Bush's prickly trade visit to Japan and Chrysler boss Lee Iacocca's blistering anti-Japan broadside after his return, the week offered a tumult of rising tension. Yoshio Sakurauchi, speaker of the lower house of Japan's Parliament, told supporters America had become "Japan's subcontractor" and reportedly said 30 percent of its workers are illiterate. The remarks triggered a furious American response. Michigan Democratic Sen. Don Riegle compared Sakurauchi's attitude to the "view the Japanese held the day its warplanes struck Pearl Harbor. Their arrogance was gone by 1945."

Japanese reaction to the American vitriol ranged from hurt to outrage. Most Japanese feel that they simply make good products. But heightened tensions sent many Japanese businessmen and politicians into a frenzy of damage control. Japanese Prime Minister Kiichi Miyazawa declared that Japan owes its prosperity to America. An executive for Mazda, which runs a factory in Flat Rock, Mich., said Sakurauchi's remarks were "Stupid and inaccurate."

The highest spike in the weeklong fever was Los Angeles County's move against Sumitomo. Though Sumitomo had built the first phase of a 30-year, $150 billion transit project, the subsequent economic downturn made Californians less sanguine about giving work to foreign corporations. The day of the vote, 500 union workers showed up at Transportation Commission offices. "Taxes being paid here should not only solve problems, but should create jobs here," says state Assemblyman Richard Katz.

That's where "Buy American" gets its strength. Dr. William Lippy, an Ohio surgeon who began a nationwide "Jump Start America" campaign, now claims to have signed 140 companies with 35,000 employees. Last Thursday Monsanto Chemical Co. became the latest major company to start such a drive; its "Project Get Rolling" program will offer its 12,000 workers $1,000 cash for buying American cars.

The public anger has politiians pricking up their ears. In Congress, chances have improved for protectionist legislation, such as a bill by Richard Gephardt that requires Japan to cut its trade surplus with the United States by 20 percent a year.

On the campaign trail, Democrats Bob Kerrey and Tom Harkin stress "get tough with Japan" themes, as has Republican Patrick Buchanan.

But simple slogans don't help make sense of a maze of globally produced products. If Idaho-based Morrison Knudsen wins the contract for L.A.'s railcars, it will likely buy the shell for the cars from the same Japanese manufacturer that Sumitomo uses. And Honda, after all, makes many Accords in Marysville, Ohio. Some of the anti-Japan reaction seems blatantly xenophobic. When the Seattle Mariners announced that a group headed by Japanese businessmen had offered to buy the ailing franchise in order to keep it from moving to Tampa, Fla., it seemed a classic act of corporate good citizenship. Seattle locals had asked the Japanese to pitch in to save the team. But some of the public and press responded with indignation. And while Baseball Commissioner Fay Vincent says the league was "flattered by their attention," the owners preferred local control.

Despite all the fuss, some of the trade news is good. U.S. exports to Japan have grown over the last five years, and the United States has won some concessions: a high point of the Bush trip was the agreement by Japan to open its $6 billion government computer market to foreign firms. Vice President Dan Quayle cited such facts last week while calling for an end to "mindless Japan-bashing." Any progress that's been made could be lost in the rising emotionalism. Calm voices in the U.S.-Japan relationship have been pushed to the sidelines, says one Western diplomat in Tokyoand "the crazies are getting all the attention."

Ultimately, "Buy American" is not the answer; most consumers don't really blame Japan for the nation's economic ills. A Wall Street Journal/NBC poll released Friday showed that only 19 percent of Americans fault Japan, while 53 percent blame American managers and labor. And some U.S. executives have learned that it's not impossible to overcome Japan's own deeply ingrained "Buy Japanese" policy. Companies like Caterpillar Inc. have established a longtime Japanese presence and cultivated trading partners profitably. CEO John Rollwagen of Cray Research Inc. says Japanese businesses need top products like his supercomputers: "They're driven by the same thing we're driven by-competitive success."

The big fear for such executives and trade negotiators is that as American anger rises, Japan could respond in kind.

"It's not going to make much sense to give them an excuse to shut markets back down," says an American official in Tokyo. Since Japan is America's second largest customer, buying some $50 billion in goods last year, that could mean big economic trouble in the United States. But former trade negotiator Clyde Prestowitz, who heads the Economic Strategy Institute in Washington, says that if the Gephardt bill were to pass, Bush would veto it-but still be forced to adopt a stronger stance against Japan. "The Congress really only has meat axes," Prestowitz says. "They don't have nice fine tools on the Hill. By using the meat ax, they're forcing the president to use the scalpel" to work harder at negotiating trade deals.

Some trade experts also say that Americans need to listen to Japan's unpleasant message-"to make America more competitive rather than beating up on the foreigners," says Edward Lincoln of the Brookings Institution. There's nothing wrong, after all, with making cars that consumers trust. If the United States is to have any chance of closing the gap with Japan, the rallying cry has to be not just "Buy American" but "Make American"-better.