Trade winds that blow in one direction
By Lorraine Mallinder
European Voice
26.06.2008 / 00:00 CET
Post-war Japan invented the globalisation handbook. But the country has been slow to open up its own markets to foreign products and investors.
For a country that prides itself on being at the vanguard of globalisation, Japan remains remarkably closed to foreign investment. The figures speak for themselves: for every euro of Japanese investment in the UK and the Netherlands alone, Europe is able to invest only three eurocents in Japan.
Dejima
Peter Mandelson, the European trade commissioner, attributes this unbalanced state of affairs to Japan’s historic suspicion of the outside world. In a speech delivered in April ahead of this year’s EU-Japan summit, he made reference to Dejima, an artificial island in the port of Nagasaki that served to segregate foreign merchants from the local population during the country’s two centuries of isolationism.
Today, that suspicion translates into a highly restrictive mergers and acquisitions market. Although the country’s cosy corporate culture has been shaken up in recent years by domestic takeovers and buyouts, the market is still closed to foreigners. Selling to foreign firms or funds (‘hagetaka’ or vultures) is still largely perceived as an act of defeat. Corporate poison pill schemes protect against ‘tekitai teki baishu’ or bids by the enemy.
It is ironic, then, that Japan practically invented the cross-border supply chains that underpin the post-war global economy. Back in the 1980s, Japan pumped large-scale investments into car and electronics factories in the US and Europe. The move kicked off the outsourcing trend that is now overturning the global economic order.
The question is whether Japan’s present attitude, with the rapid growth of emerging economies such as India and China, is sustainable. Responding to the changing terrain and sluggish domestic growth, Japan is starting to open up, albeit slowly. The Japanese authorities are in the process of translating investment-related laws into English. The country aims to increase foreign direct investment stocks to 5% of gross domestic product by 2010.
Exaggeration
Razeen Sally, co-director of the European Centre for International Political Economy, says that the EU also needs to open its borders. “It is easy to exaggerate the extent to which Japan is closed, just as it is easy to paper over obstacles which exist in the EU,” he says. If Japanese companies built factories in Europe back in the 1980s, it was largely because of Europe’s prohibitive regulatory climate. Today, Japanese companies seeking to export to Europe still face punitive tariffs and onerous technical standards.
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