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F-2 / FSX - The Debate in the US

Some expressed concern that Japan will someday become a weapons exporter. But it was very unlikely that made-in-Japan fighters, tanks, warships, ammunition, artil1ery - inshort, weapons - will be exported. Japan's long-standing official government policy prohibits the export of weapons to any country and allows the export of military technology to only one country - the United States. This policy - adopted by Japan at the request of the US - enjoys strong public support in Japan across the political spectrum. While there are some in Japan who would like to see the policy changed, such a change would precipitate a major rupture in Japan's security relationship with the US. Clearly, such a development is unlikely so long as the US continued to demonstrate to Japan a reliability as an ally in a partnership requiring trust and cooperation. In the specific case of FSX, there are provisions in the agreement which prohibit the sale or transfer of the FSX without the consent of the US government.

Some suggested that going ahead with FSX will result in the US giving up its lead in aerospace to Japan in the late 1990s. but the agreement was well-structured to protect American advanced technologies while providing access to Japanese technology and building on the advantages that international coproduction and codevelopment provides. Recognition of this fact has led Aviation Week, The Wall Street Journal, The Economist, The Aerospace Industries of America, and others in the aviation industry, including McDonnell-Douglas and Boeing, to support the FSX agreement. In the 1990s, international coproduction and codevelopment made good business sense as well as good strategic sense.

The technology transfer concems with the FSX were not forgotten. These concerns centered on the four areas of the a1rcraft - the airframe, the avionics, the engine, and the software. The airframe technology to be provided was essentially 15 to 20 years old. The US Air Force and General Dynamics were both interested in what the Japanese might do to improve on it. Otherwise, there was nothing new or significant in this area. The avionics will be developed by Japan, and no technology will be provided by the USHowever, again, the Air Force is interested in Japanese improvements. Japan will be developing the active phased-array radar, inertial navigation system, electronics countermeasures system, and mission computer hardware system without US participation - but the results of these Japanese developmental efforts were available to the US.

The debate in the United States over the FSX project has to be viewed in the context of the larger debate over Japanese economic competitiveness. In the view of many politicians and other observers, by the late 1980s one of the most important problems that the United States confronted was that of maintaining or enhancing the nation's economic competitiveness.

In the 1980s, some major US industries, such as automobiles and steel, that once epitomized US industrial supremacy, lost significant market share to foreign competitors, notably from Japan. As the preeminent worldwide economic position of the United States eroded, concern about the competitiveness of the US economy grew. Between 1972 and 1989, the Japanese standard of living increased seven times as fast as that of the United States. Significant differences existed among the business environments in which US and Japanese companies operated and in government relationships with industry in each of these countries. Cultural, historical, and macroeconomic differences, such as saving and investment rates and the cost of capital, influenced the business environments. The cost of capital in Japan was much lower than in the United States in the 1980s, thus influencing investment rates. This difference appears to have encouraged Japanese companies to invest a greater amount in research. In addition, during the 1980s some Japanese companies pursued a strategy of long-term market share gains over profits. Japan was the world's most successful practitioner of industrial policy. Japan's industrial policies were largely responsible for its economic recovery from World War II and its increasing preeminence in high-technology industries.

But the shocking performance of Japan in the late 1980s was due less to industrial policy and more to the illusions of an economic bubble. Many of Japan's industrial and financial firms were heavily burdened by debt, which was often incurred through the purchase of high-priced assets during the bubble period of the 1980s. The assets were worth much less after the bubble burst. After the bubble burst in 1990, industrial firms, financial firms, and households all found that their portfolio of speculative investments in real estate and stocks was suddenly worth much less than during the bubble. The value of real estate and stocks continued to decline in the 1990s. Banks and industrial companies were slow to invest in new projects, and economic growth was meager through 2008.




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