Ronald W.Cox 371achieved by reliance on close functional relationships between customers and
suppliers, the multiple tasks performed by Japanese autoworkers to enhance
productivity and inhibit the formation of independent unions, and protection from
the Japanese government, which limits access to foreign firms and practices
discriminatory intervention in favor of domestic producers. Prior to 1982, this
productive system was combined with an emphasis on export promotion to
successfully penetrate the developed market economies.
Such import penetration posed a considerable challenge to U.S. auto firms,
which saw their competitive advantage eroding in the U.S. market. In response,
U.S. auto firms most severely affected by Japanese imports joined the United
Automobile Workers Union to pressure the government to negotiate voluntary
export restraints with Japan. U.S. manufacturers and labor union officials hoped
these restraints would help to create a level playing field in the U.S. market by
encouraging Japanese companies to reduce exports in favor of foreign direct
investment. In this regard, it was hoped that Japanese direct investors would then
have to operate under the same conditions as did U.S. companies.
Japanese companies’ newfound interest in direct foreign investment went well
beyond the expectations of U.S. business and government elites, however. From
1982 to 1989, Japanese auto firms began establishing production plants in the
U.S. market that provided further challenges to U.S. companies....
In addition, Japanese firms in consumer electronics were increasing their direct
foreign investment in the United States, although this trend began in the 1970s
with the television industry (where it had its greatest impact) and continued in the
1980s with the videotape recorder industry....
Historically, the Japanese consumer electronics companies, like their automobile
counterparts, [exported] to European and U.S. markets. However, the proliferation
of voluntary export restraints, coupled with the development of new technology,
made it necessary and profitable to engage in direct foreign investments in the
United States and Europe. The 1970s saw a wave of Japanese companies invest in
television manufacturing plants in the United States.... Consequently, only Zenith
remained as an indigenous U.S. manufacturer by the end of the 1970s. By the
1980s, Japanese firms were repeating this wave of foreign investment in the area
of videotape recorders....
U.S. firms began to shift protection strategies in an effort to withstand the
Japanese competitive threat.... U.S. producers sought to rely increasingly on supply
and production networks in Canada and Mexico in an effort to gain a competitive
advantage in the U.S. market.
Thus, U.S. auto and electronics firms were solidly behind the free trade
agreements with Mexico and Canada, which they saw as essential regional locations
for improving their production system in the U.S. market. The recent investments
by U.S. auto firms in Canada and Mexico represent an effort to integrate production
for the U.S. market via the expansion of low-cost supply networks and production
facilities. Thus, regional trade agreements are seen as preferable to GATT in meeting
the competitive challenges of global competition. Meanwhile, electronics firms
have lobbied heavily for both CBI and NAFTA, reflecting their global production
strategies in the face of the internationalization of the U.S. market in the 1980s....