America’s 1980s Japanese Lesson for Today’s China

One of the few advantages of ageing is that what younger people think is new is actually just repeated.

China’s techno-nationalism is nothing new, though some pundits pretend that it is. Before the Chinese, Japan had its own version. And the response from the United States was the same: outright hostility. It’s well worth remembering that particularly recent history to appreciate what is happening today.

Much has been said about how the Chinese Communist Party had learned from the collapse of the Soviet Union and Russian communism to survive and prosper. In recent years, though, many within the party are likely to have been studying the rise of Japan in the 1980s and Washington’s successful response to nip it in the bud.

American leaders like to portray their growing rivalry with China as one of ideologies – democracy vs authoritarianism. That was how US Secretary of State Antony Blinken made it out to be in his preface to the contentious first meeting in Anchorage, Alaska, between the Chinese and the new American leadership under Joe Biden. It irked foreign policy chief Yang Jiechi so much he went into a 17-minute rebuttal.

At bottom, he suggests, ideology and values are just a fig leaf to conceal the US drive to maintain its global dominance, in trade, technology and geopolitics.

If we recall how the US treated Japan, a close ally, there is much to be said about Yang’s criticism of the US. Granted, the American response to China has been much more militaristic and therefore far more dangerous. However, we should not underestimate the underlying economic competition.

In his influential 1987 textbook, The Political Economy of International Relations, the late Princeton University political scientist Robert Gilpin offers an extensive account of Washington’s reactions to the rise of Japan’s market dominance in hi-tech manufacturing and consumer electronics, with their ever higher-value supply chains. Originally, the US had encouraged Japanese economic development and merging much of the two economies together during the first few post-war decades. There was the Nichibei economy, much like the Chimerica coined by economic historian Niall Ferguson in the 2000s to describe the interdependence of the Chinese and American economies.

If you substitute “China” for “Japan”, and “Chinese” for “Japanese”, Gilpin’s account holds up pretty well for what’s going on today.

He is worth quoting at length:

“Throughout most of the post-war era, Japan’s economic strategy of following the product cycle and moving up the value-added curve worked remarkably well. A complementary relationship existed between its trade strategy and the foreign investment strategy of the United States. In the 1980s, the closing of the technological gap between it and the United States, in conjunction with the other structural changes, began to alter this favourable situation and increasingly brought Japan into conflict with the other advanced economies. With intensified Japanese competition in ever higher levels of technology, Americans and Europeans became more and more concerned over what they perceived to be Japanese industrial ‘targeting,’ the ‘dumping’ of goods abroad, and the ‘pirating’ of American innovations. Many Americans and West Europeans saw the Japanese as aggressively challenging the Western powers for the dominant position in the new era of the international political economy.

“The economic challenge of ‘Japan Inc’ began to raise disturbing questions about ‘the Japanese problem’. Few Westerners or other peoples were willing to tolerate what the Japanese themselves had begun to regard as the natural state of affairs … Despite rhetoric in praise of multilateralism and the Pacific community, Japan only slowly opened its market to the manufactured exports of its Asian neighbours … Japan’s export and import policies have intensified the pressures on the American market and stimulated further protectionist responses.

“With a rapidly expanding older population, [the Japanese] must save and repress present consumption. They have viewed foreign complaints and pressures for greater liberalisation, expansionary economic policies, and harmonisation of domestic economic structures as directed at cherished Japanese values and motivated by the fact that Japan, playing by the rules of the liberal international system of the West, has been winning the global economic competition.

“Japanese strength arises from its high degree of domestic consensus … Japan has found a more effective way to reconcile the domestic demand for equity and security with the international need for efficiency and competitiveness than has the West.

“The economic differences between Japan and its economic partners are not merely economic disputes; they result from a cultural clash of societies with different national priorities, social values, and domestic structures.

“There is a constant danger that the economic conflict between Japan and its trading partners, especially the United States, could deteriorate into political conflict.”

We all know how Washington responded. First there was the Plaza Accord in September 1985 to re-evaluate the dollar-yen exchange rate against Japanese exporters. Two years later, the Reagan administration imposed 100 per cent tariffs on a long list of key Japanese goods, supposedly in retaliation for the Japanese cornering the semiconductors market.

In the late 1980s, when I was a college student in the US, Japan-bashing was in full swing, just like China-bashing is today – except it was against one of its closest allies. Michael Crichton’s 1992 novel Rising Sun, and the Hollywood movie of the same name made a year later starring Wesley Snipes and the late Sean Connery, were products of that widespread hysteria and paranoia about Japan’s impending takeover of America. The first Die Hard movie that made Bruce Willis a household name was a violent literal rendition of such common financial terms as “hostile takeover” and “poison pill” about Japanese economic might against a hapless America referenced frequently in the US business press.

Well, we all know what happened in the three decades thereafter in Japan. In those days, in the US, the threats were Toyota, Honda, Sega, Nintendo, Sony, Canon, Toshiba and JVC.

These days, it’s Huawei Technologies, ZTE, ByteDance with its TikTok app, Alibaba, Tencent, Xiaomi, Didi Chuxing, DJI and Baidu, and the big Chinese telecoms firms.

Last year, China accounted for more than 60 per cent of imports of electronics into the US. In 2019, more than 25 per cent of flat-screen TVs shipped to North America were made by TCL, the electronics giant based in Huizhou.

The industrial policies of Japan and China are also strikingly similar. That’s not an accident because the Chinese Communist Party had studied the “Japan miracle” and the rise of the so-called Asian Tiger economies, as well as liberalisation in the former Eastern communist bloc.

Both Beijing and Tokyo promoted home-grown industrial champions to establish market dominance against foreign competition. The Japanese keiretsu system, with the corporate and banking cartels closely tied to the government, was a lot like the state-sponsored capitalist system presided over by the Chinese Communist Party and state-owned enterprises.

Indeed, post-war democratic Japan has been essentially a one-party state, dominated by the Liberal Democratic Party, except for some periods after the 1990s.

The irony for America is that to counter Japan’s manufacturing might, US corporations practically offshored their entire manufacturing base to developing countries with low labour costs, chief of which was China.

Having learned from Japan, China began with low-value products, then moved quickly up the value chain, often by copying US technology. The year 2011 marked China as exceeding the US as the world’s largest manufacturing nation.

Having slain the Japanese dragon, America helped create the Chinese one. This is a familiar story with the US. After getting rid of one challenger, another one comes up, usually one it had helped prop up.

To cite just one regional example, the Islamic revolution in Iran overthrew the tyrannical Shah Washington supported for decades. To contain revolutionary Iran, it befriended Iraq under Saddam Hussein. But when Saddam got too ambitious, he had to be overthrown. That in turn encouraged Iran’s regional hegemonic ambitions, which have to be contained today.

It is not that the US has been going against John Quincy Adams’ famous advice of not going abroad to look for monsters to slay, but that it has been, time and again, actively creating monsters after its own shadows.

China’s case is, perhaps, only unique in that it combines both the economic and military aspects of this endless but futile quest by America for total security and dominance around the world.

Contrary to Mike Pompeo, the former US secretary of state, wiser heads in Washington would not want the Chinese Communist Party to actually collapse and cause chaos not only across Asia but the world economy. The best outcome for them would be a Japanese-style, decades-long stasis, which would put a stop to China’s global and regional ambitions.

Unfortunately, Japan had to play ball because its security depended on the US. China can defend itself.

Source: South China Morning Post