passing up domestic development would consign Japan to a follower role forever.⁶

During 1986, by which time the momentum in Japan for domestic development had become quite strong, DOD began a more aggressive push for the FS-X to be based on an existing U.S. design. This resulted in an agreement to ''codevelop" an FS-X based on the design of the General Dynamics F-16. From the start, the two countries conceived codevelopment differently, making it an attractive political solution but ensuring problems later. The Japanese assumed that a Japanese company would manage the process of developing an indigenous aircraft, with selected foreign technologies incorporated as necessary. The U.S. conceived the joint improvement of an existing aircraft, with a priority on ensuring "flowback" of Japanese technology based on know-how transferred by the United States.

A U.S.-Japan memorandum of understanding (MOU) on FS-X codevelopment was signed in late 1988, but congressional concerns were raised during confirmation hearings of Bush administration officials in early 1989. Contentious debate over the agreement continued through the spring of that year, with opponents arguing that F-16 technology transfers would contribute to Japanese competitiveness in commercial and military aircraft, that "off-the-shelf" Japanese procurement of F-16s would cut the huge U.S. trade deficit with Japan while addressing Japan's security needs more economically, and that Japanese technical capabilities were not high enough for the flowback provisions to deliver many benefits to the United States. U.S. proponents of FS-X codevelopment argued that significant U.S. participation in the FS-X program was better than none at all, that Japanese procurement of unmodified F-16s was not a realistic scenario, and that flowback would bring considerable benefits.

In the end, congressional opponents were not able to stop the FS-X agreement, but were able to force DOD to gain a "clarification" of several key points. First, the Japanese explicitly committed to a 40 percent U.S. work share during the development phase and to providing access to Japanese-developed technologies. Second, the denial of several key F-16 technologies—including computer source codes, software for the fly-by-wire flight control system, and other avionics software—was made explicit.

The clarification exercise threw into sharp relief the contrast between the contentious divisions over Japan policy in the United States and the much more united front—albeit with some bureaucratic infighting—that Japan presents to the United States in bilateral negotiations. In addition, the contention left heightened resentment on both sides. Many Japanese opinion leaders, in particular, resent codevelopment as having been forced on Japan by the United States.

The development phase is now nearing completion, and first flight is projected for September 1995. Prospects for actual procurement are still uncertain.

Front Matter (R1-R8)

Executive Summary (1-7)

1 Introduction (8-11)

2 Background and Policy Context (12-35)

3 Current Status of U.S.-Japan Linkages (36-64)

4 Future Trends (65-73)

5 Conclusions and Policy Recommendations (74-94)

Appendix A: The Importance of the U.S. Aircraft Industry (95-102)

Appendix B: U.S-Japan Technology Linkages in Airframes and Aircraft Systems (103-127)

Appendix C: U.S.-Japan Technology Linkages in Aeroengines (128-144)