5

Defining Rights and Responsibilities

The purpose of this chapter is to lay the groundwork and describe the concrete thinking behind the U.S. working group's conclusions, summarized in Chapter 1 , in light of the trends described in this report. It is possible to divide this discussion into three parts: (1) issues concerning policy approaches to FDI as they relate to the rights of MNCs establishing and doing business in host countries, (2) issues concerning MNC behavior in host countries and related responsibilities, and (3) future tasks. The focus is on questions related to MNCs and their roles in technology development, diffusion, and utilization. One key conclusion clear to the U.S. working group from this study and from recent reports by other groups is the importance of remembering that technology is developed and utilized in a broader context affected by policies, corporate strategies, and other underlying factors. The rights and responsibilities of MNCs in an age of technological interdependence must be defined within this wider context of trade and investment (see Box 5-1 for definition of terms used in this report).

Box 5-1 Definition of Terms

The definitions of several terms used in this chapter, as understood by the U.S. working group, are included here.

Narrowly speaking, the “rights” of multinational corporations (MNCs) consist of the treatment that they can expect from governments in countries where they operate. These are defined by national policies, as they are written or enforced, as well as by informal business practices, such as the ability to participate in industry associations and standard-setting organizations. Various bilateral and multilateral agreements, such as the frameworks developed by OECD, the TRIMs agreement of the Uruguay Round, and others, have a bearing on host country policies, although a comprehensive multilateral investment agreement setting forth widely agreed norms for MNC rights does not exist at this point. Liberalization of national investment environments and establishing “national treatment” for MNCs—treatment equivalent to domestic-owned firms in the same industry—have been underlying goals of existing agreements and initiatives.

In countries that do not grant national treatment, such as Japan in the past and most countries in selected industries even today, MNC “responsibilities” may refer to legal obligations on MNCs in areas such as ownership limits, trade, foreign exchange, and information reporting that do not fall on domestic firms in the same industry. In the context of this report, the U.S. working group also includes informal responsibilities to host countries that MNCs or industry groups may define and adhere to by choice.

In the context of this report “best practices” relates to MNC responsibilities and refers to the practices of MNCs that have contributed to host country scientific and technological capabilities while achieving business success.



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Global Economy, Global Technology, Global Corporations 5 Defining Rights and Responsibilities The purpose of this chapter is to lay the groundwork and describe the concrete thinking behind the U.S. working group's conclusions, summarized in Chapter 1 , in light of the trends described in this report. It is possible to divide this discussion into three parts: (1) issues concerning policy approaches to FDI as they relate to the rights of MNCs establishing and doing business in host countries, (2) issues concerning MNC behavior in host countries and related responsibilities, and (3) future tasks. The focus is on questions related to MNCs and their roles in technology development, diffusion, and utilization. One key conclusion clear to the U.S. working group from this study and from recent reports by other groups is the importance of remembering that technology is developed and utilized in a broader context affected by policies, corporate strategies, and other underlying factors. The rights and responsibilities of MNCs in an age of technological interdependence must be defined within this wider context of trade and investment (see Box 5-1 for definition of terms used in this report). Box 5-1 Definition of Terms The definitions of several terms used in this chapter, as understood by the U.S. working group, are included here. Narrowly speaking, the “rights” of multinational corporations (MNCs) consist of the treatment that they can expect from governments in countries where they operate. These are defined by national policies, as they are written or enforced, as well as by informal business practices, such as the ability to participate in industry associations and standard-setting organizations. Various bilateral and multilateral agreements, such as the frameworks developed by OECD, the TRIMs agreement of the Uruguay Round, and others, have a bearing on host country policies, although a comprehensive multilateral investment agreement setting forth widely agreed norms for MNC rights does not exist at this point. Liberalization of national investment environments and establishing “national treatment” for MNCs—treatment equivalent to domestic-owned firms in the same industry—have been underlying goals of existing agreements and initiatives. In countries that do not grant national treatment, such as Japan in the past and most countries in selected industries even today, MNC “responsibilities” may refer to legal obligations on MNCs in areas such as ownership limits, trade, foreign exchange, and information reporting that do not fall on domestic firms in the same industry. In the context of this report, the U.S. working group also includes informal responsibilities to host countries that MNCs or industry groups may define and adhere to by choice. In the context of this report “best practices” relates to MNC responsibilities and refers to the practices of MNCs that have contributed to host country scientific and technological capabilities while achieving business success.

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Global Economy, Global Technology, Global Corporations MNC RIGHTS: PERSPECTIVES ON POLICIES In addition to continuing efforts to liberalize policies toward FDI on the basis of national treatment, the United States should go further with other like-minded nations to establish the principle and implement the reality of “equal access”—equal participation by MNCs in host nation economies and technology systems. The United States can contribute to progress toward this goal through leadership in various international economic forums, and by avoiding policies that can be characterized as protectionist or discriminatory. The biggest contribution that Japan can make to the global economy and its own long-term prosperity is aggressive action to open its economy and increase the level of imports. Although Asian countries might enjoy a relatively large share of the benefits of such a Japanese market opening, U.S.-based MNCs, which are discouraged from investing in Japan because of higher costs and informal entry barriers greater than those that exist in other developed countries, would enjoy expanded opportunities as well. Now is precisely the wrong time for U.S. companies to “bypass Japan.” As described in Chapter 3 , the United States and Japan historically have taken very different approaches toward foreign participation in their respective domestic economies. As noted in Chapter 2 , although national governments around the world are showing a general trend toward greater openness to FDI, individual countries continue to utilize a variety of approaches. The United States and Japan both have an enormous stake and significant responsibility for helping to manage a world economy that is increasingly integrated yet marked by continuing national differences in policies. A number of multilateral and other agreements and forums are related to this effort. The recently concluded Uruguay Round Agreement of the GATF, which included provisions on trade-related investment measures (TRIMs) and established the new WTO, represents the continuing effort to liberalize world trade through a broad, multilateral approach. Although TRIMs were included, the agreement does not impose strong disciplines on host country governments in such areas as performance requirements.1 Among developed countries, the voluntary Code on the Liberalization of Capital Movements and the Declaration and Decisions on International Investment and Multinational Enterprises of the OECD remain the most prominent formal multilateral agreements concerning national policies toward FDI and MNC behavior.2 The OECD has studied the technology-related aspects of FDI and MNCs in recent years, but no concrete negotiations on extending OECD instruments to areas such as competition policy or R&D subsidies have emerged. Some observers see a real need for negotiating a multilateral accord on direct investment. One approach envisions an initial “triad” agreement between the United States, Japan, and the European Union (EU) that would remain open to allow other countries to sign on after it is completed.3 Recently, significant initiatives involving FDI and MNCs have been undertaken regionally. The EU, for example, has already achieved substantial harmony on competition policy, and NAFTA involves significant trade and investment liberalization. ASEAN recently has taken steps to liberalize trade and investment further. Numerous bilateral agreements regulating FDI and the tax treatment of MNCs also exist. APEC endorsed liberalization of trade and investment within the region by the year 2020 in the November 1994 Bogor Declaration. In the coming years the United States needs to continue working toward a more liberal trade and investment environment in the world economy. There is a great deal of debate concerning the relative merits of multilateral, regional, and bilateral approaches, with some asserting that

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Global Economy, Global Technology, Global Corporations regional and bilateral liberalization can help supplement and encourage multilateral efforts, and others arguing that they are counterproductive. It is likely that the United States will continue to move toward an international economic policy that focuses on concrete benefits for the United States in order to sustain commitment to open access to the U.S. market and its contribution to free and open world trade as a global public good. In pursuing a strategy of expanding world trade and investment and the benefits to the United States, it is likely that various multilateral, regional, and bilateral initiatives can make important contributions. For example, ensuring that the new WTO operates effectively will require the focused efforts of all the major trading nations and should be a major priority for both the United States and Japan. The traditional focus of initiatives toward FDI and MNCs has been national treatment or comparable treatment for domestic and foreign-controlled enterprises. The experience of foreign MNCs in Japan shows that formal national treatment may not always translate into effective national treatment. In addition to efforts to further liberalization and greater implementation of nondiscriminatory policies in broad multilateral forums, there may be opportunities to pursue deeper liberalization and harmonization of policies that affect foreign participation among like-minded, probably developed, countries. These efforts, one possibility being a direct investment treaty involving the EU, the United States, and Japan, should, in the short term, be aimed at achieving effective national treatment and, in the long term, at equal access by MNCs to participation in host country economies. “Equal access” to (or equal participation in) economies means that, given a comparable level of competitive strength, including effort, technical excellence, management skill, and overall value delivered to customers, MNCs should have an equal opportunity to succeed anywhere in the world. Equal access, therefore, goes beyond national treatment and implies that comparably strong Japan-based companies should have an opportunity to succeed in the United States equal to what American-based companies enjoy in Japan, and vice versa, but it does not mean guaranteed results or market share targets. Access to markets and technology can be achieved through various means, including direct export sales, direct investment, and various forms of strategic alliances. Although equal access is not a governing principle of the multilateral trading regime today, and would take some time to bring about, it is an important goal that the United States should lead the world economy toward. In the judgment of the U.S. working group, a stable, long-term future for a liberal, open world economy cannot be secured without a commitment toward equal access, at least from the developed countries. Equal access implies international convergence in domestic systems affecting most important aspects of policy related to microeconomic management. The focus of efforts to achieve equal access should be on the harmonization of domestic systems that affect market entry and access, including intellectual property rights, regulation, competition policy, R&D subsidies, and business-government relations. In the context of high-technology industries, intellectual property rights are especially relevant, but the other aspects of economic system harmonization also affect the ability of MNCs to gain a return on technology investments through participation in global markets. If it so chooses, Japan can play a critical role in the process of liberalizing trade and investment. In multilateral and regional institutions and with such initiatives as WTO and APEC, Japan can choose to play a constructive role by helping to advance liberalization through its leadership position in the Asia Pacific and global economies. However, Japan also could choose to play a nonconstructive role by using its economic clout to secure preferential access to rapidly growing economies while taking a passive approach to multilateral and regional forums, or by

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Global Economy, Global Technology, Global Corporations encouraging resistance to liberalization as an ostensible “mediator” between developed and developing countries. Perhaps more important than approaches to multilateral and regional initiatives are the approaches the United States and Japan take toward their own domestic economies. While continuing to press for greater market access in Japan and enforcing U.S. trade laws, the United States should resist approaches that can be characterized as discriminatory or constituting “managed trade.” The attraction of pursuing such approaches toward Japan is understandable, in light of the long-standing, continuing asymmetries in access and of the observation that most significant steps to remove barriers to market access in Japan have been taken at the instigation of foreign pressure, often led by the United States. However, U.S. authority and credibility in the international economy are very valuable assets. The United States can be aggressive in pursuing its interests in economic and technological relations with Japan and other nations when necessary without being open to charges of pursuing approaches that are opposed to free trade principles or are discriminatory. Japan, perhaps, has a more important responsibility to fulfill in its domestic policies: reform in regulation, business practices, and other areas, leading to a much more rapid increase in foreign participation in the Japanese economy. This is the most important contribution Japan can make in maintaining progress toward a more open world trading system and in protecting the progress that has been made. Starting with the Maekawa Report in the mid 1980s, numerous Japanese and foreign groups have advocated a more aggressive effort on the part of Japan's government and business leadership to build a more open Japanese economy.4 Japan has made progress, but it remains an outlier in the international economy on many measures of foreign access and participation.5 This is not simply a matter of Japan making greater public relations effort.6 There have been encouraging signs of progress recently, including the more vocal stance by the Japanese business community in advocating regulatory and other reforms. Although the experience of U.S. working group members indicates that predictions of imminent breakthroughs by Japan in economic reform and market opening should be met with a certain degree of skepticism, including the current effort to ease regulations, it is clear that objective market forces increasingly will force the issue. Hopefully, the self-interest of Japanese exporters and others in the business community will be sufficiently engaged to encourage more rapid progress over the next several years. It is important to make two final points, which the U.S. working group believes will hold true whatever the pace of change in Japan. First, although operating in Japan still involves significant difficulties and upfront costs compared with many other markets, U.S.-based MNCs in a wide variety of industries will find the investment well worth it. This is precisely not the time for U.S. firms to bypass Japan. Working independently or with other U.S. and Japanese firms in strategic alliances, U.S. companies can make a significant contribution to improving the competitive environment in Japan. Second, although U.S. firms undoubtedly will benefit from more aggressive Japanese efforts at market opening, should such efforts materialize, a larger share of the direct benefits will likely flow to other Asia Pacific nations and to Japanese companies. The overall macroeconomic effect will lead to indirect benefits for the United States, as Asian exports to Japan fuel growth and create a larger Asian market for U.S.-based MNCs.

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Global Economy, Global Technology, Global Corporations MNC RESPONSIBILITIES: DEFINING AND IMPLEMENTING BEST PRACTICES In order for the world economy to maintain progress toward equal access, MNCs increasingly must integrate themselves positively into the host countries where they do business. U.S. and Japanese MNCs can make a particular contribution by continuing efforts to define and pursue their “best practices” of behavior in host countries. In addition to standard criteria for good corporate behavior incorporated into various guidelines and corporate statements, the United States, Japan, and other host countries will increasingly scrutinize technological aspects of MNC behavior. The most important technology-related contributions of MNCs come from creation of a competitive environment in the host country, which raises standards of performance by domestic companies, and the range of activities MNCs undertake that result in enhancing the capabilities of host country employees and suppliers. The U.S. working group believes that accelerated growth in utilization of U.S. suppliers by Japanese MNCs is particularly important in the current context. The U.S. working group also believes that MNCs deriving significant benefits from the research and technology base of a host country have an interest in sustaining that asset and a responsibility to make special contributions to that end. In addition to its agreements and ongoing initiatives related to host country treatment of MNCs, the OECD has issued guidelines for MNC behavior.7 The guidelines cover behavior related to the disclosure of information, competition, financing, taxation, employment and industrial relations, environmental protection, and science and technology. The guidelines state normative goals and generally call on MNCs to meet standards of behavior in these areas that are consistent with host country laws and policies and are comparable to domestic companies in the same industry. The science and technology portion of the guidelines calls on MNCs to contribute to host country innovative capabilities, to permit rapid diffusion of technology consistent with IPR rights, and to grant licenses at reasonable terms.8 In addition to these guidelines, an increasing number of U.S. and Japan-based MNCs and business groups have issued their own statements defining their missions and the standards of behavior they seek to adhere to in their global operations.9 For example, Toyota issued the “Guiding Principles at Toyota” in 1992, which commits the company to the following: fostering local managers and ensuring a global viewpoint on the part of expatriates, devoting careful attention to safety and environment, handling as much work as possible locally in every market, and fostering a corporate culture that honors individuality while promoting teamwork.10 This statement also commits Toyota to “provide operations in principal markets with capabilities for handling the entire sequence from product development through production to marketing and after-sales service,” and to “equip operations in every nation with state-of-the-art technology, and provide the necessary training to develop a productive, world-class workplace.”11 In addition, the Japan Federation of Economic Organizations (Keidanren) issued “Guidelines for Overseas Direct Investment” in 1987 that cover such issues as labor-management relations, employment and promotion of local personnel, and promotion of education and training for local employees.12 For MNCs, tension between the modes of operation and values developed in the home country environment and host country practices and cultures is almost inevitable and is not likely to disappear. As host countries allow MNCs greater access, there likely will be greater scrutiny of MNC contributions to host societies in a variety of areas. At this point, technology issues are not at the forefront of corporate responsibility discussions, but the U.S. working group believes

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Global Economy, Global Technology, Global Corporations that they will become more central in the future. Also, the issuing of statements by business groups and individual MNCs cannot guarantee the specifics of implementation. Nevertheless, efforts to develop and define responsibilities and contributions in the area of technology can have a positive impact. As the world's leading technoindustrial powers and direct investors, U.S. and Japanese MNCs can make a special contribution by helping to define best practices for MNCs in host countries as they relate to technology. These definitions should not have binding force or perhaps even the authority of informal guidelines. But if best practices, developed through an interactive process by U.S. and Japanese business leaders, were well publicized and accepted by companies in both countries, the overall policy discussion of technological relations between the two countries would advance. What might these best practices incorporate? The OECD Guidelines for Multinational Enterprises, in stating that MNCs should enhance host country capabilities for innovation, is a good starting point. The issues of U.S. and Japanese MNC interaction and future trends in this report and the report of the Japanese working group suggest how MNCs can contribute to host country innovative capabilities. MNCs must be effective in the management and technological aspects of their business activities. The Japanese working group report contains a useful list of the practices and elements that MNCs need to succeed: (1) maintaining a long-term viewpoint, (2) maintaining mutual understanding with the parent company, (3) effectively fusing host and home country management styles, (4) allowing sufficient scope for independent action by joint ventures, (5) focusing on profitability and growth, (6) achieving synergy in R&D, (7) establishing an appropriate division of labor with headquarters, (8) establishing good business and sales relations with local companies, and (9) establishing an appropriate division of labor between home and host country operations. From this report of the U.S. working group, we can see that MNCs effective in pursuing their business goals do make a significant contribution to host country technological capabilities by creating a more competitive environment and by setting standards for technology, quality, and customer value that local firms are pressed to meet. This has been true of both U.S. MNCs in Japan and of Japanese MNCs in the United States. For example, U.S. automakers have made significant improvements in their management of manufacturing processes in large part because of competitive pressure from Japanese MNCs. Currently, U.S. personal computer makers might be putting similar pressure on Japanese firms, to the long-term benefit of Japan's competitiveness and technological capabilities in that industry. MNCs also make a technological contribution by implementing other elements of good corporate citizenship, as covered in the Toyota Guidelines. For example, the commitment to provide subsidiaries in major markets with full-line capabilities and to handle operations locally to the extent possible implies working toward building R &D facilities, training local employees, and transfering superior management practices, expanding the scope of authority of and providing satisfying career paths for local managers, and increasing utilization and upgrading of local supplier networks. All of these elements of technological contribution related to empowering and enhancing the capabilities of subsidiaries and their employees and suppliers can be measured and evaluated in some way. As is true of effective business practices, this category of best practices also enhances the long-term profitability and sales of the MNCs that are able to practice them consistently. The U.S. working group believes that effective business practices and the enhancing of the capabilities of subsidiaries and their employees and local suppliers are the most significant categories of best practices related to an MNC's impact on host country innovative capabilities.

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Global Economy, Global Technology, Global Corporations The working group here suggests two other areas for further developing and defining best practices. The first area concerns MNC responsibilities toward the research and engineering base in the countries where it operates. Probably, in the vast majority of cases, this responsibility is adequately discharged through normal business activities, particularly if undertaken as outlined above—through the employment and training of local technical and other personnel and through normal R&D activities. Still, in some cases, MNCs might be wise to recognize an additional responsibility for the research base. This would be analogous to an MNC that derives a particularly large percentage of its sales from a particular overseas market and engages in corporate philanthropy there as a result of its own judgment that it should make a focused contribution to this host country. In the area of technology, a firm might feel such an obligation if a significant number of the technologies or underlying basic discoveries utilized in its current and future businesses were developed in the host country; many of the MNC's lead customers and key suppliers were based in the host country so that it would become, in a real sense, dependent on that country's capabilities; or key management and technical personnel were to receive training and education in the host country. If an MNC believes that these conditions are operative, then contributing to the technological capabilities of the host country will be in its own self-interest. Although more discussion could better define what sorts of contributions are appropriate, the following are possible candidates: (1) efforts to conduct or support fundamental research on a scale that makes a tangible contribution to basic knowledge and maintains the host country research infrastructure in a field underlying the MNC's business and (2) in addition to sponsored research targeted at benefits to the firm, efforts to support at some significant level educational and other institutions advancing research or technical human resource development without a quid pro quo. This second type of contribution might include endowed chairs at universities and other mechanisms. A second category of additional obligation might be incurred when MNCs perform a significant amount of R&D in a host country or have acquired a subsidiary with leading-edge technological capabilities. These MNCs are stakeholders in the R&D enterprise of the host country, and managing these assets might involve expectations of mutual responsibility with the host country. For example, an MNC participating deeply in the research and technology system of the host country might expect to be perceived as more local than foreign for policy and other purposes. If it is performing cutting-edge R&D, such an MNC will be able to attract top technical talent in the host country, form business relationships on an “insider” basis, and perhaps participate in government-sponsored R&D programs. In return, the MNC might be expected to manage its technological assets so that they are maintained, enhanced, and deliver a continuing stream of benefits to the host country. The actual implementation of this obligation might be accomplished through general principles of enhancing local capabilities as outlined above. TASKS FOR THE FUTURE Whatever the degree of progress made toward liberalized world trade and investment, convergence in economic systems, and equal access, business and technological leaders in the United States and Japan likely will continue to display significant gaps in their viewpoints and operating assumptions. In view of the importance of the two countries to the world economy and the global scientific and technological enterprise, opportunities for discussion to increase mutual understanding should be maintained and expanded on a bilateral and multilateral basis. APEC

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Global Economy, Global Technology, Global Corporations can make a contribution in this area—one example being a public-private effort to collect data and perform analysis on important issues where the information base is especially thin. The U.S. working group believes that this project has been very useful in furthering a needed U.S.-Japan discussion of MNCs and their role in the scientific and technological relationship between the two countries. We believe that the reports of both working groups are significant and should be examined by policy makers and business leaders in both countries. Nevertheless, some issues inevitably remain unresolved, and we hope that a brief enumeration of these, along with suggestions for possible next steps, will be useful. To begin with, it is clear—from the priorities established in the two working group reports and from the fact that the U.S. and Japanese working groups were not able to establish a basis for proceeding toward a joint final report—that the viewpoints of business leaders in the two countries display deep and persistent gaps. We believe that an unvarnished presentation of these differences is healthy and valuable, and we prefer this result to a jury-rigged joint declaration lacking real substance. Clearly, there is a continuing need to better understand these differences in perspective and, where possible, to work toward finding common ground, particularly on a private sector level. There are institutional arrangements for doing this, such as the joint activities of the U.S.-Japan Business Council and Japan-U.S. Business Council and discussions held under the auspices of the Committee for Economic Development and Keizai Doyukai. During the 1980s and early 1990s, a group of writers, known as “revisionists” in shorthand, propounded the viewpoint that Japan's political economy is fundamentally different from that of the United States and other Western countries and that the United States and other countries therefore needed to develop a fundamentally different approach to dealing with Japan's rapidly growing economic and technological strength.13 At about the same time, a group of prominent Japanese business and opinion leaders emerged with a basic premise very similar to that of the revisionists: that Japanese business and policy processes work in ways fundamentally different from those of other countries. The prescriptions of this group were mixed; some urged that, in order to continue to prosper in the world economy, Japan itself needed to make fundamental changes in MNC and political behavior, whereas others touted the superiority of the Japanese system as a model for the rest of the world.14 The Japanese business community joined in the debate, with some advocating that Japanese firms “ease up” on foreign competitors in such industries as automobiles and form strategic alliances with foreign competitors to promote kyosei, usually translated as “symbiosis.”15 Although there were wide differences among and between the revisionists and the Japanese perspectives, the resulting dialogue on the differences and relative merits of American, European, and Japanese capitalism, while at times somewhat acrimonious, constituted a positive and stimulating exchange of perspectives. Today, some of the bearings that oriented that debate a few years ago have changed dramatically. Both the comeback of American companies in several important industries and the long recession in Japan have shaken the belief of some in the superiority of the Japanese system. As we have noted, there appears to be a palpable fatigue in both countries toward continued acrimony over trade. Important elements of the business and opinion leadership in each country appear to advocate turning toward Asia. Considering the international situation and domestic political trends in both countries, we probably should expect the current tendency for Japan and the United States to look inward and toward other parts of the world. However, as explained in Chapter 4 , there are good reasons to believe that this would not be a productive long-term approach for either country. The U.S. working group believes that it is in the interests of both the United States and Japan for progress

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Global Economy, Global Technology, Global Corporations toward world economic integration to continue and accelerate. In order to achieve this, the United States and Japan need to rejoin and continue the examination and debate over the reality and prognosis for different varieties of capitalism—including technology and direct investment as important elements—in the U.S.-Japan relationship as well as within a wider context. We believe that this project has made a constructive start in this endeavor. APEC might provide a useful forum for encouraging productive private sector exchanges on these issues, particularly in examining critical Asia Pacific economic and technological issues for which the information base necessary for objective analysis is weak or nonexistent. For example, the changing patterns of production and trade in the Asia Pacific region and the role of MNCs based in Japan, the United States, and other countries are of great interest to all APEC countries. As we have seen, although some data collected by the Japanese and U.S. governments and other organizations, such as the International Monetary Fund and the United Nations, shed some light on these trends, it is difficult to draw firm conclusions on many critical issues. We believe that an APEC-organized effort to undertake a program of targeted data collection and private sector exchange on Asia Pacific production networks in one or two key industries, such as electronics and automobiles, would yield very important and useful results for the policy makers and private sectors of APEC members. Apart from creating and developing new forums and institutions, the U.S. working group believes that it is critical for a variety of U.S.-Japan private exchanges to continue and to increasingly target the next generation of younger business leaders and academics entering influential positions in their respective countries. If mutual fatigue and frustration grow to the extent that dialogue is impaired, there will be significant negative consequences for both countries and for the entire global economy. NOTES AND REFERENCES 1 The Uruguay Round provisions on trade in services and intellectual property (TRIPs) will probably have more positive impact on MNCs than the TRIMs provisions themselves. United Nations Conference on Trade and Development, 1994, pp. 281-285. 2 The OECD is a multilateral body, but membership is limited to developed countries. Both the United States and Japan are OECD members. The Declaration and Decisions on International Investment and Multinational Enterprises was established in 1976 and includes the National Treatment instrument, the Guidelines for Multinational Enterprises, an instrument on International Investment Incentives and Disincentives, and cooperation on Conflicting Requirements imposed on MNCs by different governments. For the Code on Liberalization of Capital Movements and the National Treatment instrument, national policies in conflict with the principles of liberal capital flows and national treatment for MNCs are registered as exceptions. See OECD. 1993a. National Treatment for Foreign-Controlled Enterprises.Paris: OECD; OECD. 1993b. Code of Liberalisation of Capital Movements.Paris: OECD; and OECD. 1992. The OECD Declaration and Decisions on International Investment and Multinational Enterprises.Paris: OECD. 3 Bergsten, C. Fred and Edward M. Graham. 1992. Global Corporations and National Governments: Are Changes Needed in the International Economic and Political Order in Light of the Globalization of Business.Washington, D.C.: Institute for International Economics. 4 See Committee for Economic Development and Keizai Doyukai. 1994. From Promise to Progress: Towards an New Stage in U.S.-Japan Economic Relations.Washington, D.C.: Committee for Economic Development.

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Global Economy, Global Technology, Global Corporations 5 See Lincoln, Edward J. 1993. Japan's New Global Role.Washington, D.C.: The Brookings Institution and Bergsten, C. Fred and Marcus Noland. 1993. Reconcilable Differences? United States-Japan Economic Conflict.Washington, D.C.: Institute for International Economics. 6 Belying the often-heard assertion that foreign MNCs often try to hide their success in Japan and that the main problem in Japan's trade relations with the United States and the rest of the world is a lack of public relations effort is the continuing effort of the Japan External Trade Organization (JETRO) which has devoted a significant part of its publication activity in recent years to publicizing cases of successful foreign companies in Japan. See JETRO. 1984. Japan's Manufactured Imports—23 Case Studies. Tokyo: JETRO; JETRO. 1989. A Survey on Successful Cases of Foreign-Affiliated Companies in Japan. Tokyo: JETRO; JETRO. 1990. The Challenge of the Japanese Market: How 144 Foreign-Affiliated Companies Succeeded.Tokyo: JETRO; JETRO. 1991. Manufacturing Success—Nine Foreign-Affiliated Companieswith Plants in Japan.Tokyo: JETRO; JETRO. 1992. Manufacturing Success Part II—Five Foreign-Affiliated Companies with Plants in Regional Japan.Tokyo: JETRO; JETRO. 1993. Manufacturing Success Part III—Eleven Foreign-Affiliated Companies Active in R&D, Parts and Consumer ProductsManufacturing.Tokyo: JETRO. 7 See OECD, 1992, pp. 101-111. 8 OECD, 1992, p. 108. 9 This movement deals with a wide range of issues, including human rights, labor practices, and environmental protection in developing countries. For the purpose of this report, we focus on aspects of these statements and guidelines that relate to technology access, development, and transfer in a broad sense. 10 Toyota Motor Corporation. 1992. “Guiding Principles at Toyota” Tokyo: Toyota; as summarized in United Nations Conference on Trade and Development, 1994, pp. 323-324. 11 Toyota Motor Corporation, 1992. 12 Toyota Motor Corporation, 1992, p. 333. 13 Although others are sometimes mentioned, the primary “revisionists” are James Fallows, Chalmers Johnson, Clyde Prestowitz, and Karel Van Wolferen. 14 In the first category are Morita, Akio. 1992. “Nihon Keiei ga abunai” (Crisis for Japanese-style management). Bungei Shunju.February, pp. 94-103; and Nakatani, Iwao, 1990. Japan Puroburemu no Genten(Roots of the Japan Problem). Tokyo: Kodansha. In the second category is Sakakibara, Eisuke. 1993. Beyond Capitalism.Lanham, Md.: Economic Strategy Institute and University Press of America. 15 Chandler, Clay. 1992. “An Appeal to Change Cutthroat Ways Roils the Japanese Business Community. ” The Wall Street Journal.August 6, p. A5.