Japanese Investment and Technology Transfer Report of a Workshop (1992) / Chapter Skim
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3. Policy Issues and Options
3. Policy Issues and Options
Pages 35-46
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Clearly, a large part of the current policy debate revolves around the concerns expressed about foreign investment and outward technology transfer. An evaluation of the situation and policy implications of inward technology transfer and Japanese investment must take this context into account.
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The goal of the Foreign Direct Investment and International Financial Data Improvements Act of 1990 was to provide better data without damaging the confidentiality underlying current reporting practices, and with 62See Graham and Krugman, op.
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was established to review foreign investments with national security ramifica 63A number of separate pieces of legislation on foreign direct investment data collection dissemination were debated during 1990. For the language of the bill that finally passed in November, 1990, see U.S.
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Anxiety often focuses on Japan because of the strength of Japanese firms in industries such as electronics, machine tools, robotics and others with clear present and future military applications.66 The notion that Japan's dual-use high technology could be a potent weapon in global geopolitics has become part of the public debate in both countries.67 In the wake of the Persian Gulf War concerns about U.S. dependence on Japan for key components in military systems have been raised.68 Countries dependent on foreign sources for key components of weapons systems are not only vulnerable to clear threats of technology denial, but can be manipulated in more subtle ways.69 The experiences of countries dependent on foreign sources of technology or goods indicate that there is 66Though the focus here is on military and dual-use technologies, and Japanese investment, the issue of possible technology denial is broader.
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The continuing debate over the CFIUS process is relevant to both of the national security concerns raised by FDI.~° Although CFIUS has made only one recommendation to block a sale, there have been several other cases in which Congressional opposition or informal signals sent by the executive 70CFIUS also figures prominently in U.S. policy debate over "economic security," discussed in the following section.
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policy on foreign investment and the defense technology base may be inadequate to protect against technological vulnerability in the long-term. Theodore Moran proposes a comprehensive set of policy changes to address perceived shortcomings.
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COMPETITION POLICY While much of the debate over foreign investment has focused on national security concerns in the traditional sense, there are a number of issues related to foreign government promotion of high technology indus 72"Bei 7sha Rengo ga Baishu" (Buyout By a Coalition of 7 Companies) , Nihon Keizai Shimbun, April 4, 1990.
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high technology industries vulnerable to targeting strategies of foreign governments or"business-financial combines."73 Much of this concern is related to the possibility that U.S. industry could fall prey to anticompetitive practices by Japanese companies.74 Differences in antitrust law and practice are the basis for these concerns.
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The specific recommendations center on revamping Exon-Florio so that the CFIUS process considers "economic security" as well as "defense security." The Technology Preservation Act of 1991 was introduced in the 102nd Congress by Representative Cardiss Collins (D-Ill.) to address "the failure of Exon-Florio to stop the transfer of technology and production out of our country due to foreign investment."78 The permanent renewal of the Exon-Florio provision in August 1991, which was favored by the Bush Administration, marked the establishment of a consensus on the issue of review on national security grounds.
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Over the past several years, a number of large American companies have opened R&D facilities in Japan, and have had some success in gaining access to Japanese technology as a result.79 Japan has somewhat relaxed its traditional restrictive stance toward inward FDI, which was designed to obtain foreign technology yet discourage foreign ownership of business enterprise in the domestic market.~° At the same time, private arrangements and business practices continue to act as important barriers to foreign acquisition, including, notably, acquisition of Japanese firms that possess significant technologies. Limitations on foreign access to Japanese technology can result in a long-term competitive advantage for Japanese companies.
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industry. But if Japanese companies continue to gain strength across the range of high technology industries and the perception of a lack of reciprocity remains, public support for more restrictive investment policies-which is already significant according to polls will continue to escalate.
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3. The discussions at the workshop did not uncover evidence of major outward technology flow resulting from Japanese investment in small, high technology companies.
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