O.C. Especially Vulnerable to U.S.-Japan Trade Chill

IRVINE —  When trade relations between Japan and the United States get chilly, an icy breeze blows through Orange County.

Japan is Orange County’s largest export destination, taking about $1 billion in computers, medicines and other goods produced locally every year. And Orange County is the home of U.S. headquarters for Japanese companies like Mazda, Mitsubishi, Kawasaki and Ricoh, which provide thousands of jobs locally.

So it hit home Wednesday after U.S. Trade Representative Mickey Kantor said that the United States may seek high tariffs on several hundred million dollars’ worth of Japanese goods in response to Japan’s refusal to fully open its cellular telephone market to companies such as Motorola Inc.

“If there was a general deterioration of exports to Japan, then Orange County is bound to lose more than other areas,” said economist Anil Puri of Cal State Fullerton, who has analyzed the county’s export industry.

Without specifics, many businesses were unsure of how to gauge the announcement or know what to expect, but officials were uniformly unhappy about the prospects of rising discord among the two countries.

“I don’t want to see it deteriorate to the point of emotional hatred,” said Maho Fukuda, president of Maho International Co. Ltd., an Irvine trading company that sells U.S.-made industrial machinery to the Japanese. Her business would suffer if trade barriers went up, she said, but “it will (put) pressure on the Japanese.”

What Fukuda said she fears most is a resurgence of anti-Japanese sentiment.

“Americans are always blaming the Japanese and the Japanese are always blaming the Americans,” she said.

Within 30 days, Kantor said, the United States would publish a list of Japanese products that could be subject to punitive tariffs of up to 100% if the cellular phone dispute isn’t resolved.

In Japan, chief government spokesman Masayoshi Takemura said Tokyo would wait for a U.S. decision on sanctions before responding to the U.S. trade representative’s announcement.

But a bilateral trade war is unlikely, suggests Cal State Fullerton’s Puri. Japan and the United States both have a lot to lose from retaliatory tariffs and other restrictions, so any action by the Clinton Administration will probably be fairly limited, he predicts.

About 16% of all Orange County companies that sell overseas are trading with Japan, said UCI management professor Kenneth L. Kraemer, who released the university’s annual survey of the county’s top executives earlier this week.

While a trade war could cause short-term pain, Kraemer said he sees long-term benefits. Such action could force Japan to pry open markets for high-technology products heretofore closed to Americans, creating new opportunities for Orange County companies, such as computer disk-drive maker Western Digital Corp. in Irvine.

For now, most Orange County companies with ties to Japan are waiting to see how the two nations respond.

If the United States imposes tariffs on Japanese-made cellular phones, that could hurt phone manufacturer Mitsubishi Electronics America Inc. in Cypress, part of the far-flung Japanese conglomerate Mitsubishi Electric Corp.

“It’s too early for us to tell what impact there would be,” said Mitsubishi spokesman Tom Chapman. “It has been mentioned that cellular telephones might face a tariff, but we don’t know what will happen.” The company, however, has several options. For instance, if tariffs are slapped on assembled phones imported from Japan, Mitsubishi would likely expand its assembly operations in Braselton, Ga., which depends largely on Japanese-made parts.

If the parts are hit with tariffs too, Mitsubishi would be forced to find American suppliers of those parts or consider raising the prices on its phones, though they are assembled in the United States.

Similarly, Toshiba America Information Systems Inc. in Irvine could see its business disrupted if the Clinton Administration reinstitutes tariffs on imported computer screens, a sanction that was lifted last year.

Under President George Bush, tariffs were imposed on flat-panel displays that were imported into the United States, but not on displays that were brought into the country as part of an assembled computer.

As a result, companies with U.S. manufacturing, such as Toshiba America in Irvine, shifted assembly of the affected portable computers offshore so that they wouldn’t be hit with a tariff. Critics of the policy contended the tariff forced thousands of jobs overseas.

“The lifting of that tariff allowed us to assemble the computers here and create jobs here,” said Robert Wittenburg, a Toshiba spokesman.

Rino Zaccuri, spokesman for Ricoh Electronics Inc. in Tustin, said the company doesn’t expect to be affected with product sanctions since it is not involved in the telecommunications industry. The company’s 1,000 employees in the county are involved in making and selling copiers.

But the currency fluctuations resulting from the rise of the yen could play havoc with the company’s financial planning, he said.

Like with the electronics companies, Orange County’s cadre of Japanese car and motorcycle importers say they are paying close attention.

Japanese auto and motorcycle importers--Mazda, Mitsubishi, Kawasaki, Suzuki and Yamaha, which all have U.S. headquarters in the county--already are being hurt by the growing weakness of the dollar against the yen. So to the extent that trade policy affects currency exchange rates and pressures Japanese companies to increase prices in the United States, the burgeoning trade war would be a problem.

“The strength of the yen affects us more” than the present strain in trade relations between the two countries, said Kim Custer, spokesman for Mitsubishi Motor Sales of America Inc. in Cypress.

Tom Meyers, marketing director for American Suzuki Motor Corp., the Brea-based importer of cars, sports utility vehicles, motorcycles and outboard motors, said he and other officials of the company don’t see the trade dispute affecting their business at all.

“At this point, the issue seems strictly one targeted at mobile phones, and we think any retaliation against Japan will be in that area and wouldn’t affect our industry.”

* HOW JAPANESE SEE IT: In pragmatic Japan, fair trade is more a matter of perception. D1