Japan-US: 'backyard' pact
THE tentative joint venture involving America's National Steel Corporation and Japan's Nippon Kokan should benefit both companies. Equally important, it is one more crucial link in forging a common industrial bond between the two highly competitive trading partners, the United States and Japan.Skip to next paragraph
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The steel linkup, which must be approved by the US Justice Department, is the latest in a number of ventures involving US and Japanese companies. The largest is the $300 million agreement between General Motors and Toyota to build subcompact cars at a GM facility in Fremont, Calif. Two months ago it was announced that Nishin Steel Company of Japan would purchase 10 percent of the Wheeling-Pittsburgh Steel Corporation. And two Japanese automakers, Honda and Nissan, have built plants in the United States.
The National-Nippon venture, however, is significant in that it represents the first time an overseas steel producer has directly moved into the giant US market.
The US steel industry, in part because of technical factors, has been coming out of the recession more slowly than other key industries. True, United States Steel, the nation's largest producer, just announced a first-quarter profit for 1984 of $171 million, compared with a loss of $118 million for the same period a year ago. But Bethlehem Steel, the nation's second-largest producer, posted a loss of $54.6 million for the quarter; that compares with a loss of $149.7 million a year earlier.
Still, the outlook for the rest of the year for the US steel industry seems promising. Industry in general in the US is now earmarking more resources for capital spending. And the consumer-goods market remains strong. Both factors should keep US steel plants humming in the months ahead.
For National Steel, the joint venture means an infusion of much-needed capital for further modernization - as well as management expertise from its Japanese partner. National's facilities are already considered among the US industry's most modern plants.
For Nippon Kokan, the joint venture means a direct foothold in the US industrial market at a time when protectionist sentiment against imports is rising. The Japanese steel producer is also logically following the movement of Japanese auto plants onto the US mainland.
The steel venture is expected to pave the way for joint ventures in other industries, such as computers.
What seems especially clear is that the increasing commercial linkup between the two nations should prove mutually beneficial. Japan, it might be noted, is larger in population than any two of the four largest Western European nations combined. Little by little Japan's highly protected domestic consumer market is being pried open to US exports. Moreover, both nations share a common commercial ''backyard'' - namely, the giant Asian-Pacific Rim trading market.
Japanese companies recognize that they will be facing mounting competition in the years ahead from the newly industrialized countries of Asia - such as South Korea and Taiwan. That means that Japanese heavy industry - steel and autos, for example, as well as Japanese consumer-goods industries - will face increasing competition in Asia and North America from its new upstart Asian competitors.
An automobile produced in South Korea, for example, could be turned out at lower cost then in Japan itself, what with lower wage scales. For just these reasons, joint ventures with United States companies make good sense indeed to Japanese business leaders.