June, 1995

Fruits of Thought

Japan Retribution: Produce?

When Herbert Hoover signed the Smoot-Hawley Tariff Act in 1930, raising customs duties by an average of 20 percent, he did so explaining that, though he opposed the tariff, he was signing it to eliminate uncertainty in the stock market which could be a threat to our national prosperity. After the tariff was signed, a trade war broke out as other nations retaliated. Wall Street soon lost any uncertainty as to where things were headed and the stock market soon crashed. Of course, the Great Depression shortly followed.

All this shows that actions often have unintended consequences or, as my mother taught me: If you play with matches you are bound to get burned. The current President could have benefited from having my mother.

I have always been proud of my country and am convinced that, by and large, the United States has been a force for good in the world. In this age, when the Soviet Union has joined the great colonial oppressors on the junk bin of history, and when American power is virtually unchallenged, we, as Americans, have a unique opportunity to guide the world to a more peaceful, more just and more rewarding future.

So, as an American, I am ashamed at the actions taken by President Clinton regarding the Japanese automobile manufacturers. As you know, the President has ordered 100 percent tariffs on a select group of high-priced vehicles entering the U.S. from Japan. This basically closes the U.S. market to these cars and deprives those Americans who wish to purchase them of their liberty to do so.

What egregious act has Japan or these automobile makers committed that justified this action? Nothing. Nothing except to present President Clinton with the most cynical of political opportunities to bolster his standing with U.S. manufacturing unions and his image as a tough guy with those Americans who don’t understand this situation and who already thinking the President is weak for avoiding military service and for his pattern of changing positions.

The specific U.S. demand is for the Japanese government to pressure Japanese automobile manufacturers into “voluntarily” agreeing to purchase more U.S. made parts. There is, of course, no particular justification for this position. Just turn the situation around: Japan does run a big surplus with the U.S. in automobile trade, but the U.S. runs a big surplus with Japan in entertainment products. Just imagine Americans’ reactions if Japan tried to pressure the U.S. government into pressuring private U.S. companies to import more Japanese films to show in the U.S. The absurdity of this kind of demand is self-evident.

Even more absurd, though, is the question of why we are in this situation to begin with. The very focus of the first half of President Clinton’s term as President was the passage of the new GATT – General Agreement on Tariffs and Trade – accord. The GATT accord was opposed by many people and interests, and the focus of their opposition was that GATT, by virtue of its requirement that we bring trade disputes to the World Trade Organization (WTO), was a diminishing of American sovereignty.

The sovereignty argument was disposed of on the absolutely correct grounds that any agreement serves to restrict the parties’ freedom of action. The point was that the WTO was going to be a perfectly reasonable place to bring this type of dispute.

If we have a complaint against a country that is also a signatory to the agreement, we agreed in signing GATT to bring our complaint before the WTO. Japan is a signatory and yet, instead of acting civilized and following our agreements, we have chosen to be a bully and try sanctions.

We did this because we would be laughed out of the WTO. There is simply no basis in GATT for the U.S. demand. Now there are disputes with Japan that the U.S. might well win. For example, there are great difficulties in Japan for those American firms that wish to establish automobile dealerships. There are also legitimate complaints about the speed with which imported cars are cleared by Japanese authorities.

Many of these types of issues could be resolved through negotiations with Japanese officials; others we might be able to take to the WTO and win. In any case, fighting for the removal of these types of restrictions, the U.S. would be on the side of the angels. So why don’t we fight on these issues? Simple really. U.S. automobile manufacturers have only the most limited interest in selling cars in Japan.

They like having one percent of the market, so the cars are big novelties and can bring wide margins. But as a mass market, it has a slow-growing population and most Japanese have been able to afford cars for years. Second, Japan has nine domestic automobile manufacturers (as opposed to only three in the much larger U.S. market) who compete bitterly and thus keep margins low.

Besides, why should U.S. auto manufacturers work hard to design, produce and market cars in Japan when the U.S. government says it will simply force Japanese manufacturers to give parts orders to U.S. producers?

Perhaps, of course, you might ask what this article is doing in a produce magazine. Fair enough question. It is unlikely that trade representatives of the produce industry will take up the issue of opposition to this tariff. On the surface it seems to have nothing to do with fruits and vegetables.

Ah, but then there are all those unintended consequences! For the moment Japan has responded by requesting a WTO hearing on the sanctions. Perhaps Japan will grow impatient as the WTO machinery grinds to a decision on this matter and choose to impose sanctions on U.S. products unilaterally. Perhaps, Japan will wait until WTO decides in Japan’s favor and thus authorizes Japan to apply sanctions.

If sanctions come from the Japanese, a very likely target is U.S. produce. Florida grapefruit, for example. There is virtually no market for Florida white grapefruit other than in Japan. If the Japanese don’t buy it, the price domestically would collapse and much fruit would still wind up being dumped. California fruit is another tempting target. All these items are basically luxuries which the Japanese could well do without.

And don’t count on getting these markets back when these sanctions are eventually lifted. When President Nixon restricted soybean exports, Japanese investors poured money into Brazil to develop an alternative source of supply. Grapefruit and other produce items can grow in many locations and with Japanese funding of sophisticated growing, packing and shipping operations, a new competitor for U.S. producers can be built.

The bigger impact on the produce industry is unpredictable, though. By its behavior in this matter the U.S. is sanctifying the principle of unilateral national action. So, one day, when someone wants to keep grapefruit out of France or apples out of Saudi Arabia, or some other country somewhere wants to keep U.S. produce from their land, they will point to the U.S.’s unilateral action in this case and will claim justification for hurting our industry.

Because things happen in the world, actions can lead to other actions, and for all we can predict, some future dispute could lead to a war. Many historians, for example, believe that World War II would not have come about had not the Great Depression interfered with European economic recovery following World War I.

Of course, we are already hurt another way. When the U.S. buys products from foreign countries, it is not to “help out” those countries. It is to help ourselves. The casualness with which the President restricts the rights of law-abiding Americans to buy what they choose is astounding. It is, like much else in this matter, positively anti-American.

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Last month in PRODUCE BUSINESS (May 1995 page 12), we published an exchange of letters regarding a particular advertiser’s ad and certain complaints lodged against that advertiser’s claims by another advertiser via a letter to the editor. I’ll let that particular dispute, which focused on Tofu, stand as it was published. I do, however, think it worthwhile for me to share with you our general approach to advertising material and product claims by advertisers.

As a trade publication, we speak to an audience that is highly sophisticated in evaluating product claims. This leads us to provide advertisers with substantial leeway, or, as others might say, rope with which to hang themselves.

It is important to keep in mind the difference between a consumer and a trade publication: Consumer publications reach an audience with little first-hand knowledge about many issues which PRODUCE BUSINESS deals with. As such, the possibility of panic or of consumers declining to buy a product due to even one consumer ad saying something negative about a product is very great.

In contrast, PRODUCE BUSINESS reaches a highly sophisticated, knowledgeable and experienced audience.

We believe our readers are well equipped, through their own experience, to judge whether the problems with a product are substantial or inconsequential. If they have found the problems referenced or implied in an ad to not exist or to be insignificant, the ad will lack credibility and buyers will think poorly of the product and the company.

If, on the other hand, buyers have often experienced the problems mentioned in an ad and have yearned for a solution, then the advertisement will be credible and of interest to the buyer.

In any case, it is inconceivable that our highly experienced and sophisticated readers will toss aside a lifetime of experience because of an advertising claim. If the claims of the advertiser ring true, the ad will be a success for the advertiser. If the ad rings false, the advertiser will have wasted its money and done its reputation for veracity substantial harm.

Of course, PRODUCE BUSINESS would not knowingly publish an ad that is libelous. Obviously, we would be very cautious about ads that mention a specific company by name. Most claims which are made in advertising are either statements of opinion – such as “this tastes best” – or assertions of benefits as to the relative value of different packaging methods, products and services, all of which are subject to dispute.

Generally speaking, those who are unhappy with the image some competitor is presenting of the relative merits of different approaches to a market are well advised to take their own steps to aggressively market their vision of the marketplace.

PRODUCE BUSINESS is proud to be an intellectual center for debate within the produce industry. Our editorial pages are the fruit of a relentless search for a better understanding of marketing, merchandising and management issues that are important to the trade. Our advertising pages serve as the forum for the vigorous debate among industry players of the relative merits of brands, companies and approaches to doing business. We think both are important facets of the process of building a stronger industry.  pb