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WHEN TRADE MEETS CULTURE

THE BALTIMORE SUN

TOKYO -- Consider pacemakers and shoes.

Both are common products, both are produced internationally, and both are emotionally charged, multimillion-dollar players in the multibillion-dollar issue of trade between Japan and the United States.

President Clinton and Japan's Prime Minister Morihiro Hosokawa will try to thrash out the big picture on U.S.-Japan trade relations at a meeting set for next week. Each has the same broad goal of reducing Japan's vast trade surplus.

In areas that do fall within the shadow of a national government, such as foreign policy and federal spending, there is likely to be some agreement, and that could have a modest impact on trade.

To the applause of the United States, Mr. Hosokawa had proposed a large tax-cut and spending plan to pump up Japan's lethargic economy, at least for a moment. But opposition forced him to shelve the plan yesterday, delaying the announcement of an emergency economic stimulus package until next week.

Real progress has reportedly been made on joint U.S.-Japan statements concerning AIDS, the environment and other issues of international policy.

But in terms of the core goal, reducing the $57 billion U.S. trade deficit by expanding access to the Japanese market, the two leaders have a problem.

For in reality, trade is not a big picture waiting for national leaders to paint it in. It's rather a thousand small vignettes, each with its own array of interests far from the White House, or more to the point, from the Japanese equivalent, Nagatacho.

Negotiating positions become particularly intractable when the issues extend beyond money.

Begin with shoes. They were specifically cited yesterday by U.S. Trade Rep. Mickey Kantor to buttress his demand that Japan must agree to "commercially meaningful reductions" in tariffs. That's easy for a high U.S. official to say in a news conference, but almost impossible for anyone in Japan to even discuss. Many government officials dread being connected with it.

Why?

Shoes, and to a more limited extent all leather products, stand at the intersection between Japanese trade and culture. Indeed they are more closely entwined with the two than rice, which receives vast amounts of publicity. The issue, rarely acknowledged, is the long-standing discrimination against a group of Japanese citizens.

In the rare moment when the group is referred to at all, it is by the name Burakumin, a word that literally translates to people of a village, but is too loaded a term to be casually stated in public.

The Burakumin are indistinguishable from other Japanese in appearance, dress, manner or any other evident way. Their classification within this group stems from a connection to the bottom of a class system that was officially expunged decades ago.

But as recently as the mid-1970s, a court case documented the practice of companies using lists of areas where Burakumin lived, in order to screen their hiring; it is rumored that such lists continue circulating, but quietly.

To this day, says Toshiichi Kondo, of the Buraku Kaiho Domei (roughly translated as the Buraku liberation organization), a connection to this group is a key issue examined by private investigators hired by families to look into potential spouses. Evidence of Buraku ancestry has been sufficient to call off a marriage, or cause estrangement from the family.

Traditionally connected to the status of this group was its role doing what the Japanese considered to be society's dirty work, notably converting animals into leather. More recently, in a modern twist, the government has taken strong steps to protect the industry as part of its official effort to assist a historic source of work.

The tariff schedule is complex but, generally, the initial surcharge on an imported pair of leather shoes is $48 or 60 percent, whichever is greater. The result: A government official formerly involved in negotiations said only about 1 percent of the leather shoe market was imports.

The impact of this protected mar ket is evident in the stores, where leather shoes are among the most expensive items in a country famed for high costs. It is also evident in the hundreds of tiny factories that dot major cities. Small-scale production thrives in Japan, whereas in America, intense cost pressures pushed the shoe industry out of New England to the South, and then offshore, leaving only the most efficient.

At Shoji Seika Co., Ltd. in Tokyo, nine employees turn out about 80 pairs a day that cost about $120 wholesale, $450 in a store. Each of the employees has a cobblers' skill. There are almost no modern machines. One man dyes crepe soles using a toothbrush. Others use a mallet and tacks to shape and fasten uppers. The work week commonly includes Saturdays, the hours stretch from 8:30 a.m. to 7 p.m. Pay does not exceed $48,000, a small income in high-priced Tokyo.

"A success?" asks Ryusuke Shoji, the company's president, as he reflects on the effort involved in his business and the small rewards. "I wonder."

There is no land nearby to create a modern assembly line, no money for massive amounts of machinery, and traditional labor is growing scarce. Nearby, the Tokyo metropolitan government spends approximately $30,000 a student to educate 20 new shoemakers a year. Applications sponsored by a Burakumin group are automatically accepted.

That used to fill a class, but now it typically accounts for a third of the class or less. Young people aren't interested. Mr. Shoji said his children will work elsewhere. In 10 years, he suspects, the business could disappear.

Within the formidable walls of Japan's bureaucracies, murmurs, if not discussions, over the fate of this industry have begun to be heard. Quietly, and if the Japanese have their way, without excess pain or controversy, time and gentle prodding will open this market and alleviate international complaints.

But if this is an area where long-standing barriers may eventually be resolved, some of the issues arising with sophisticated medical products are precisely the opposite.

Pacemakers are a vivid example. These small machines regulating the heart beat are common tools in the United States, with sales of about 120,00 a year.

The Japanese market is less than one-quarter the size, but it is growing as the population ages, and as the product becomes more common. Importantly, 100 percent of the equipment is imported, with U.S. firms such as Eli Lilly and Medtronic dominating the market.

The companies involved say pacemakers can provide the kind of access resulting in the sale of other sophisticated products.

But the conditions are changing. Medical costs for such products as pacemakers, artificial joints, and the like, are paid for by government reimbursements to manufacturers.

This year the government intends to reduce the amount of reimbursements dramatically, and, not coincidentally, according to the American Chamber of Commerce in Japan, the areas they have moved on first are the ones dominated by U.S. firms.

At the same time as foreign companies face receiving less for their product, the Japanese government, through the Industry of Health and Welfare, has begun funding a Japanese-only industry consortium including medical supply-maker Terumo, which operates a plant in Elkton, Md., to develop a domestically produced pacemaker. The ministry's involvement provokes fear because it is the authority that licenses treatment, and thus plays a critical role in which products can be sold.

NTC And the idea of subsidizing the development of an existing product that already receives tremendous investment funds from existing manufacturers provokes questions about the ministries true intentions, and its consequence on trade.

Why do so? The agency connected to the ministry funding the development answers merely that the intent is to do something good. A U.S. businessman involved in the negotiations has another answer.

"There is no doubt but that the Japanese medical community and the government is not happy that it is so heavily dependent on the foreign community," he said.

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