US Trade Deficit With Japan Drops, One Razor at a Time

The Gillette Company of Boston, with 700 million shaving customers around the world, knows a tough market when it sees one: Japanese public bath houses.

Lots of Japanese men do their shaving at the public bath, where they use disposable razors supplied to the baths exclusively by Japanese companies.

Like many other American firms, however, Gillette is working hard at selling more goods to the Japanese, and these businesses are having some success.

In fact, the US trade deficit with Japan, which slipped out of the headlines about two years ago, is being shaved down, albeit one proverbial hair at a time.

US exports to Japan in the first quarter of this year were up 10 percent from the same 1995 period, while imports from Japan dropped 6 percent, according to the US Commerce Department. An agency official sees roughly the same trend continuing this quarter.

But the Japanese still sell about $59 billion a year more in goods here then the US does there. That's about $225 per person in the United States - a lot of camcorders, cars, and razors, however one slices it.

That's why President Clinton made trimming this trade deficit a prime goal of his administration. In all, the president has negotiated 20 trade agreements with Japan, including one last year on the high-profile issue of automobiles and auto parts.

July 31 deadline

Still, US negotiators are frustrated by several key issues that remain unresolved, from airline landing rights and insurance to a semiconductor accord that expires in July. At a summit of economic powers this past weekend in Lyon, France, the two sides made some progress. They agreed on a July 31 deadline for settling the battles over computer chips and insurance.

Much of the recent export gains, analysts say, can be explained by exchange-rate shifts and price-cuts that make US goods more attractive. Bilateral trade deals by Clinton and previous administrations, as well as global tariff-cutting agreements, have also helped.

Barriers persist

"Our exports to Japan are rising at a good clip, but this does not mean the Japanese market is really open now," warns Clyde Prestowitz, president of the Economic Strategy Institute in Washington. This long-time expert on Japan-US trade points out that Honda and Toyota are making cars in the US and exporting them to Japan - which is a plus for the US in the trade tally - but it's "a lot harder for Ford and Chrysler to export there."

He has another warning. As Japan expands its manufacturing into other Asian nations, they "are taking their keiretsu system of doing business with them, and this will make it harder for the US to export to those nations." The keiretsu, or business groups, often link specific producers, wholesalers, and retailers.

Eastman Kodak Company alleges exclusionary industry practices in Japan's photo film and paper market. It recently decided to take its case to the Japan Fair Trade Commission. Meanwhile, US officials are petitioning the World Trade Organization in Geneva in an effort to resolve the dispute.

Another Commerce Department spokesman says it's unusual that "our exports grew so well in Japan at the same time they were having a long recession." Japan is just beginning to come out of a four-year dip, and "this should boost our exports there even more," this source says.

In April, the overall US trade deficit was $8.63 billion, 7.7 percent above March, largely due to higher prices on imported oil, but still 20 percent below the April 1995 deficit.

As Japan continues to open its markets, the US trade picture should see more improvement, says Sean Greene, a consultant at McKinsey Global Institute in Washington, because US business "is so very productive" in its use of capital. The institute just released a major study concluding that Japan and Germany use investment capital only two-thirds as productively as the US does.

As to Gillette and shaving in Japan, two-thirds of the shaving market in Japan is dry. That market, for electric razors, is dominated by imports from Gillette-owned Braun A.G. of Germany.

In the remaining one-third of Japan's shaving market - the wet side of the face, so to speak - Gillette supplies nearly 50 percent of the razors.

"The Japanese love high-tech," says a Gillette spokesman, and so the firm's advanced Sensor brand "does well in Japan" - outside the bath houses.

Gillette won't release specific figures on product sales or markets, but Japan is one of the company's top 10 markets.