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The State of U.S.-Japan Economic Relations:
What’s Working and What’s Needed

May 20, 2021 @ 2:00 pm - 3:15 pm

 

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On Thursday, May 20, 2021, Sasakawa Peace Foundation USA (Sasakawa USA) hosted a virtual event, “The State of U.S.-Japan Economic Relations: What’s Working and What’s Needed.” This event featured Mr. Kenichiro Mizoguchi, General Manager of Hitachi Ltd.’s Washington, D.C. Office; Mr. Shinsuke Takahashi, Chairman of the Board and Head of Government Relations at NEC Corporation of America; and Ms. Misato Kogure, Director of Business Development & Environmental Affairs at Daikin U.S. Corporation, for a discussion on U.S.-Japan economic ties in the context of the broader U.S.-Japan strategic partnership.

Attendees included distinguished guests from the Washington, D.C. policy community, academia, think tanks, Japan-America Society directors, along with former and current leaders of both the U.S. and Japanese business and government. Mr. Satohiro Akimoto, Chairman and President at Sasakawa USA, facilitated the event and moderated the Q&A.

Remarks by Mr. Kenichiro Mizoguchi

Mr. Kenichiro Mizoguchi began by providing an overview of Hitachi, Ltd. Founded in 1910 and headquartered in Tokyo, Hitachi is a global company focusing on developing cutting-edge operation technology products and systems. In the fiscal year 2020, the company’s consolidated revenue was $78.6 billion with more than 350,000 employees working worldwide. In particular, the United States is the largest foreign market for Hitachi. The company began its operations in the United States in 1959 and over the past decades, has undergone a profound transformation from a consumer electronics giant to a global social innovation solution leader.

Mr. Mizoguchi explained that Hitachi has focused on business-to-business and business-to-government cooperation, specializing in the information and infrastructure industries such as energy, automobiles, railways, and IT. Some recent key company acquisitions have included obtaining 80.1% of ABB Power Grids, which operates grids that serve 80 out of the top 100 U.S. power generators, and JR Automation, a leader in intelligent automation manufacturing and physical asset-data information integration. Additionally, Hitachi is working towards finalizing a deal with GlobalLogic, a leader in digital product engineering and helping clients develop innovative software that powers products, platforms, and digital experiences for the modern world. Lastly, Mr. Mizoguchi also touched upon the recent deal with the Washington Metropolitan Area Transit Authority where Hitachi is contracted to design 8,000 railcar vehicles in a contract worth up to $2.2 billion, promising hundreds of new jobs and manufacturing facilities in the D.C. region.

Next, Mr. Mizoguchi reflected upon what has been working well for U.S.-Japan economic relations. First, he remarked that the U.S.-Japan economic relationship is far more stable today compared to the past few decades, especially the eighties. Mr. Mizoguchi noted that Japan is now the top foreign direct investor in the United States. More importantly, U.S. policymakers appreciate Japanese investments in their American communities, and the concept of kaizen, an ethos of continual product improvement that resonates with the U.S. market’s focus on innovation, as the United States accounted for 14 of the top 20 most innovative firms in 2020.

Consequently, Japanese companies benefit from this ecosystem as the U.S. market remains a place to conduct business freely and equitably. Mr. Mizoguchi remarked that the United States still maintains a fair and transparent business environment that is hospitable to foreign entrants. He also noted that the United States boasts an incredibly efficient and talented pool of workers with world-class researchers. The United States still has the most cited papers from AI conferences and benefits from a diverse population and immigration system. Mr. Mizoguchi cited that 45% of Fortune 500 companies were founded by immigrants or their children, including Apple, Amazon, Tesla, and Alphabet.

Regarding what is needed for improving U.S.-Japan economic relations, Mr. Mizoguchi pointed to the desperate need for an overhaul in U.S. infrastructure. However, Democrats and Republicans remain divided over the definition of infrastructure, leading to stalled progress. He asserted that U.S. policymakers need to look beyond the traditional definition of infrastructure of roads, bridges, and other physical architecture, urging greater investment in digital infrastructure. If a congressional agreement is reached, the United States will quickly be able to build the next-generation infrastructure needed for further economic growth and development.

Moreover, Mr. Mizoguchi outlined that a whole-of-society approach is necessary to meet U.S. President Biden’s goal of reducing carbon emissions by 50-52% and positioning the United States as a climate leader for the world. Pursuing technological advancements to help global communities will be critical to meeting that target, and Japanese companies should play a central role in decarbonizing the U.S. economy. However, Mr. Mizoguchi stated that state-by-state regulations limit these efforts, and federal regulations must keep up with technological innovation to ensure continued progress.

On the energy side, Mr. Mizoguchi referenced how there is a similar issue with the Energy Policy Act of 2005, which designates the jurisdiction of local power distribution in states and municipal governments. He recommended the formation of a nationwide power grid that would be essential for a more affordable and resilient power source. In addition, a more consistent federal framework is needed so that companies can treat the United States as a single market as opposed to a collection of states with regulatory markets. Mr. Mizoguchi also suggested that with fair and clear regulations along with a speedy and transparent review process for supply chains, the United States should apply more narrowly the national security standards for Japanese businesses and companies in the U.S. market.

Mr. Mizoguchi also suggested the creation of a whitelist for Japanese corporations because of the strong U.S.-Japan alliance. Also, Mr. Mizoguchi argued that President Biden’s “Buy American” plan, which prioritizes domestic purchases and buying standards at the initial stage of technology development, will negatively impact the U.S. economy in the long term. He instead urged the adoption of a more flexible system to benefit the U.S. domestic economy while also cooperating with foreign partners like Japan. Mr. Mizoguchi alluded to the recent summit between President Biden and Prime Minister Suga where both spoke about the importance of global partnership in a new era of rapid transformations, challenges, and opportunities. He asserted the need for the private sector to lead those changes through deeper U.S.-Japan commercial ties by engaging in constructive discussions.

Remarks by Mr. Shinsuke Takahashi

Mr. Takahashi spoke next about NEC Corporation of America’s operations. NEC is an international technology company with more than 110,000 employees worldwide and revenue totaling $28 billion in the fiscal year 2020. The company has had a presence in the United States since 1963 with its North American headquarters based in Irving, Texas. NEC has continued to invest in R&D in fields such as biometrics analog wireless systems, undersea cables, space technology, advanced telecommunications, 5G, and AI technologies.

Mr. Takahashi outlined NEC’s work in biometrics, particularly its strong commitment to developments in facial, fingerprint, and iris recognition technology that passes the National Institute of Standards and Technology (NIST) test standards. He provided examples of how U.S. government departments and companies are using NEC technology. The Hawaii Department of Transportation has used NEC-designed temperature screening systems for ensuring safe travel during the COVID-19 pandemic and the U.S. Transportation Security Authority and Customs and Border Protection successfully launched a pilot trial of integrating NEC biometrics into checkpoints. Delta Airlines also established its first fully NEC-biometric enabled terminal at Atlanta International Airport, a service that has since expanded to airports in New York City, Los Angeles, Minneapolis, Salt Lake City, Orlando, and Boston.

Mr. Takahashi emphasized how the company has focused on promoting the ethical use of biometrics and the strengthening of public trust towards its digital systems, an effort grounded in a broader commitment to protecting human rights through developing fair, private, and transparent solutions to uphold AI and ethical principles. He underscored how NEC’s approach included product encryption, diverse algorithms, and extensive testing. Among other safeguards, NEC analyzes other business partners, screens for trusted customers, and works with customers to plan biometric deployments and train staff.

To build stronger U.S.-Japan economic relations, Mr. Takahashi first suggested the development of government frameworks that protect privacy but also promote security, economic efficiency, and technological innovation. He stressed the creation of national frameworks that support global efforts to build public trust in biometrics and reinforce ethical AI technologies. Additionally, these frameworks could also combat global techno-authoritarianism and ensure democratic countries continue to play leading roles in determining how to ethically use cutting-edge technology like biometrics and AI.

Mr. Takahashi also underlined the importance of bolstering the U.S.-Japan technological alliance, specifically cooperation on 5G. He stated that trust between U.S. and Japanese companies and government support is critical to successfully deploying 5G Open RAN. He also expressed his hope that the U.S. would establish a multilateral telecommunications fund to promote safe and secure networks among U.S. partner federal agencies involved in international aid, such as the United States Agency for International Development and the U.S. International Development Finance Corporation. To conclude, Mr. Takahashi accentuated the importance of further technological cooperation between the United States and Japan in areas like AI, 5G, quantum computing, and space exploration to building stronger bilateral economic ties and Mr. Takahashi asserted that NEC was committed to advancing this goal.

Remarks by Ms. Misato Kogure

Ms. Kogure then followed by offering an overview of Daikin U.S. Corporation. Established in 1924 in Osaka, Daikin is a leading air conditioning and fluorochemical manufacturer. The company has been operating in the United States for more than 25 years with more than 17,000 employees nationwide. Daikin has invested more than $7 billion in U.S. production with a broad sales network encompassing more than 60,000 dealers and contractors with over 2,000 distribution locations. The company’s biggest facility lies in Houston, Texas with other large manufacturing plants based in Minnesota, Virginia, and Alabama. Additionally, Daikin has several R&D facilities constructed for developing products optimized for the American market. Daikin Texas Technology Park (DTTP) located in Waller, Texas, is the company’s largest facility in the United States and the overall third-largest R&D facility in the country after Tesla and Boeing. Over $500 million was invested in the construction of DTTP and the facility boasts more than 8,000 workers.

Ms. Kogure then elaborated upon Daikin’s corporate philosophy of people-centered management. This philosophy manifests through Daikin providing employee education and safety training through its online learning program, Service Technician of Excellence Program, among other initiatives like internship programs with local universities, community support through homestays, donations to local community organizations, and partnerships with local NPOs. One other consistent initiative of outreach for the company is its annual Daikin Festival held in Decatur, Alabama, an annual community event facilitating U.S.-Japan cultural exchange festivities.

Next, Ms. Kogure spoke about Daikin’s three core environmental technologies, which include energy-efficient heat pumps, inverters, and refrigerants. She highlighted how Daikin had developed air conditioning products in a variety of spaces that span from residential to commercial to industrial. Daikin also has a long-term environment commitment plan called Environmental Vision 2050 in which the company targets reducing carbon emissions from its products to net-zero by 2050.

Furthermore, the United States is the world’s largest heating, ventilation, and air conditioning (HVAC) market with the second-largest amount of HVAC carbon dioxide emissions only after China. Ms. Kogure stated that Daikin believes it will help the United States achieve its environmental commitment by promoting its energy-saving technologies and products to reduce emissions. The company has also been actively conducting advocacy activities in Washington D.C. to promote more environmentally friendly HVAC products.

To strengthen the U.S.-Japan economic relationship, Ms. Kogure proposed the implementation of policies that help promote environmentally green technologies and products. She also stressed the need for strong government leadership and policies in the area of global climate issues, such as the U.S. ratifying the Kigali Amendment to the Montreal Protocol to reduce hydrofluorocarbon gas emissions. In addition, Ms. Kogure recommended tax incentives and credits for home and commercial building owners that use energy-efficient products along with trade policies that help local production in the United States. She added that excessive tariffs and restrictions may weaken the competitiveness of manufacturers and supply chains, discouraging foreign direct investment. Ms. Kogure also gave the example of how Section 232 of U.S. Tariffs on Steel and Aluminum, specifically those towards Chinese products, should be reconsidered.

Moderated Q&A with Attendees

The first question came from Manny Manriquez, General Director at the Japan Automobile Manufacturers Association, Inc. Before his question, Mr. Manriquez provided some insight on Japanese automakers’ presence and investments in the United States. Japan’s automobile companies have more than $53 billion in cumulative U.S. investment and produce one-third of the vehicles in the country. Moreover, they have an established track record in environmental sustainability across the country, advancing automotive innovation in more than 50 R&D centers, including leading Centers of Excellence (COE) in Michigan, Ohio, and Southern California. Related to that last point, Mr. Manriquez’s asked what regions of the United States have supported each of the panelists’ respective companies in developing in terms of presence, investment, and cutting-edge technologies.

Mr. Takahashi responded first by answering that while the software and algorithms for NEC’s biometrics come from Japan, the company’s airport solutions and products are built in the United States. For example, NEC kiosks and hardware are constructed in their COE located in Sacramento, California, and then exported to foreign countries. He also mentioned other similar COEs in other parts of the country such as one in Dallas, Texas, which is NEC’s North America headquarters built over twenty years ago in 2001. Additionally, Mr. Takahashi referenced NEC’s ongoing construction of a COE concentrating on telecommunications technologies and 5G in Princeton, New Jersey.

For Hitachi, Mr. Mizoguchi explained that the company had 17 R&D laboratories in the United States and had invested $400 million in the three most recent years. He referenced Hitachi’s flagship Silicon Valley laboratory in Santa Clara, California, that specializes in AI, robotics, blockchain, and other new types of technology. Mr. Mizoguchi stated that Hitachi had major facilities in 14 states with the industry segment mainly located in the Midwest and the energy segment located in the South. Lastly, he noted that infrastructure facilities were based in a variety of states and the West Coast.

Ms. Kogure responded that Daikin does not have a preference for specific areas and is fairly flexible when picking out the most optimal locations for manufacturing. However, to be more specific, Ms. Kogure said that if she had to pick a few prominent states, Texas, Virginia, Minnesota, Alabama, and Kentucky would be some of the main states of production where Daikin has strong relationships with the local communities.

Dr. Akimoto asked the next question which was what actions the panelists would like Congress and the Biden administration to consider in terms of infrastructure policy. First, Mr. Mizoguchi replied that despite long-term bipartisan congressional agreement to renew infrastructure deals, U.S. policymakers still need to build consensus in the area details, like how much to spend and what regions of the country to target. He added that policymakers should prioritize digital infrastructure alongside physical infrastructure and that the United States could build a new generation of more competitive and effective infrastructure through public and private sector cooperation. Regarding HVAC infrastructure, Ms. Kogure said that an increase of well-trained personnel is crucial, as installation quality impacts durability and energy efficiency. She urged greater investment in technician education and the improvement of public transportation networks to raise efficiency. Mr. Takahashi then spoke about the need for airport modernization in the United States to improve travelers’ experiences and promote more tourism. He cited Delta Airlines’ solution of streamlining the boarding process through check-in with facial recognition. In addition, he emphasized the importance of investing in emerging technologies, including AI and 5G, to building resilient digital infrastructure.

Dr. Akimoto then pivoted to a question about human rights. He spoke about how Speaker of the House of Representatives Nancy Pelosi testified that private companies should boycott the 2022 Beijing Olympics. His question to the panelists was how geopolitics and human rights factor into business decisions globally for Japanese companies. Mr. Takahashi answered that NEC has created corporate principles for protecting human rights. NEC globally conducts customer inspections to see how they will use their products, such as checking customers’ track records related to human rights and privacy. He also stated that, as an internal principle, companies must be brave enough to not sell their technology if they are not sure that it will be used ethically. Mr. Mizoguchi next responded by first explaining that Hitachi’s 2021 Mid-term Management Plan emphasizes the importance of positive social and environmental outcomes, not just economic ones. He added that corporations must fulfill their obligation to customers and stakeholders in each region while supporting human rights, rendering it a complex issue. Ms. Kogure provided Daikin’s position which was that the company does not take a stance on specific issues and that among its global operations, China is an important market for Daikin that is just as big as the United States. She concluded that Daikin’s goal is prioritizing the provision of comfort to citizens and reducing emissions globally.

Dr. Akimoto’s last question was specifically for Mr. Takahashi and about NEC’s biometric technologies. Dr. Akimoto wanted to clarify with Mr. Takahashi what the technology situation is for recognizing identities across different demographic groups, especially if there were any discrepancies for people of color and other marginalized groups. Mr. Takahashi answered that there is a difference in accuracy for some of the algorithms for different skin types and that there is always room to train and improve algorithms more. However, he did cite evidence that NEC was the company with the highest accuracy with no detectable differences between different groups by NIST testing announced at the end of 2019. For biometric technology, Mr. Takahashi noted that it all depends on the level of quality and how that technology is used. He concluded that while software can be helpful and effectual, humans have to be the final decisionmakers in the process.

 

Sasakawa USA is grateful to Mr. Kenichiro Mizoguchi, Mr. Shinsuke Takahashi, Ms. Misato Kogure, the Q&A participants, and attendees for their insightful discussion on the current state of affairs for U.S.-Japan economic relations.

The summarized views of the speakers expressed herein are entirely the work of Sasakawa Peace Foundation USA and do not represent the official positions of any of the speakers.

For more information about Sasakawa USA’s Policy Briefing Series, click here.

 

 

Details

Date:
May 20, 2021
Time:
2:00 pm - 3:15 pm
Event Category:

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