Looking Back at the FSX Dispute: Lessons for the future

Mr. Hidehiro Konno

Twists and turns of negotiations under the U.S.-Japan Security Arrangements
Last week (September 27), the final F-2 support fighter for the Japan Air Self-Defense Force was handed over from Mitsubishi Heavy Industries to the Ministry of Defense. September 26 was the deadline for submitting proposals for the F-X (next-generation fighter), and the full-scale selection process just got underway. These events may make today's seminar look timely. Today's discussion, however, is not on these contemporary issues but on a page of history back in the late 1980s.

The U.S.-Japan negotiations in the 1980s on the FSX (Fighter Support Experimental) can be divided into three phases: Phase 1 (October 1985-November 1987) was the run-up to the F-16 based co-development decision. In October 1985, the official process regarding the F-1's successor started at the Japanese Defense Agency, and a systematic study was conducted under the three options of (1) domestic development, (2) conversion of the existing F-4EJ, and (3) adoption of a foreign fighter. In April 1986, a meeting was held between U.S. Secretary of Defense Caspar Weinberger and Director General of the Japan Defense Agency Koichi Kato, and the U.S. side expressed its "willingness to assist" in the FSX selection work. In July 1986, Director General of the Japan Defense Agency Yuko Kurihara stated that the selection should be based on the three principles of "military rationality, IO (U.S.-Japan interoperability), and the elimination of all kinds of pressure." In December 1986, the term "domestic development" was revised to "development" by the National Security Council of Japan, and the concept was changed to one that included joint development with foreign countries.

In March 1987, the Toshiba Machine incident came to light. In the same month, the United States sanctioned Japan on the pretext of the violation of the Semiconductor Agreement. In October 1987, an agreement was reached between Kurihara and Weinberger on co-development based on either the F-15 or F-16. It led to a decision in the National Security Council of Japan on F-16 based co-development. In the meantime, in July 1987, a resolution requesting Japan to purchase U.S. fighters for the FSX was passed by the U.S. Senate. In the same month, Toshiba's president resigned.

Phase 1 negotiations were characterized by Japan's posture for a fair selection process, and the U.S.' upholding of its public stance to respect Japan's autonomous decisions. The Department of Defense handled the matter on the U.S. side, keeping the negotiations separate from trade negotiations. Both sides sought for a ground that would be acceptable to the United States, while being very cautious about hurting the pride of the Japanese public. In other words, it can be said that the negotiations were carried out between the professional hands in charge of the U.S.-Japan security partnership.

Prolonged negotiations and confusion
In Phase 2 (November 1987-January 1989), a number of people from both sides of the Pacific were engaged in a tug of war over the details of the F-16 based co-development plan. In November 1987, two negotiations started—the License Technical Assistance Agreement (LTAA) between Mitsubishi Heavy Industries and General Dynamics Corporation and the Memorandum of Understanding (MOU) between the two governments. However, the negotiations ran into difficulties regarding the percentage and components of work allocation and the issue of free transfer of derived technologies. In the end, an agreement was reached on the basic conditions of joint development at the meeting between Director General of the Japan Defense Agency Tsutomu Kawara and U.S. Secretary of Defense Frank Carlucci in June 1988, and the MOU was signed that November. The private sector LTAA was signed in January 1989.

Phase 2 was characterized by the fact that matters that should have originally been settled at the political level were deferred to administrative and technical level negotiations, hindering progress and causing delays. As negotiations dragged on until 1989, the United States transitioned from the Reagan administration to the Bush administration, and circumstances changed significantly.

Phase 3 (January to September 1989) is the period when the American defense hawks and trade hawks collaborated to make a comeback. At the Senate hearing of the incoming Secretary of State Jim Baker held in January 1989, Senator J. Helms requested the new administration for a review of the FSX agreement. In the same month, C. Prestowitz, former counselor to the Secretary of Commerce, wrote an article in the Washington Post titled, "Giving Japan a Handout." In the following month, when a U.S.-Japan summit meeting was held in Washington, a letter was sent by 12 senators to President Bush requesting for the review of the FSX agreement. In March 1989, a media report was made on the suspected involvement of Mitsubishi Heavy Industries in the Libyan chemical weapon plant construction. As far as I know, this report was an unsubstantiated and intentional leak. One week later, President Bush decided to review the FSX agreement at the National Security Council (NSC). Afterward, President Bush announced the "review" result, but this was not settled in the Senate and the House of Representatives, and Congress was thrown into chaos over the Byrd-Bruce resolution. In the end, the Senate failed to overturn the presidential veto of the Byrd-Bruce resolution by a margin of only one vote.

James Fallows' article "Containing Japan" published in May 1989 shows the sentiment toward Japan during those days. This article obviously followed the famous article by George Kennan, who initiated the U.S. foreign policy of containment towards the Soviet Union. Fallows' argument was to make Japan a target of containment policy after the Soviet Union. Along with the changes in the views on Japan, the trade disputes escalated from Market-Oriented Sector-Specific (MOSS) talks to Structural Impediments Initiative (SII) to Framework Talks. Article 301 of the Trade Act was invoked frequently as the disputes escalated. It lost its strength only after the establishment of the World Trade Organization (WTO) in 1995.

The F-2 took off on its maiden flight in October 1995, two years behind the initial plan. Its development costs were 327 billion yen, which was approximately double the initial estimated amount of 165 billion yen.

From the second half of the 1980s to the 1990s, Japan was the target of the U.S. defense hawks who consistently wielded strong power in U.S. politics. During the Cold War era, the Soviet Union was their target, but they shifted their focus to Japan almost as soon as the Cold War ended, and afterward dedicated their efforts to the fight against the Islamic extremists' terrorism. Former Assistant Secretary of Defense Richard Perle and several other people who played up the Toshiba Machine incident now belong to a group called the Neo-Conservatives.

There is no doubt the U.S.-Japan security framework brought prosperity to post-war Japan. At the same time, though, this framework enclosed Japan inside a greenhouse, which afforded the citizens to live comfortably without fully noticing the cold reality of international relations. The story of the FSX tells us how Japan skated on thin ice. If I may add a note on the recent development, some actions of the Japanese government, such as the apparent mishandling of the Futenma issue, look as if Japan is ruining the long-standing security arrangement with its own hands. This is certainly a matter of concern. But if we were to look for the positive, Japanese people, even though inadvertently, have started to expose themselves to the cold outside air, obliging themselves to think seriously about their own security. If a new Japan-U.S. alliance emerges from here, it will be based on a much firmer foundation than before. In addition, Japan would be able to develop more robust ties with its neighboring countries.

Dr. James E. Auer

An American's View of Japan's FSX Program: Was it "reinventing the wheel" or increasing Japan's defense capability?
Looking at the Japanese aircraft industry, following the end of World War II, one of the first actions of the U.S. occupation was to demobilize the Japanese military and also to close all Japanese munitions' factories. In 1950, however, the United States started procuring aircraft parts from Japan for the Korean War, later contracting with Japanese companies to manufacture entire aircraft. After the end of the U.S. occupation in 1952 and the end of the Korean War in 1953, the United States loaned, cost-shared, and licensed aircraft to the new Japan Air Self-Defense Force, encouraging increased aircraft manufacturing not only to increase Japan's own self-defense capability but also to secure a second supply source in case of a major war with the Soviet Union.

From the mid-1970s, the United States changed its stance and stopped encouraging Japan to increase manufacturing capability but instead to purchase from the United States. It is my opinion that the U.S. aircraft industry, whose orders had flourished as a result of increasing concern over the growing strength of the Soviet Union and its aircraft fleet in the Far East, from the early 1970s started suffering from overcapacity.

As for different views in the national security establishment level of both countries, the Japan Defense Agency (JDA) wanted a replacement for the F-1 support fighter as part of a time-phased program, while the U.S. Department of Defense (DOD) wanted to increase Japan's overall defense capability, including and perhaps even especially aircraft, as rapidly as possible for deterrence against the Soviet Union. In this sense, their goals were incompatible, further exacerbated by political issues in both countries.

In Japan, the revived aircraft industry meant that its workers were a source of political support, particularly for the ruling Liberal Democratic Party. Japanese manufacturers saw the need to keep their aircraft design and production bases alive, therefore supporting the view that the FSX should be a Japanese-developed fighter. On the other hand, American politicians, influenced by negative media portrayals, believed that Japan was an economic threat to the United States as evidenced in Japan's success in areas such as automobiles and electronics. The U.S. aircraft industry, led by General Dynamics and McDonnell Douglas, was in fact convinced that Japan had already made a decision for autonomous production (kokusan) and that therefore only U.S. political pressure could prevent this.

In my opinion, many in the JDA and the Pentagon felt the need for additional and more capable Japanese aircraft. However, some civilian elements in the JDA and the Ministry of International Trade and Industry (MITI) wanted to support the Japanese defense industry. It should be pointed out that DOD engineers believed that if Japan did go ahead with domestic development, the result would not be significantly different from what already existed capability-wise, but that it would be more costly and time-consuming to go online, especially considering the Soviet threat.

Inside the U.S. government itself, there were differences in views between the Department of Commerce (DOC) and the DOD. Commerce Secretary Robert Mosbacher and Counselor to the Secretary Clyde Prestowitz accepted a paranoid view that the only way to defeat kokusan production in Japan would be to insist that Japan adopt American aircraft. Conversely, Defense Secretary Caspar Weinberger and Assistant Defense Secretary Richard Armitage argued that the United States could not order Japan how to spend its defense budget as doing so was likely to inflame nationalism in Japan.

President Ronald Reagan agreed with Secretary Weinberger on this issue, and instead, Secretary Weinberger offered to provide the Japanese all information about existing American aircraft and share some of the problems, such as cost overruns and technology failings in aircraft development, and let Japan make its own decision. This became the policy approved at the National Security Council level by President Reagan. This happened during the time of the "Yasu-Ron" relationship as Defense Minister Yuko Kurihara accepted Secretary Weinberger's suggestion and convinced Prime Minister Yasuhiro Nakasone of this idea, perhaps to the disappointment of some in the Japanese industry as well as defense and MITI officials.

Naively and clumsily, the new Bush administration agreed to "review" and later clarify the FSX agreement based on sensational misinformation propagated by Prestowitz and others. They built on the fear that the United States won World War II and Japan won the peace and that the FSX was another example of how Japan was going to take advantage of the United States.

What are the lessons learned from the FSX situation? First of all, even though it was decided to be called F-2 co-development, it was actually not. The F-16 was not a new aircraft. It had been developed decades earlier and was licensed and sold to 10 other countries. Japan essentially procured a license to manufacture the F-16 in Japan as it did previously with the F-15, P3C, etc. Defense Minister Tsutomu Kawara and Defense Secretary Frank C. Carlucci agreed that this was not co-development but expressed the hope that it would eventually lead to a meaningful and real one.

Second, Japan wisely decided to adopt a U.S. aircraft and add new technologies to it, rather than "reinvent the wheel." Frankly, if Japan had decided to go ahead with the kokusan aircraft for the F-2, it probably would have contained the same amount of American content, but emotionally it would have created a potential political firestorm in the United States. Some Japanese felt that the decision to choose an American aircraft was linked to the Toshiba COCOM incident, but I believe that Minister Kurihara and Prime Minister Nakasone understood correctly that the largest part of Japan's defense vis-à-vis the Soviet Union came from its close ties with the United States. The release of the information about Toshiba Machine was primarily the result of an internal U.S. government struggle—a turf battle over the control of American exports between the DOC, which wanted a more liberal release policy to aid U.S. exports, and the DOD, which wanted control over transfer of technology for national security reasons.

Third, under pressure from Congress, the Bush administration agreed to "review" the FSX agreement in which Japan had effectively given up what its own industry wanted for the sake of alliance cooperation. The results of the review were cosmetic, surface-level changes, but there was extreme anger and disillusionment on the Japanese side from Mr. Shintaro Ishihara and others—and most importantly, the delay of any meaningful co-development for years to come. In fact, Japan decided a few years ago not to become a co-developer of the F-35, a new fifth generation aircraft.

What would be necessary for real co-development? Japanese and American planners would have to come together and agree to pursue common needs and objectives prior to the implementation of design, development, and manufacturing. Is this a bridge too far? I hope not. Currently, Japan is choosing a new F-X among three candidates: the Eurofighter, the F-18, and the American F-35. With both Russia and China reportedly working on a fifth generation aircraft, Japan and the United States have to keep pace, so regardless of which aircraft Japan chooses, it is vital that they start discussing real joint co-development of a sixth generation aircraft.

Q: I agree that Japan and the United States should cooperate in producing a sixth generation aircraft, but the main purpose for the F-X development is different in the two countries. While the United States has a more aggressive, offensive stance, Japan's is more defensive. Can these be reconciled in successful co-production?

Dr. Auer
Vince Lombardi, the legendary former coach of the American football team Green Bay Packers, always said, "The best defense is a good offense." Throughout the Cold War, it could be argued that the most defensive equipment the United States had was the nuclear-powered ballistic missile submarine. Because if it ever had to fire even one time, it would have failed. The mission of the nuclear-powered ballistic missile submarine was to convince the Soviet Union that if it attacked the continental United States, the United States could still, from the middle of the ocean, bring unacceptable damage to the Soviet Union. Therefore, the sole mission was deterrence.

While Japan has a choice to equip itself in defense, it has chosen to rely on the nuclear umbrella of the United States, in the spirit of a "division of roles and responsibilities." While engineers will naturally safeguard the domestic industry, it would be advantageous if the political and defense leaders in Japan and the United States directed their engineers to collaborate in order to use their limited resources most economically and also to provide particularly the most effective combined deterrent vis-à-vis a common enemy—whoever it might be.

QUESTIONER
I would like to make a comment. I believe that the issue concerning this FSX has generated considerable resentment in Japan. In addition, due to U.S. attacks against Iraq, the United States' reputation in the international community is slipping. I feel that the U.S. can't help but create a system that eliminates people with unique values in the given country.

Q: With the F-X decision in Japan approaching, can you envision a scenario in which Japan would choose a non-U.S. aircraft and what scenario that might be?

Dr. Auer
If Japan chooses a Eurofighter, there would not be demonstrations in the streets in the United States because the whole trade imbalance has changed so greatly. Given that the Russians and the Chinese are proceeding with fifth generation aircraft development, it would be of great benefit for Japan to think seriously about true fifth generation aircraft also, which neither the F-18 nor the Eurofighter are.

Q: Why did Japan decide not to participate in the development of the F-35?

Dr. Auer
It is now too late for Japan to join in the development of the F-35 since it is too far along in the process. At the time when Japan decided against joining the nine other countries in developing the F-35, there was a strong desire within the Japan Defense Agency (JDA) to procure the F-22, which the United States has stopped selling because the F-35 is a far more sophisticated multi-mission aircraft.

Hidehiro Konno
Even if Japan wanted to participate in the development of the F-35, it had not been able to do so. Under Japan's three principles of arms exports, every time components and technologies are transferred overseas, they must go through the Japanese political process. It is just not workable. Therefore, foreign governments and companies would not welcome Japan in international joint development programs.