APPLES AND TRADE BARRIERS
THE DEBATE FROM THE PUNDITS OFF THE FUKUZAWA NETWORK
(from what survives in my files, anyway)
Date: Fri, 26 Apr 1996
From: Dennis O
Subject: Re: Recent NEWS (pt 1)
I agree with Victoria S that the US apples were ineptly marketed. This was due to the US side's customary willingness to turn over its product to large Japanese firms at the upper echelon importer/distribution level, leaving the marketing in their hands. As I understand it, the US growers sent no American marketing specialists to shepherd their product during the crucial first introduction last year. Things were left to the Daiei chain and other mass distributers, who apparently reassured the US side that any sophisticated exporter puts its product in the hands of "experts" on the Japanese market. The US side signs and shakes hands in a plush Tokyo or Kobe hotel, leaving its product to be sold in the huge markets outside Tokyo and Kobe without any American marketing direction. the results are evident and inevitable.
To fend off the "US invasion," japan's apple industry association mounted an astute lobbying and marketing campaign last year. it cut prices in markets and planted stories in the local press about the residue chemicals supposedly on the US apples. TV talk show types decreed that US apples were well-suited only for apple sauce. the industry association also got MAFF to work out a reciprocal deal with the US side to export premium fuji apples to the US. Given the radical drop in exported US apples, I wouldn't be surprised if Japan is now running a trade surplus in apples. At the same time, the Japan apple industry pressured its traditional regional buyers not to handle US apples (i.e., the legion of regional distributors outside the Daiei chain and Seiyu chains). It soon became "not the accepted thing" to handle Us apples.
In other words, the apparent inept marketing had a complex origin. (My wife and I recall buying US apples at Daiei that were already mushy, having been stored and displayed in plastic bags without the proper handling.) Until US companies make the effort to put people on the ground in Japan's major regions to do their own marketing, I believe the same unhappy results will contiune to await other US products.
Date: Fri, 26 Apr 1996
From: Philip C. B
Subject: Re: Recent NEWS (pt 1)
>>>At 23:39 96/04/25 "fletcher" wrote:
>>> Could markets alone have caused a 90% drop in apple imports in just one year?
To make matters worse, the type chosen to import was Red Delicious, particularly-small, bite-sized ones in fact. Bad idea... quality Japanese apples are big, round and smooth, of course.
My understanding is that four varieties were cleared for import at the request of the Washington State Apple Commission. One of the others was Golden Delicious, at least equally as problematic a fruit as the Red. Can't recall the other two.
A colleague who acted as an advisor to the WSAC tried to convince them to get clearance for more varieties to no avail. No hint in my discussions with my colleague a year ago that market research was conducted at all.
The wax, can routinely be found in your neighborhood grocery store, transpor ted like the chemical mentioned, without much investigation of how people in Japan would react.
Date: Fri, 26 Apr 1996
From: Christopher H
>>>At 23:39 4/25/96, "fletcher" wrote:
>>>Could markets alone have caused a 90% drop in apple imports in just one year?
Yes, I believe US apple imports would have plummeted this drastically, entirely apart from whatever trade machinations may have occurred. Their introduction was a marvel of ineptitude. What were they thinking on the US side? What else? The taste was insipid, as a lot of Americans will agree about this variety; they are the iceberg lettuce of apples. But that was not as decisive a factor as the peel problem, or the fact that they were invariably displayed (at Daei, Seiyu, Jusco and elsewhere) next to a stack of their cardboard cartons, upon which were proudly emblazoned a stars-and-stripes motif--and the very bold banner "TREATED WITH TETRAHYDROBENZEDROXENE"! (Sorry, I forget the actual compound but whatever it was, the effect was daunting and certainly played into the Japanese media/agricultural interest scares about chemically-treated US produce. Nearly every woman I know brought up the issue after seeing this in the supermarket. Surely the US growers/marketers had some input into the design of the display? I suspect so, because it was pretty much the same in all stores, at least for the weeks immediately following the launch. Was it necessary to put such an ominous-looking proclamation on the cartons, and if it was, did they have to be part of the display?
I would also add that the apples appeared to have been waxed, apparently to make them "shiny and attractive," and my wife and her fellow homemaker friends were no more inclined to eat wax than they were to eat "tetrahydrobenzedroxene."
Date: Sat, 27 Apr 1996
Subject: RE: insipid fruit that tastes like marketing tactics
Several DFSers have commented in support of:
>>>What else? The taste was insipid, as a lot of Americans will agree about this variety; they are the iceberg lettuce of apples.
A classmate of mine at MIT many years ago, now in business for himself as a management consultant, approached the Washingt on State Apple Growers Association (that ain't the name but it is close enough) about consumer research in Japan. He's conducted such research for American beef exporters and others earlier. He was given several appointments, but informed that the growers had themselves already made over a couple of dozen trips to Japan and were "well acquainted" with the Japanese consumer needs. At his next to last appointment, he was left in an office alone for a few minutes and read upside down on the desk of the executive in front of him, a report, apparently, by one of those grower teams visiting Japan. The gist of the report was that "American delicious have better firmness, color, shelf life, price, packaging, skin texture than Fuji and other Japanese brands". The growers had, apparently according to the upside down report contents, not bothered to ask Japanese at all but relied on their own judgements of the competition. As other DFSers have noted, even the most basic total quality approach would involve NEVER substituting professionals judgements on product merits for the "murmurs" of actual consumers. You can amplify consumer judgements with expert opinion but never substitute expert opinion for actual consumer reactions. I suspect the apple growers imagined themselves as expert marketers of apples and made judgements accordingly, not realizing that their Washington State apples TASTE like marketing tactics, not fruit. That in no way is to say that the Japanese did not do everything in their power to unfairly regulate away the possibility of American exports to Japan! It is just saying that unfairness plus lousy taste and shape for peeling as others pointed out) = drastic drop.
Date: Sat, 27 Apr 1996
From: minoru a
May I add some comments on the apple marketing debate going on for some while as one of consumers who lived on both sides of the Pacific?
I don't think American apples would have a chance here as fresh fruit unless the price is 50% or less of Japanese products which are hand-picked for flawless shape, color, and skin.
Those mind-controlled housewives don't even buy cucumber unless the shape and size is right. The only way to prevail over this idiosyncrasy would be, in my opinion, to offer drastically low prices many will find irresistible.
Date: Sun, 28 Apr 1996
Maybe we have a different understanding of what it means to "regulate", but as I understand it, regulation means government intervention. Where in this entire discussion about the recent importation of apples to Japan has their been mention made of government intervention?
If I have understood correctly, for many years a ban on the import of foreign produced apples was in place. Notwithstanding, this regulation had already been removed before the US apple growers made their most recent import attempt.
Nobody ever said that breaking into the Japanese market was easy, but does it make sense to assume that there exists a Japanese bureaucratic boogey man behind each and every newly negotiated trade arrangement?
It is one thing to acknowledge certain facts about the Japanese economy, it is quite another to popularize them to the extent that they no longer reflect reality.
The Japanese government does, more so than many governments, have a direct say in what and how things get traded, but might we not achieve a better understanding of US/Japan trade friction by distinquishing clearly when the government can be held responsible, and when it cannot?
Perhaps the wound has been exposed for so long, that it no longer seems possible to heal, but if we truly wish to see it close, we must make a concerted effort not to throw salt onto it, each and every time it reappears.
[This email, questioning the existence of a governmental-level boogeyman, put me over the edge. I subsequently released anambiguous precursor to the Tanii Suicide writeup, found elsewhere in this section of my web page, to little response but from reporters and Washington State apple growers.
[In July, when full details of the Tanii Tragedy became public, the same guy, H.I., responded with something even more incredible like, "Tanii might have drunk pesticide by accident! Why, Japanese have been known to put paint thinner in their eyes, thinking it eyewash!"
[I wasn't the only one who got set off: ]
Date: Tue, 23 Jul 1996
From: Dick G
H.I. Said: (snip)
>>>If I have understood correctly, for many years a ban on the import of foreign produced apples was in place. Notwithstanding, this regulation had already been removed before the US apple growers made their most recent import attempt.[CAN YOU BE SERIOUS?]
>>>Nobody ever said that breaking into the Japanese market was easy >> [THEY DID SAY FAIR THOUGH], but does it make sense to assume that there exists a Japanese bureaucratic boogey man behind each and every newly negotiated trade arrangement? [ASSUMING IT DOES NOT MAKE SENSE, BUT FINDING IT, WHEN THERE, DOES] (snip)
>>>The Japanese government does, more so than many governments, have a direct say in what and how things get traded, but might we not achieve a better understanding of US/Japan trade friction by distinquishing clearly when the government can be held responsible, and when it cannot? [THE WORLD TRADE ORGANIZATION FOOLISHLY EMPHASISES GOVERNMENT TRADE ACTIONS IN A WORLD WHERE NON-GOVERNMENT ACTIONS ARE RELIED ON BY JAPAN AND OTHERS TO COUNTER-ACT GOVERNMENT OPENNESS, SO THE ANSWER TO YOUR QUESTION IS NO, IT WOULD NOT PRODUCE BETTER UNDERSTANDING TO LOOK AT ONLY THE FORMAL, LEGAL WORLD NOT THE REAL WORLD] (snip)
The Japanese tacticians would like Americans and Europeans to believe that there is no bogeyman. But bogeymen do exist in developin economies entering the intimidating world of already established global giants. The meiji genro did a tally of competitive strengths Japan could rely on in catching up with and surpassing the West, about 100 or slightly more years ago, coincident with the Iwakura mission (a remarkable act by government leadership). A number of their conclusions are well known--the thrift of Japanese peasants, translated into producer-favoring incentives, the social enforcement of regulations to counter public legal regulations forced by the international trade system.
That is many countries, the US when developing under Britain's shadow, Japan when developing under the US shadow, use social solidarity to circumvent regulations they must be formally and legally seen to enforce. There is absolutely nothing new or insightful about this. When the Japanese market was opened to many kinds of direct imports, 20 years ago, for a well trodden example, many of us remember reading about the poorunfortunate IBM employee who imported whiskey from Hong Kong to Tokyo hotels, only to be, without any charge ever being filed, put in jail for two six week periods and released only on agreeing never to return to Japan. (snip) He found out there was a social enforcement system quite capable of counteracting recently enacted Japanese laws.
So when you accuse me of error in suggesting that apple growers used "regulation" to prevent apple distributors being available for US apples and so forth, you are yourself being a literal, legalist, naive interpreter of society. When you ask me, a Westerner, to divide up the world into what government does and what non-government does, you are asking me to be foolishly Western--I refuse. (snip snip snip!)
In my opinion piece on this topic I was even handed--condemning the American product's taste and peel-ability, and the American growers substitution of their own opinions for valid research on Japanese needs, and condemning the Japanese growers and government collusive denial of distribution channels to the Americans. If I had been wont to speak more exactly I would have condemned the stupidity of Japanese overreaction--expending a good social counter regulation effort against a product that on its own merits had little chance of success.
(super snip of about two pages of further diatribe)
Date: Mon, 29 Apr 1996
From: Dennis O
Mr H.I. wrote that i was perhaps seeing a "bureaucratic boogieman" behind the failure of US apples in the Japanese market. In fact, I focused my remarks largely on the responsibility of the US growers, themselves, for their product's debacle. I also mentioned the spirited defense raised by the Japanese apple industry associations against the imports, which included applying pressures to regional distributors.
Although I did not mention the Agriculture Ministry's role MAFF) in preventing market access, there was in fact a very significant role played by bureaucratic delaying tactics. For nearly a decade, MAFF used a series of regulations governing either potential insect damage or agricultural chemicals to stall the US growers from exporting to Japan. This obfuscation became so evident that the growers finally had to turn to direct Us "gaiatsu" (i.e., political pressures) to obtain MAFF approval for limited shipments. It was a classic example of non-tariff barriers to market entry.
it is sometimes preposterous to make a major distrinction between the industry and the officials regulating it since the links are so strong. I'm sure that the prefectural governments in Nagano and Aomori have been supportive of their growers' efforts to hold on to their markets. The prefecture's role in supporting the industry is an essential part of the local economic structure. The whole point is that American exporters must simply learn to deal with these multiple levels of market resistance by employing more of their own market specialits to be sure their product is shepherded through the right gates. i don't believe it is useful to create "boogie men" or demonize the hard-working Japanese officals who are simply doing their jobs well.
Date: Tue, 30 Apr 1996
Subject: More Apples: A Washington State Perspective
Washington state apple growers have been trying to break into Japanese apple market with intense efforts for at least 20 years and knew very well they could expect a high degree of organized resistence once they got there. It was only through intense trade balance lobbying efforts that U.S. apples were allowed into Japanese markets for the first time about a year ago. It was a big story in Washington because of the lengthy organized resistance on the part of the Japanese.
Agriculture and the sale of food is highly regulated in Japan, which is absolutely dependent on imports to feed its people. Most of Japan is mountainous with marginal conditions for agriculture. But the Japanese remember how sorely they suffered when agricultural imports were disrupted at the end of World War II, and it is considered a matter of national security to have the government there encourage as much domestic agriculture production as possible. Tree fruits, which can be grown on soils and slopes inhospitable to other types of food production, occupy a small but important niche in that effort.
When the Japanese did at last agree to allow the import of U.S. apples, they put so many restrictions on their import it virtually amounted to a marketing ambush, and Washington state apple marketing experts knew it. They expected to have their foot slammed in the door, but at least they do, now, have their foot in the door, and in fact hope to turn the initial disappointment to their advantage.
If sales of U.S. apples in Japanese markets continued at the high level provoked by the initial curiosity attendant on their much ballyhooed introduction, U.S. exporters would have encourtered a firestorm of resistance from Japanese apple growers, marketers and trade officials.
The strategy of exporting apples to the Japanese market has never been one of usurping the local market. Washington state apple marketing officials have been quite upfront with the Japanese about their strategy, which is one of the ways they were able to win the slight amount of reluctant cooperation they have gotten.
The Japanese grow and market apples as a dessert delicacy. Especially prized are blanched apples, which require apple growers to hand-wrap each apple in tissue while its still on the tree. Washington state apple growers are not prepared to adopt such labor intensive techniques in their orchards in order to compete with Japanese growers, which would only provoke more hostility on the part of those growers, anyway.
Instead U.S. growers hope to create a new market for an entirely new kind of apple in Japan, a food staple instead of a food delicacy and do it in such a way as not to destroy the current domestic Japanese market.
Small, red delicious apples, which are indeed foreign and inferior to the Japanese apple market, is the toehold of that stragedy, not the linchpin. Most new plantings of apples in Washington state in the past few years have been Fujis. We are already growing enough Fujis, we could entirely substitute them for the red delicious that are being sold in Japan if Japanese marketing resistance would permit it.
But I doubt U.S. apple marketing experts are that concerned about pushing Fuji apples in the Japanese market at this stage of the game. The most important efforts now are to reassure the Japanese that U.S. imports are going to leave their domestic apple industry intact. Reduce the fears and hostility of the target market first, develop a better understanding of the dynamics of that market, develop production tailored to Japanese taste, then slowly work to grow a new market for apples as a food staple.
The Washington state apple industry can affort to be patient, because it has a confidence in its own ability to overcome the substantial barriers in the Japanese market based on its own success in overcoming similar barriers elsewhere.
I remember the big effort 10 years ago to educate East Coast retailers on the proper storage and display of apples to retain crispness and flavor on supermarket shelves. I remember the efforts the industry invested to solve the problems of protecting the quality of their apples during ocean shipment to Taiwanese and Saudi Arabian markets.
I've also seen the success the industry has had in creating an apple market from scratch in some countries. Ten years ago the export market to Mexico was marginal. Ten years later, Mexico is the largest export market for apples of any country in the world. Of course, the industry had ready-made diplomats for the effort in the many Mexican farm workers who were supplying labor in Washington apple orchards, but they only aided in what was a deliberate effort to position apples beside bananas, oranges and other tropical fruits on Mexican supermarket shelves.
All this is not to say, of course, that we should be confident of eventual success in creating a market for U.S. apples in Japan. We are just at the base of a very steep flank of Mount Fuji in our efforts to market apples in Japan and we can expect Japanese apple growers, marketing organizations and trade officials to be pelting our heads with boulders most of the way up. But Washington state keeps planting more apples every year and we're hoping the Japanese are going to be eating some of them.
There were a few more questions and comments forthcoming, but the debate soon petered out. That is, until three months later, when Leslie Helms of the LA Times got all his research done, and released a bombshell of an article. He revealed the real boogeyman in this arena--the Japanese government--and how maintaining a closed the Japanese market took priority over good science and the lives of its citizens.
(Click here to go to the Tanii Suicide LA Timesarticle)
(For an up-to-date response to the ignorant debate above, from a representative of the Washington State apple growers, click here.)