Magazine article CMA - the Management Accounting Magazine

Lessons from Japan

Magazine article CMA - the Management Accounting Magazine

Lessons from Japan

Article excerpt

Rarely has Canada faced such uncertain times as the '90s. And we're not alone. Not since 1973 have the world's three big economic motors -- Germany, Japan and the United States -- experienced recession and a loss of domestic business confidence at the same time. This uncertainty shows up in a variety of ways -- in the General Agreement on Tariffs and Trade (GATT) talks, in the World Bank and the International Monetary Fund (IMF), in the turbulent republics of the former Soviet Union, in the post-Free Trade Agreement (FTA) and pre-North American Free Trade Agreement (NAFTA), and in the ongoing crisis of consumer confidence.

To an astonishing degree, the industrialized world is aligning itself into three trade blocs -- the European Community, North America (with spokes into South America), and Japan and its Southeast Asian neighbors. This "bloc mentality" is strongest in European countries, whose blatantly protectionist rules and regulations are aimed at overseas competitors. But protectionism in the United States is rampant in the Congress, occasionally aided and abetted by the Administration under the influence of industry lobby groups. The targets include the United States' two largest trading partners, Canada and Japan. Outside of the legal protection afforded by the Canada-U.S. free trade agreement (which, contrary to the FTA's critics, affords considerable protection for Canada), our leverage for retaliation against "unfair" American trade practices is slim. In particular, our ability to ward off American protectionist practices aimed at foreign-owned companies located in Canada is limited indeed.

Today companies decide to trade or invest from one market in this triad into another based on whether they, can easily reach all corners of that market. More specifically, European or Japanese firms will look to invest in whichever North American country affords the best opportunity to sell into the other countries on the continent. American protectionism is increasingly aimed at forcing foreigners to invest in the U.S. as a base from which to serve both Canada and Mexico, a point amply illustrated in the case of Honda's new North American operations. Is Canada's economic growth rate sufficient to attract foreign investors interested in serving not just a market of 27 million people with middling purchasing power, but the substantially larger market available under NAFTA?

Challenges for Canadians

Canada faces three competitive challenges: to rebuild our resource sectors around new technologies and markets; to retool our manufacturing base, especially in small and mid-sized companies; and to participate in the growing field of science-based innovation. In order to meet these challenges, Canada needs access to Japanese capital and technology -- and, more importantly, must adopt Japanese management practices.

I am reasonably confident about Canada's prospects for rejuvenating its resources sector. Rebuilding and restructuring efforts are already well under way -- especially in Western Canada, thanks to Japanese financing and technology. And a broad consensus exists on the nature of the problems that we must address, even though solving them will mean that certain regions are hit particularly hard (witness the Atlantic fishery, or Eastern Canada's pulp and paper industry).

Canada's manufacturing sector faces more severe challenges. It lacks "state-of-the-art" industrial processes and highly trained engineers and scientists. Canada's manufacturing sector lacks the mid-sized companies that are such important economic engines to major exporters like Germany or Italy. Canadian industry is weak in industries that have propelled American export success, including companies that make machine tools, process control equipment, computers and aerospace equipment. And Canada is weak in the consumer-driven, quality-based sectors in which Japan excels and in which other Asian nations are developing strengths, such as electronics, appliances, and sophisticated leisure products of all descriptions. …

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