International Trading Companies: Building on the Japanese Model
Robert W. Dziubla, International Trading Companies: Building on the Japanese Model
International Trading Companies: Building on the Japanese Model
Robert W. Dziubla 0
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International Trading Companies:
Building On The Japanese Model
Robert W. Dziubla*
Passageofthe Export TradingCompanyAct of1982providesnew
opportunitiesfor American business to organize and operategeneraltrading
companies. Afterpresentinga thoroughhistory anddescriptionofthe
Japanese sogoshosha, Mr. Dziubla gives several compellingreasonsfor
Americans to establish export tradingcompanies. He also examines the changes
in UnitedStatesbanking andantitrustlaws that haveresultedfrompassage
ofthe act, and offers suggestionsfor draftingguidelines,rules, and
regulationsfor the Export Trading CompanyAct.
For several years, American legislators and businessmen have
warned that if America is to balance its international trade-and in
particular offset the cost of importing billions of dollars worth of
oilshe must take concrete steps to increase her exporting capabilities., On
October 8, 1982, the United States took just such a step when President
Reagan signed into law the Export Trading Company Act of 1982,2
which provides for the development of international general trading
companies similar to the ones used so successfully by the Japanese.
The Japanese success in exporting goods is primarily a result of the
operation of a specific type of trading company, the sogoshosha, or
gen* Awarded the Japan-U.S. Friendship Commission/American Bar Foundation Fellowship in
in scattered sections of 12 and 15 U.S.C.).
eral trading companies. While there are thousands of Japanese trading
companies, the vast majority of these are small- to medium-sized firms
specializing in a particular product or industry (senmonshosha)3. Only
nine out of these thousands, however, qualify as sogoshosha.4
The ability of the sogoshoshato export goods in enormous
quantities and thus help Japan maintain a trade surplus is undeniable. The
Japanese overall trade surplus is expected to climb from $16 billion for
1981 to $20 billion in 1982, and its trade surplus with the United States
is expected to reach $15 or $16 billion, up from $9.91 billion.5
Former Senator Adlai Stevenson III, the chairman of the Senate
Subcommittee on International Finance and formerly the primary
proponent of the Export Trading Company Act, noted that in June 1980
the United States had a trade deficit of $2.28 billion, the fiftieth
consecutive monthly trade deficit, and that the "success of trading companies
in exporting United States products has already been demonstrated by
foreign trading companies. Mitsui Trading Company is America's
sixth largest exporter." 6
While this statistic is both impressive and disturbing, it
nevertheless fails to convey the true enormity and marketing ability of the
sogoshosha. One revealing statistic is that in 1979 these nine
companies accounted for 54.5% of Japan's imports and 48.2% of her exports.'
Further figures showing the size of the sogoshosha, the scope of their
activities, and their importance to manufacturers will be considered
Two important questions face American businessmen and their
counsel as they consider the establishment of export trading companies.
First, why should American business go to the expense and trouble of
trying to establish general trading companies that could compete with
companies such as Mitsui or Mitsubishi when these same companies
are doing so well at exporting American products, for a commission of
only 2-3%? In other words, would it not 'be cheaper for American
companies to use the Japanese sogoshosha and pay their small commission,
or alternatively enter into joint ventures with them, rather than spend
millions of dollars to set up their own general trading company?
Second, if, as this article will demonstrate, there are compelling reasons
3 Y. TSURUMI & R. TSURUMI, SoGOSHOSHA: ENGINES OF EXPORT-BASED GROWTH 1 (1980)
[hereinafter cited as SOGOSHOSHA]; Cole, supra note 1, at 281.
4 SOGOSHOSHA,supra note 3, at 1; Cole, supra note 1, at 281 n.22.
5 Asian Wall St. J. Weekly, Nov. 23, 1981, at 2, col. 1.
6 126 CONG. REC. S1 1587 (daily ed. Aug. 26, 1980) (Statement of Senator Stevenson).
7 Kanabayashi, Japan'sBig andEvolving TradingFirms: Can the U.S. Use Something Like
7hem, Wall St. J., Dec. 17, 1980, at 58, col. 2.
why America should establish general trading companies, then how
can American business develop general trading companies?
Six reasons compel American business to develop its own general
trading companies rather than to rely on the existing Japanese export
companies. First, although it will require enormous capital investment
to establish an American trading company that could compete with the
sogoshosha in an area where the sogoshosha have a definite
experiential advantage, an American general trading company would have only
one goal: to export American goods, particularly those manufactured
by small- to medium-sized firms, which have traditionally been sold
only within the United States. Thus, America's trade deficit would
improve. Moreover, because the trading companies would require an
extensive network of international offices, they would presumably
provide many valuable jobs, particularly for liberal arts graduates and
especially for those with foreign language ability.8
Second, because the sogoshosha already are tied to their
ownlargely Japanese-sources of supply of manufactured goods, they are
unable to give total commitment to exporting American goods.9 As
will be seen below, the sogoshosha have developed an integral network
of subsidiary and affiliated companies that provide component parts
and distribution services for finished goods ultimately exported by the
sogoshosha. Because all of these companies belong to a particular
trading company group, because the core trading company has a financial
interest in seeing each of these companies prosper, and because the
trading company is often under a long-term obligation to purchase the
component parts from its affiliates, it cannot devote itself completely to
exporting American goods. Thus, it cannot devote itself
wholeheartedly to its American customers, and exportation of American goods
would be of secondary concern at best.
Third, because the sogoshosha are already in fierce competition
with each other and beset by internal and external problems that will
be discussed more fully below, they probably cannot be induced to
undertake the additional problem of developing separate joint ventures
with nascent American trading companies,10 especially when the
American trading companies eventually could produce the strongest
threat to the hegemony of the Japanese trading companies within the
field of international trade.
Fourth, the overwhelming preoccupation of sogoshosha personnel
with sales volume, which is a necessary evil given the low commission
rates which the sogoshoshacharge, has rendered them insensitive to the
needs of small- and medium-sized firms." Although the sogoshosha
have had long experience exporting the goods manufactured by
smalland medium-sized Japanese companies and thus have learned how to
handle the concerns of such customers, the sogoshosha have limited
experience with American manufacturers of comparable size.
Therefore, they would be likely to ignore the needs of their American
customers in order to maintain sales and, thus, profit levels.
Fifth, a United States general trading company would be best
suited for barter trade. As one author has stated in concrete terms
In dealing with China, American manufacturing firms will soon
discover that China's ability to balance her imports through barter-trade
exports will require sogoshoshalike internal exchanges of diverse
commodities and services. How else can American manufacturers who
want to export tractors receive payment in kind in the form of Chinese
apparel and sorghum-based "white lightning" called Mao-tai? 2
In short, American trading companies would be an important means of
establishing mutually beneficial trade relations with many third world
nations that are short on foreign exchange reserves.
Finally, and perhaps most importantly, American trading
companies would presumably be very profitable. In 1971, the average return
on equity achieved by the Japanese trading companies was 27%. 13
American trading companies should be able to achieve similar returns.
For the foregoing reasons, American business should take
advantage of the opportunity to form general trading companies provided by
the Export Trading Company Act. Many Japanese executives,
how10 SOGOsHosHA, supra note 3, at 83.
12 Id. at 74.
13 See M. YOSHINo, NOTE ON THE JAPANESE TRADING COMPANY 15 (1973) (Harvard
Business School Case No. 9-374-136); see also infra text accompanying note 210.
ever, question the ability of American business to develop international
trading companies. This is because long-term investment in both
capital and personnel is required. As Akio Morita, chairman of Sony, Inc.,
remarked in 1973:
A member of our company may be stationed in some faroff land,
struggling to learn in a country with entirely different customs and
characteristics. But he realizes that with the knowledge he has gained in five years or
so he might become chief of the department in our head office that deals
with this area. . . . He, therefore, is keenly interested in how strong the
company will be in five or ten years from now. . . . As a result, Japanese
enterprises steadily move ahead. . . American companies are
constantly concerned with figures, and if rapid returns are not produced, the
rating of the company drops. Except for very large corporations
therefwoorerl,dIwiwdoenmdearrkwethinegthevrenAtumreesricthanat croemqupiarenielosnagreterwmilliinnvgesttomeemntbs.ar4k on
Similarly, the managing director of Marubeni Corp., the third largest
sogoshosha, commented that "[i]t would be very difficult for the U.S. to
establish trading firms like those in Japan because Japanese firms are
based on Japan's unique industrial structure."' 15
What is this "unique industrial structure" and, assuming that it
provides the basis for the Japanese success in forming export trading
companies, how can America develop successful trading companies
within the context of its own business and industrial structure? The
remainder of this article attempts to answer this question. Only one
previous article has even addressed this question, 6 but given the
novelty of the Export Trading Company Act and the dearth of information
on the sogoshosha, several questions remain unanswered.
For example, will the modifications of United States antitrust laws
by the Export Trading Company Act provide American trading
companies with immunity from antitrust laws comparable to that enjoyed
by their Japanese counterparts? Will the modifications of United
States banking laws permit United States banks to become as
financially involved with their client trading companies as is possible
for Japanese banks under the Japanese banking laws and system? Why
did the sogoshosha develop in Japan over 100 years ago while the same
concept is only now beginning to arouse interest in the United States?
Can this 100-year gap in experience be closed, and, if so, what form
will American trading companies assume?
In attempting to answer these and related questions, this article
first defines general trading companies and establishes a framework for
14 Quoted in Y. TSURUMI, JAPANESE BUSINESS 4 (1978).
15 Kanabayashi, supra note 7, at 56, col. 2.
16 Cole, supra note I.
analyzing them. This framework is simply a statement of the three
crucial functions that all trading companies must perform to be successful.
Then a review of the pre-World War II development of the sogoshosha
within this framework shows how the Japanese social and legal
structures provided the basis for the phenomenal growth of the sogoshosha.
Incidentally, this review may also provide a preview of the possible
stages of development facing American trading companies.
The next section of this article describes the postwar development
of the sogoshosha and their current functions. Included in this section
are discussions of the Japanese antitrust laws and how they affect
sogoshosha operations; the financial structure of the sogoshosha; the
degree of intercorporate ownership and interlock which prevails; and
the fundamental role that large commercial banks fulfill by making
enormous low-cost loans to the sogoshosha and by owning significant
percentages of their stock. The section then concludes with an analysis
of the changes adopted by the sogoshosha within the past eight years in
order to cope with significant developments in international investment
The last section of this article examines the modifications of
United States banking and antitrust laws that have resulted from
passage of the Export Trading Company Act. It compares the American
and Japanese laws to determine if American trading companies will
have the same freedom and flexibility of operation as their Japanese
In conclusion, this article offers suggestions for the drafting of
guidelines, rules, and regulations for the Export Trading Company Act
and describes the most likely course that American
businesses-especially American multinational banks-may follow in creating their
own trading companies under the new Act.
A general trading company is an economic organization whose
1. to minimize the risks involved in international transactions (the
risks of fluctuation in demand and fluctuation in exchange rates) by
spreading these risks over many transactions and many customers;
2. to reduce transaction costs by taking advantage of economies of
3. to make efficient use of capital because of the preceding two
A sampling of the descriptions of the sogoshosha provided by other
scholars may help expand and explain this proposed definition and
One author has attempted to describe the essence of the
sogoshosha by declaring that "its ability to bring about synergistic
impact is the success secret of trading companies.""' Another has
described the sogoshosha as "market intermediaries for the domestic and
international distribution of Japanese manufacturing firms."19 A third
scholar has focused on the integrative function of trading companies
within groups of corporations: 2° the trading company taps the financial
resources of the group bank and acts as the purchasing and sales agent
for all of the group's manufacturing enterprises.2 ' A recent work has
described the sogoshosha as "primarily large-volume, first-stage
wholesale traders of industrial raw materials and grains and of such
standardized intermediate products as steel, synthetic fiber, and
fertilizer. '22 One of the most thorough scholars in the area of Japanese
multinational business operations, Michael Yoshino, believes that the
17 Yamamura, GeneralTrading Companies in Japan: Their Originsand Growth, in JAPANESE
INDUSTRIALIZATION AND ITS SOCIAL CONSEQUENCES 165 (H. Patrick ed. 1976).
Two other authors have tried to define what the sogoshosha are by proffering a profile of their
fundamental activities. One writer states that the "vital functions" provided by the sogoshosha
are: (I) territorial knowledge of both domestic and international markets; (2) dynamic and static
economies of scale; (3) a large internal market, that is, the ability to barter goods and services
within the sogoshosha itself because of the huge number of goods and services handled; and (4)
financing services using capital from the international capital markets. SOGOSHOSHA, supra note 3,
Another author states that the main strengths of the sogoshosha are: (1) group affiliations
revolving around the central trading company and including various manufacturing firms, (2) an
international information network, (3) excellence in management, and (4) financial services. M.
YOSHINO, supra note 13, at 11-12.
Both of these authors have overlooked the central role that the large Japanese commercial
banks have played in the growth of the sogoshosha. For a description and analysis ofthese
"bankcentered conglomerates," see infra text accompanying notes 218-236.
18 M. YOSHINO, supra note 13, at 6.
19 SOGOSHOSHA, supra note 3, at 5.
20 Throughout its history Japan has been noted for the importance of groups. In the business
world, this national characteristic is demonstrated by the common practice of corporations
grouping around a large commercial bank. For more information, see infra text accompanying notes
21 M. YOSHINO, JAPAN'S MULTINATIONAL ENTERPRISES 6-7 (1976) [hereinafter cited as
JAPAN'S MULTINATIONAL ENTERPRISES].
22 A. YOUNG, THE SOGO SHOSHA: JAPAN'S MULTINATIONAL TRADING COMPANIES 6 (1979).
Mr. Young further states that price, speed of information, and economies of scale "are of primary
importance in these kinds of sales, which require little engineering service to manufacturers,
minimum sales promotion, and minimal repair and other after-service to retail customers." Id. Each
of the sogoshosha handle between 10,000 and 20,000 products. Id. at 4.
true strength of the sogoshosha lies in their ability to coordinate the
activities of small, independent manufacturing firms so that these firms
complement each other's skills in performing a variety of specialized
manufacturing and distributing functions.2 3 One example of the
successful sogoshosha operations that he provides is the synthetic fibers
field. This example will help illustrate the previously proposed
definition by providing a concrete explanation of the contribution of the
sogoshosha to the development of successful export trade.
The two firms that pioneered synthetic fibers had many problems
marketing their new products, and one of the main obstacles was the
reluctance of the spinning, weaving, dyeing, and manufacturing firms
to use the synthetic fibers. Most of these firms were small and
familyowned. Their reluctance was understandable because they were unsure
of market response and lacked technical expertise. To overcome this
reluctance, the synthetic fiber manufacturers organized a select group
of the small firms into a hierarchical manufacturing system and
provided technical and managerial expertise. The trading companies took
over the movement of the goods among these firms and provided credit
at every stage. Finally, with the help of the trading companies, the
fiber manufacturers developed a hierarchical system among fiber
wholesalers and distributors. The result was vertical integration from
the manufacturer through processing firms to retail outlets.24
. The trading companies also gave export advice to the fiber
manufacturers. When import restrictions abroad began threatening the
export position, the trading companies were the first to perceive this
threat because they were the export agents. The trading companies
then put together a hierarchical organization abroad by convincing and
helping the small manufacturers-who had hesitated to locate abroad
by themselves-to set up foreign subsidiaries. Generally, the fiber
manufacturer held 20-30% of the equity in the foreign subsidiary. The
trading company held 15-25%, other firms in the group held 5-10%, and
the remainder was locally owned.25 These foreign subsidiaries then
became captive outlets for the export of intermediate materials. This
method succeeded because the import restrictions were imposed on
goods in the final stages of production-spun, woven, or completed
manufactured goods-rather than the fibers themselves. By exporting
fibers to their subsidiaries and manufacturing the restricted goods in
the foreign country, the manufacturers avoided all or most of the
The fiber manufacturers provide a concrete example of how the
activities of the sogoshosha can help to solve the export problems of a
particular industry. It is now necessary to examine how these activities
fit into the three-part analytical framework proposed at the beginning
of this section.
Minimizing the Risks of International Trade
One of the three functions of the sogoshosha is to minimize the
risks inherent in international trade. These risks fall into two
categories: fluctuation in exchange rates and fluctuation in demand.
The sogoshosha minimize the risks that result from fluctuations in
exchange rates by importing and exporting simultaneously. Thus, they
are able to buy and sell in local currencies. This, according to at least
one author, reduces transactions across different currencies to "a
fraction of the total import and export business."2 7 For example, a trading
company will make a commitment to buy goods from a Japanese
producer in yen, even though the export sales contract is in dollars.
Although the trading company might thus absorb a foreign exchange loss
for its customer, it can internally offset this exchange loss against an
exchange gain resulting from the purchase of goods in America in
dollars and the sale in Japan in yen.28
Another benefit accruing to the trading companies because of their
dealing in several currencies is the ability to speculate in the foreign
exchange markets. Because the sogoshosha have large supplies of
many foreign currencies on hand to finance their various projects, they
are able to sell at a profit--or at least avoid a loss--on a currency that
is about to decline in value vis-;I-vis other currencies that the
sogoshosha possess. Thus, when the sogoshosha expect the American
dollar, for example, to decline in value against the Deutschmark, the
sogoshosha will sell their dollars for Deutschmarks. The trading
companies are particularly well suited to benefit from trading in the foreign
27 Yamamura, supra note 17, at 163-66. Another author, however, contends that the trading
companies are able to "marry" their exchange transactions only about 15% to 25% of the time.
The reason, he explains, is that "[t]he tendency for import payments to be short-term and export
receipts to be medium to long-term results in a lower ratio of 'marriages' than would be possible if
export receipts and import payments were more in phase." W. MONROE, JAPAN: FINANCIAL
MARKETS AND THE WORLD ECONOMY 51 (1973). He goes on to remark that the trading
companies are both the major customers of the authorized foreign exchange banks and the major de
facto foreign exchange dealers for the majority of Japanese firms. Id.
28 Krause & Sekiguchi, Japan and the World Economy, in AsiA's NEW GIANT: HOW THE
JAPANESE ECONOMY WORKS 391 (Patrick & Rosovsky ed. 1976).
exchange markets because of their vast international intelligence
networks that often provide advance knowledge of political and economic
changes affecting international exchange rates.29
The sogoshosha minimize the risk of fluctuation in demand
primarily through their ability to spread this risk over many transactions
and many customers. Although no concrete data exist on the number
of sogoshosha transactions or customers, each of the sogoshosha
handles 10,000 to 20,000 different products.30 The number of individual
transactions would obviously be much higher.
The sogoshosha also reduce fluctuations in demand through their
unique ability to create long-term supply and demand, to ensure
longterm stability in supplies of products and materials, and to generate
new business. The sogoshosha create supply and demand by
organizing huge joint ventures, such as overseas development of industrial raw
materials like iron ore, coal, or bauxite, with giant producers. On the
one hand, these ventures supply raw materials which the sogoshosha
can sell 31 and, on the other hand, they create demand for
transportation, construction, and mining equipment. Naturally, the sogoshosha
are willing to provide such equipment, either as principals or agents.
Economies of Scale
The second function of the sogoshosha is to take advantage of
economies of scale. Although trading companies effect economies of
scale in numerous areas, the most significant one is the development
and transmission of market information.
The production of information about market opportunities
includes the costs of gathering and disseminating such information.
These costs, however, are fixed and independent of the use to which the
information is put. Thus, the key to lowering the costs is to increase the
size of the market for such information.32 The costs of assembling this
information are distributed among its users. Nonetheless, as a whole
these costs are staggering. For example, in 1973 Mitsui spent 3,000
million yen (about $13,333,333) on information and communications,
and 2,000 million of this amount (about $8,888,888) was spent on
telecommunications alone.33 It is this magnitude of expenditure that
30 A. YOUNG, supra note 22, at 4.
31 Id. at 3-4.
32 This is true because the "search costs per unit of information" decline as the market
expands. Yamamura, supra note 17, at 164.
33 H. FUKUDA, JAPAN AND WORLD TRADE: THE YEARS AHEAD 68 (1973). The dollar figures
are based upon a July 1981 exchange rate of 225 yen to one dollar.
makes Mitsui's communications system second only to the
Within the realm of market information, the sogoshosha "thrive
on both dynamic and static economies of scale."35 The static
economies of scale derive from their domestic and worldwide network of
market contacts. Once the initial investment in large-scale
informational networks is made, the incremental costs of processing territorial
information are marginal to the trading companies and their clients.
The sogoshosha'saverage general selling and administrative expense is
very low-about 1.3% of revenues. By contrast, in small enterprises
this figure can be as high as 25%.36 Hence, even small- and
mediumsized firms, in Japan or abroad, which often are too weak financially
and managerially to have any market contact points, can simply hook
up with the vast informational network of a sogoshosha for a small fee.
This fee covers only the incremental costs and incremental
contributions to the sogoshosha's overhead. Often even large firms use the
sogoshosha'sinformation and distribution networks for developing
uncertain markets and for servicing existing but inaccessible markets.37
The dynamic economies of scale enjoyed by the sogoshosha derive
from the cumulative ability of both the organization and its individual
employees to identify, screen, process, and translate into business
opportunities the political, economic, social, and even climatic events
occurring within domestic and international markets.3" This ability stems
from what one author has termed "the process of learning by doing
that takes place inside sogoshosha."39 According to this author, the
accumulated experience of a sogoshosha's past successes and failures is
passed on to its recruits, who join the trading company's internal efforts
to increase the firm's "informational stock."' This information in turn
reduces negotiation costs because buyers and sellers are aware of their
alternatives-they have greater certainty about the world price
structure and their own opportunity CoStS. 4 1
While the range of information supplied by the sogoshosha is as
34 A. YOUNG, supra note 22, at 77-79. During fiscal year 1976, the top six sogoshoshaspent
about $192 million on expenditures related to information and communication. Id. at 77.
35 SOGOSHOSHA,supra note 3, at 12.
36 M. YOSHINO, supra note 13, at 16.
38 SoGosHosHA, supra note 3, at 12.
39 Id. Stated another way, this specialization of trading company personnel in international
trade results in savings because specialization, and the resultant increase in productivity, is a
function of the volume of transactions. Yamamura, supra note 17, at 165.
40 SOGOSHOSHA,supra note 3, at 12.
41 Yamamura, supra note 17, at 164.
broad and diverse as the needs of their clients, there are fairly standard
areas covered by all the firms. These areas include: size of potential
markets; competitive manufacturers in the export country; current
prices and profit potential; foreign exchange rates and likely financial
fluctuations; distribution channels; the credit ratings of potential
wholesale and retail distributors; current attitudes of industrial users,
consumers, competitors, labor unions, or government officials toward the
proposed export products; foreign import regulations and other tariff
and nontariff trade barriers; and the various export permits required by
the government. 4 2 For those manufacturers dependent upon advanced
technology, the sogoshosha provide information on current scientific
and technological advances in the United States and Western Europe,
on the latest equipment available, on market potential, and on
technology licensing or joint venture requirements.43
The sogoshosha also benefit from economies of scale in the areas
of transportation, warehousing, and insurance. Because the sogoshosha
handle diverse goods, and more importantly, at diverse locations, they
are able to charter an entire freighter, aircraft, train, barge, or other
mode of transportation and fill it by consolidating the goods supplied
by many clients.44 In this way, the sogoshosha do not have to pay a
premium for guaranteed, timely shipment of a cargo. Moreover, even
if they do not charter an entire vehicle, they can negotiate bulk
discounts for volume shipping. Finally, the sogoshosha can obtain
favorable shipping rates from carriers with excess capacity because the
sogoshosha can guarantee return business4.5 The trading companies
also receive beneficial rates on insurance and warehousing because
they can guarantee a high volume of transactions. Indeed, many
sogoshosha find it profitable to own their own shipping, warehouse,
and insurance companies.46
42 A. YOUNG, supra note 22, at 61.
44 SOGOSHOSHA, supra note 3, at 13.
45 Id. at 13.
46 A. YOUNG, supra note 22, at 66. Mr. Young notes that:
The big trading companies own many warehousing subsidiaries, including rolled steel
warehouses, grain elevators, and refrigerated warehouses. They also own large ore carriers, log
carriers, and general cargo ships. Firms such as Nippon Kokan K. K., Nisshin Flour Milling
Co., and Sapporo Breweries, Ltd., to use the Fuyo group as an illustration, can often employ
group railways such as Keihin Electric Express Railway Co., or Tobu Railway Co., Marubeni
Corporation warehouses such as Marubeni Reizo K. K. at the Tokyo harbor, and
Marubeniowned cargo boats or transports operated by group member Showa Shipping Company.
C. Efficient Use of Capital
The third and last major function of the sogoshosha is to make the
most efficient use of capital possible; their ability to accomplish this is
based upon their success at reducing risks and effecting economies of
scale. Simply stated, "[b]y reducing risks (that is, reducing the variance
of expected returns) in using capital, the trading companies are able to
obtain capital (and create credit) which would not have been available
to a single trader, or available only at a higher price."'47 Furthermore,
because the economies of scale described above substantially reduce
the costs to the customers of the sogoshosha, the amount of capital
employed by the customers is increased substantially.48 That is, because
the sogoshosha can extend credit and long-term financing and because
they can provide export services at the lowest cost, they reduce their
clients' costs. The money saved is capital, which otherwise would have
been unavailable. Even larger manufacturers "would have to allocate
a substantial amount of capital to provide or purchase these services
independently at a higher cost."'49 Japanese industry benefited greatly
from exactly this type of increased available capital during the boom
times of the 1960s and 1970s when capital was scarce.50
The foregoing analysis of how the sogoshosha export competitively
and yet make a substantial profit should provide the reader with an
understanding of the essential functions and operations of the
sogoshosha. It should also provide a basis for understanding how
American business-within both the industrial and service sectors of
the economy-could benefit from the formation of American trading
companies. Yet the foregoing description inadequately details the
intricacies of international trade as practiced by the sogoshosha and the
close, intergroup coordination and interdependence that are crucial to
the sogoshosha's success.
The following description of the historical development of the
sogoshoshais intended to fill these gaps. At the same time, the
description provides an insight into the role that various historical occurrences
and accidents played in the evolution of the sogoshosha. It should also
give the reader the means to assess the possibility and the methods for
development of American trading companies.
47 Yamamura, supra note 17, at 165.
48 A. YOUNG, supra note 22, at 67.
49 Id. at 68.
HISTORICAL EVOLUTION OF THE SOGOSHOSHA
The modern day sogoshosha evolved from two different sources.
The first was in the Japanese trading and banking houses that began to
expand so rapidly during the 1870s and 1880s and that ultimately were
calledzaibatsu.s5 The course of this expansion was largely vertical and
involved expansion from trading and banking into manufacturing
activities. The predominant examples are the Mitsui and Mitsubishi
families, 2 followed by Sumitomo and Yasuda.
The zaibatsu, defined as a "group of giant diversified companies
under the control of a family-owned holding company," 53 sprang up at
this time primarily for two reasons. First, in the 1880s the Japanese
government decided to dispose of most of the commercial enterprises it
had begun and run under government control since Commodore Perry
had opened Japan to the West, and it was the zaibatsu that acquired
most of these operations.54 Second, during the 1880s, the zaibatsu
adopted the radical Western notion of the joint stock company.55
Thus, the zaibatsu were able to expand their supply of capital by selling
their stock publicly.
The owners of the zaibatsu, having imposed a corporate form on
their multifaceted operations, controlled their empires in the following
manner. First, they established a holding company at the pinnacle of
their corporate pyramids. 56 They then segregated their various
commercial operations into corporate subsidiaries and affiliates. These
were linked together in an extensive network by means of
intercorporate stockholding, interlocking directorates, management agents, and
easily available bank credit, which the zaibatsu extended to their
affiliates to facilitate the expansion of their production and to increase their
dependence upon the zaibatsu5.7 One author has remarked that the
zaibatsu were patterned closely after the Japanese concept of the
family: a network of related households, all of whose members were
subject to the authority of a single head.5"
It was at this point that the trading companies as we know them
51 Y. TsURUMI, THE JAPANESE ARE COMING: A MULTINATIONAL INTERACTION OF FIRMS
AND POLITICS 132-35 (1976) [hereinafter cited as THE JAPANESE ARE COMING]; M. YOSHINO,
supra note 13, at 2.
52 J. ROBERTS, MITSUI: THREE CENTURIES OF JAPANESE BUSINESS 4-5, 119-20 (1973).
53 JAPAN'S MULTINATIONAL ENTERPRISES, supra note 21, at 4.
54 Id. at 4-5.
55 Id. at 5. This type of company is called kabushiki kaisha, and the initials K.K. are often
placed after a joint stock company's formal name.
56 Id. at 6.
today began to appear. They sprang up because the zaibatsu lacked an
integrative element, that is, a central organization within the zaibatsu to
coordinate production and intergroup transportation of component
parts and finished goods, and to arrange financing.5 9 By tapping the
financial resources of the group bank, utilizing the existing shipping
and warehousing arms of the group, and serving as the purchasing and
sales agent for all of the group's manufacturing enterprises, the trading
company was able to coordinate and integrate all of the various
activities carried on by the diverse companies under the control of the
zaibatsu.6 ° The trading company provided essential links within the
zaibatsu by skillfully organizing a large number of small enterprises to
produce for the export market.6 This relationship between the trading
company and the smaller affiliated firms was called keiretsu.62 The
trading company would supply its keiretsu firms with raw materials,
technical and management assistance, and credit.6 3 Moreover, it was
the trading company that allocated the credit of the zaibatsu.4
The second source from which the sogoshosha evolved was the
senmonshosha, or the small- to medium-sized trading companies
specializing in one product or industry.65 Some of these senmonshosha
have their origins in the textile industry and date from the late 1880s,
when the cotton spinning industry developed in Japan. The necessity
of procuring raw cotton from foreign sources gave rise to specialized
trading companies in that field.66 Then, as the cotton spinning industry
became large enough to export, the trading companies that had
specialized in cotton procurement abroad began to handle the exports as
well.67 Gradually, they diversified into other products and industries
because of their experience in the cotton industry.
The sogoshosha grew rapidly during the period from 1900 to 1945.
By the turn of the twentieth century they had established an extensive
network of branches and offices in every major market in the world.68
Through this network the trading companies exported cheap,
labor-in59 Id. at 6-7.
61 Id. at 7.
62 Kei means "lineage" and "group," while retsu means "arranged" in order. Thus, keiretsu
means an organization that is well-ordered. Id.
65 M. YOSHINO, supra note 13, at 2; THE JAPANESE ARE COMING, supra note 51, at 132-35.
66 M. YOSHINO, supra note 13, at 3.
67 Id. C. Itoh and Marubeni developed in this way. Nisho-Iwai and Ataka developed in a
similar fashion, but within the steel industry. Id.
68 JAPAN'S MULTINATIONAL ENTERPRISES, supra note 21, at 7.
tensive, highly-standardized products that were distributed in a foreign
market by local wholesalers and retailers.69 The role of the trading
company in exporting these cheap, standardized products was quite
simple: "neither technical services nor advertising and sales promotion
was required. Of overriding importance for trading in these products
was the simple communication of information on price and volume." 70
In addition to functioning as an export conduit, these distribution
networks abroad served another purpose by identifying new technology
and products and feeding them back to the main company.s
As the sogoshosha gained more experience in international trade,
their internal structure became more refined. During the early 1900s, a
trading company was a unified operation in which all employees
handled all types of trading. But, as time passed, the trading company
divided along major product lines.72 A concomitant change in
management style also occurred: managers were sent abroad for long periods
of time, and division managers and heads of foreign branches were
given considerable autonomy.73 The means by which these
foreignbased managers were controlled, however, remained traditional. They
were bound by a long-socialized and deeply engrained sense of loyalty
to the honsha, the main company, which in most cases was the holding
company at the top of the zaibatsu pyramid.74 Moreover, their loyalty
was rewarded because ultimately they were promoted back into the
Two questions remain to be answered before this historical
analysis will be complete: why was it that general trading companies
developed in Japan during this period and did not develop elsewhere, and
why did certain trading companies develop into sogoshosha while
others did not? The answers to these questions may provide helpful
insights for Americans contemplating following the Japanese model.
In trying to answer the first question, it is important to note at the
outset that Japan is tragically poor in natural resources, and it is this
characteristic which most influences Japan's economic relations with
other nations.75 This scarcity of natural resources provided a strong
impetus to engage in international trade. Furthermore, because the
Japanese government was determined to avoid the economic
tion of the kind that befell the Chinese in the 1800s, it decided to
industrialize. The trading companies were simply a necessary result of this
desire to industrialize and of "the ignorance of the Japanese about
foreign markets, their lack of knowledge of foreign languages, and their
desire to become a participant in the world economy. 76
General trading companies did not develop in the West because
there was no need for them. First, the West's institutions for
international trade had already developed over an extended period of time,
and the formation costs were spread out during the entire time. In
comparison, Japan had placed itself in national isolation (sakoku) for
200 years and was required to develop quickly after the Open Door
policy was imposed upon it by Commodore Perry. 7 Second, Western
linguistic and cultural similarities, as well as geographical proximity,
made the absolute costs of information, of negotiation, and of
enforcement of contracts much lower for the West than for Japan.78 Third, the
West had a highly developed capital market in which corporations
could obtain necessary funds. In Japan, however, the capital market
was virtually nonexistent. 79 Finally, while the industrial system of the
West was composed of many large corporations that could market their
own goods, the Japanese industrial structure was a dual-style system in
which the majority of manufacturing occurred in a cottage-industry
setting and required other large corporations to market the
manufactured goods. 80
Why is it, though, that Mitsui and Mitsubishi and the other
sogoshosha, out of all the thousands of trading companies in Japan,
became the behemoth general trading companies?8 The answer is
simple: historical placement and access to capital. For example, Mitsui
and Mitsubishi were some of the first entrants into the import/export
field. Moreover, Mitsui was an established and respected name from
the Tokugawa era (1615-1868), had been made the fiscal agent of the
Meiji government (1868-1912), and had the backing of the Mitsui
Bank.82 Thus, it was already well established and well known. In
comparison, Sumitomo Shoji, which was the trading company for the
Sumitomo group, a comparative late-comer into the import/export
76 Id. at 389.
77 Yamamura, supra note 17, at 193-94.
80 Caves & Uekusa, IndustrialOrganization, in ASiA'S NEW GIANT: How THE JAPANESE
ECONOMY WORKS 508 (Patrick & Rosovsky ed. 1976).
81 Yamamura, supra note 17, at 192.
82 Id See also J. ROBERTS, supra note 52.
field, had access to large amounts of capital and large markets (mostly
firms within its group) because it was a member of the solid,
closelyknit Sumitomo group.83 In sum, the present-day sogoshosha had their
origins in the Japanese industrialization process which began in the late
By 1945 the sogoshosha had attained a crucial role in the
worldwide operations of the zaibatsu by functioning as the central mover of
goods and credit within the zaibatsu and by marketing the products
manufactured by the zaibatsu throughout the world. The conclusion of
World War II and the Allied occupation of Japan, however, caused
significant changes in the structure and operation of the sogoshosha.
The following section details those changes and shows the course of
development followed by the sogoshosha from 1945 to the present.
III. POSTwAR DEVELOPMENT OF THE SOGOSHOSH
After World War II, the military occupation authorities, and in
particular General Douglas McArthur, the Supreme Commander for
the Allied Powers in Asia (SCAP), were faced with the task of trying to
help Japan rebuild, while eradicating the causes which the Allies
believed had contributed to Japan's imperialistic and violent expansion in
the Pacific Basin. To accomplish the first task, SCAP began a study of
the war-shattered Japanese economy. A group of American scientific
advisors reported that Japan's economic reconstruction would depend
heavily upon intensive scientific and technological development,
because only then could manufacturing productivity -increase.84
To eradicate Japanese imperialism, SCAP ordered the dissolution
of the zaibatsu because-SCAP believed-they were one of the moving
forces behind the Japanese war effort. In July 1947, SCAP specifically
dissolved Mitsui Bussan Trading Co. and Mitsubishi Shoji Trading
Co., the most important enterprises within the Mitsui and Mitsubishi
zaibatsu8.5 Mitsui Bussan was divided into 200 companies and
Mitsubishi Shoji into 139.86
Because the zaibatsu no longer existed, no one remained to
conduct Japan's international trade. Hence, Allied military authorities
conducted all such trade until 1948.87 Beginning in 1948, however,
private Japanese trading firms resumed the responsibility for international
83 Yamamura, supra note 17, at 193.
84 S. OHKrrA, GUTSU-SHIGEN-KEIZAI [Technology-Natural Resources-Economy] 4 (1949).
85 H. IyoRi, ANTIMONOPOLY LEGISLATION IN JAPAN 12 (1969).
87 THE JAPANESE ARE COMING, supra note 51, at 135.
trade.8" It was at this time that the current structure of the sogoshosha
also began to develop, for it was during the early 1950s that Japan's
leading manufacturing firms -and largest commercial
banks-encouraged and supported by the Japanese government through its
Ministry of International Trade and Industry (MITI)-began to develop a
new system of keiresau groups.
The manufacturing firms found this system particularly suited to
their immediate postwar needs. Their equity capital had been severely
depleted by the war effort and they had to contend with galloping
postwar inflation. 89 Hence, they had to rely extensively upon their banks to
satisfy their needs for both long- and short-term loans.9° These needs
resulted in an extremely high debt to equity ratio of about three to one
and made the manufacturing firms even further dependent upon their
banks,9 1which were in turn completely dependent upon the Bank of
It was this unique relationship between manufacturing enterprises
and banks-a structure that evolved as an historical accident-that
provided the Japanese government and the Bank of Japan with
effective levers to use both monetary policy, such as the central bank's
supply of money, and fiscal policy, such as the government's investments
and industrial promotions, to stimulate the Japanese economy.92 The
government had already decided to implement a long-term growth
policy whereby MITI would aid mainly a few large and growth-minded
firms in key industries such as steel, chemicals, and automobiles.93
These large businesses, nourished by MITI, in turn were to pull up
smaller manufacturers which were part of their group.94 As part of this
long-term growth plan for selected industries, MITI let weaker firms
planned, however, they were often unprofitable.262 Thus, the
sogoshosha established OEDs.
Initially, the OEDs' involvement with new overseas investments
was limited to preparing an investment proposal after the division had
decided to make an investment.263 To this end, the OEDs prepared
routine financial analyses and pro forma statements, checked the credit
of proposed local partners, submitted appropriate documents to the
governments concerned, drafted joint venture contracts, and initiated
the routine intrafirm procedure for formal approval of the
investment.2" Gradually, the OEDs realized that the only way to ensure a
substantive role in the initial investment decision itself was to make
themselves invaluable through project analyses and feasibility studies.
Thus, they honed their planning and analytical skills and eventually
persuaded either the product divisions or top management to establish
committees to screen new foreign investments 65 The end result was
that the OEDs, having standardized their data collection procedures
and having proven the need for their project analyses and feasibility
studies, assumed a central role in foreign investment decisions. Indeed,
the reports prepared by the OEDs were welcomed by the governments
of host countries and relied upon by foreign partners in preparing their
own proposals.' In this way, the sogoshoshawere able to consolidate
their foreign investment decisions and make them more profitable.
V. PROSPECTS FOR THE SOGOSHOSHA
Although the sogoshoshahave grown enormously in the past thirty
years, several authors have reservations about the ability of the
sogoshosha to maintain, much less increase, their level of sales. Two
basic reasons explain these reservations. First, the traditional strength
of the sogoshosha was the scale on which they could procure and
distribute goods. As the Japanese industrial structure shifted, however,
from textiles and standard goods to capital-intensive goods such as
steel, chemicals, oil, and petrochemicals, the type of marketing
structure also shifted. These newer types of exports require technical
services, extensive marketing efforts, and after-sales service. The trading
companies, though, lack the ability to provide these services2 6 7 and, as
a result, more and more manufacturers who formerly used the
262 JAPAN'S MULTNATiONAL ENTFRPimSES, Jupra note 21, at 99-103.
263 .d. at 103.
2 6 4 Id.
265 .d. at 103-04.
266 Id. at 104.
267 Id. at 118-19.
sogoshosha are now buying their own supplies directly and marketing
their own products independently.2 68
The sogoshosha have reacted to this problem with different
degrees of rapidity and intensity, but the basic reaction of all has been to
integrate their operations. In doing so, they have followed six closely
interrelated business strategies: growth, diversification, creation of
supply and demand, organization and coordination of new growth
industries, consumer market penetration, and consolidation of affiliates. The
expansion of C. Itoh & Co. into the United States computer market
through a local subsidiary and the consolidation by Mitsui & Co. of its
twenty-eight affiliated corporations--discussed above -are but two
The second reason for reservations about the future of the
sogoshosha is, according to at least one author, their inability to
produce more Japanese managers culturally and socially comfortable in
foreign languages, customs, and manners.2 7 1 Because the overseas
activities of the sogoshosha have become extensive, Japanese expatriate
managers and their local clerical staff are increasingly unable to handle
all the work. Moreover, to penetrate overseas markets more deeply, the
trading companies need local experts well-versed in the "ins and outs"
of local business and politics-an area in which Japanese expatriates
are at a distinct disadvantage.272
Mitsubishi International Corp., the United States subsidiary of
Mitsubishi Corp., is the only sogoshosha that has made a serious effort
to remedy this shortcoming. By the spring of 1979, it had made formal
attempts at retraining both its Japanese and American managers in
or268 A. YOUNG, supra note 22, at 100.
269 See supra text accompanying notes 160 and 261.
270 Useful examples of some of the activities are: (1) growth-introduction of three-year
economic programs based upon macroeconomic indices, the economic plans of major customers, and
internal sogoshosha data on past performance; (2) diversification-establishment of sales
companies to handle specialized products and acquisition of smaller trading companies (senmonshosha);
(3) creation of supply and demand-achieving both upstream and downstream integration in the
same industry or product line; (4) organization and coordination of new growth
industries--organizing large complex projects such as natural resource development or urban and regional
development (5) consumer market penetration-expansion into the consumer food industry (by
purchasing chicken and pig farms, the products of which go to group firms for processing,
packaging, distribution, and retail sale), or by entering into joint ventures with foreign firms seeking to
enter Japan (e.g., Mitsubishi and Kentucky Fried Chicken (1970) or Marubeni and Dairy Queen
(1973)); (6) consolidation of affiliates-the merger of Mitsubishi Nippon Heavy Industries, New
Mitsubishi Heavy Industries, and Mitsubishi Shipbuilding and Engineering into Mitsubishi
Heavy Industries. A. YOUNG, supranote 22, at 106-17.
271 SOGOSHOSHA, supra note 3, at 57.
272 Id. at 55.
der to integrate the latter more fully into the company.273 Efforts such
as this one are essential to the continued success of the sogoshosha
because they will be unable to exploit fully their key strength-economies
of scale in communications and organization-unless foreign managers
are integrated into the operation.274 Furthermore, these foreign
managers will probably be dissatisfied and unwilling or unable to devote all
their time and capabilities to their jobs until they are integrated. After
all, the sogoshosha'sorganizational strength is based on informal but
substantive cooperation among professionals who share the values and
goals of the firm.275 And the foreign managers, who are becoming
increasingly important in the overseas operations of the sogoshosha, will
not share these values and goals unless they are socialized in the
"corporate style" (shafu) and integrated into the company's mainstream
Although the foregoing reservations apply in varying degrees to all
of the sogoshosha, there is little doubt that they are, and will continue
to be in the forseeable future, engines of export-based growth. They
have taken concrete steps to move into new consumer markets and
handle goods that complement or replace standardized, less complex
ones now being manufactured more cheaply in Hong Kong, Taiwan,
DEVELOPMENT OF AMERICAN INTERNATIONAL
The concern of American business and the United States
government over the ability of American industry to export its products at
levels sufficient to balance United States imports-if not to provide a
basis for positive growth-greatly contributed to enactment of the
Export Trading Company Act of 1982.276 In title I of the Act, Congress
specifically found, inter alia, that although exports are vital to
maintaining American jobs, trade deficits contribute to inflation, and that
although America has many exportable products, especially in the
agricultural sector, "export trade services in the United States are
fragmented into a multitude of separate functions, and companies
attempting to offer export trade services lack financial leverage to reach
a significant number of potential United States exporters.""27 Thus, the
273 Id. at 57.
274 Id. at 55.
276 Export Trading Company Act of 1982, Pub. L. No. 97-290, § 102(a), 96 Stat. 1233, 1234 (to
be codified at 15 U.S.C. § 4001).
277 Id. § 102(a)(6), 96 Stat. 1233, 1234 (to be codified at 15 U.S.C. § 4001).
purpose of the Act is to increase United States exports by providing
more efficient export services through the use of export trading
companies (ETCs) and by permitting bank holding companies, bankers'
banks, and Edge Act corporations to invest in ETCs.278 In short,
Congress has amended the antitrust and banking laws to allow financial
institutions to own stock in and make loans to American trading
companies and to grant these trading companies a limited exemption from
the operation of the American antitrust laws, all to increase American
Revision of American Antitrust Laws
Although two different titles within the Export Trading
Companies Act have a direct and substantial impact on United States antitrust
laws, as a practical matter one of them may render the other
1. Limitation of Sherman Act and FederalTrade Commission
Title IV of the Export Trading Companies Act is itself called the
"Foreign Trade Antitrust Improvements Act of 1982, ''279 and it has
amended both the Sherman Act"' 0 and the Federal Trade Commission
Act.28 These amendments will create sweeping changes in antitrust
enforcement in international trade.28 2 The amendments' practical
effect is to exempt export trade from the prohibitions of the Sherman Act
against monopolistic practices and the prohibition of the Federal Trade
Commission Act against unfair methods of competition, unless the
exempted activity has a "direct, substantial, and reasonably forseeable
278 Id. § 102(b), 96 Stat. 1233, 1234 (to be codified at 15 U.S.C. § 4001).
279 Id. § 401, 96 Stat. at 1246 (to be codified at 15 U.S.C. § 6a).
280 15 U.S.C. § 1 el seq. (1976), as amendedby Export Trading Company Act of 1982, supra
note 276, § 402, 96 Stat. at 1246 (to be codified at 15 U.S.C. § 6a).
281 15 U.S.C. § 45a (1976 & Supp. IV 1980), as amended by Export Trading Company Act of
1982, supra note 276, § 403, 96 Stat. at 1246 (to be codified at 15 U.S.C. § 6a).
282 The text of the amendments is as follows:
SEC. 402. The Sherman Act (15 U.S.C. 1 et seq.) is amended by inserting after section 6
the following new section:
"SEC. 7. This Act shall not apply to conduct involving trade or commerce (other than
import trade or import commerce) with foreign nations
unless"(1) such conduct has a direct, substantial, and reasonably forseeable
effect"(A) on trade or commerce which is not trade or commerce with foreign nations, or on
import trade or import commerce with foreign nations; or
"(B) on export trade or export commerce with foreign nations, of a person engaged in
such trade or commerce in the United States; and
"(2) such effect gives rise to a claim under the provisions of this Act, other than this
benefits. u8 6
effect" on domestic trade or commerce.283
Although it can be argued that the "reasonably foreseeable effect"
language is simply a codification of pre-existing case law,284 the
required finding of a "direct" and "substantial" effect, nonetheless, will
alter the conduct of antitrust cases involving export trade. Moreover,
the requirement of a finding of "reasonably forseeable effect" arguably
will allow courts less leeway to infer intent from the defendant's
actions. A further analysis of the effect which these required findings will
have on United States antitrust litigation is beyond the scope of this
article, but no doubt numerous legal articles will be forthcoming. 85 In
any case, several practitioners have predicted that the presence of title
IV will discourage companies from seeking certification as an ETC
poses problems that
might outweigh its
284 See, e.g., United States v. Griffith, 334 U.S. 100 (1948) (a finding of specific intent is
unnecessary; if a restraint occurring as a result of the defendant's conduct is sufficient); International
Org., United Mine Workers v. Red Jacket Consol. Coal & Coke Co., 18 F.2d 839 (4th Cir.), cert.
denied sub nom. International Org., United Mine Workers v. Carbon Fuel Co., 275 U.S. 536
(1927) (questions of willful purpose or conscious design are unnecessary because persons
combining or contracting are presumed to have intended the necessary and natural consequences of their
acts and agreements).
285 Indeed, the passage of the Export Trading Company Act has already generated several
articles. Eg., Moore, LateAddition May Prove to be Key to Export Act, Legal Times, Oct. 11,
1982, at 1, col. 3-4; Farnsworth, TradeBillis Expectedto Spur Exports, N.Y. Times, Oct. 5, 1982,
at 31, col. 1-4. See also Export Trading Companies: A4New Toolfor American Business, Business
America, Oct. 18, 1982, at 1-14 (Business America is a newsletter published by the United States
Department of Commerce) [hereinafter cited as ETCs, A New Tool].
286 Moore, supra note 285, at 1, col. 3-4. For example, certification subjects the ETC to liability
for reimportation. Id.
Limitation ofAntitrust Liability and Damages
Title III of the Act is entitled "Export Trade Certificates of
Review," and its basic purpose is to limit the antitrust liability of entities
possessing a certificate of review.
Section 306 details the protection
conferred by a certificate of review and provides, in pertinent part, that:
(1) no civil or criminal action will lie against a certificate-holder for
conduct which is specified in and complies
with the terms of the
holder's certificate; (2) any person suing for relief from the activities of
a certificate-holder is limited to actual damages (rather than treble
damages), plus injunctive relief, interest on actual damages, cost of suit,
and reasonable attorneys' fees; (3) suit must be commenced within two
years of notice of the damage and in any event within four years of its
occurrence; (4) a rebuttable
exists that a
certificateholder's activity, as specified in the certificate, does not have an
anticompetitive effect; and (5) a successful certificate-holder can recover
attorneys' fees and costs of suit.28 7
To obtain a certificate of review, an applicant must demonstrate to
that the applicant's specified
trade,2 88 export trade activities, 289 and methods of operation2 9 ° will, in
287 The actual language of Section 306 is as follows:
SEc. 306. (a) Except as provided in subsection (b), no criminal or civil action may be
brought under the antitrust laws against a person to whom a certificate of review is issued
which is based on conduct which is specified in, and complies with the terms of, a certificate
issued under section 303 which certificate was in effect when the conduct occurred.
(b)(1) Any person who has been injured as a result of conduct engaged in under a
certificate of review may bring a civil action for injunctive relief, actual damages, the loss of
interest on actual damages, and the cost of suit (including a reasonable attorney's fee) for the
failure to comply with the standards of section 303(a). Any action commenced under this title
shall proceed as if it were an action commenced under section 4 or section 16 of the Clayton
Act, except that the standards of section 303(a) of this title and the remedies provided in this
paragraph shall be the exclusive standards and remedies applicable to such action.
(2) Any action brought under paragraph (1) shall be filed within two years of the date
the plaintiff has notice of the failure to comply with the standards of section 303(a) but in any
event within four years after the cause of action accrues.
(3) In any action brought under paragraph (1), there shall be a presumption that
conduct which is specified in and complies with a certificate of review does comply with the
standards of section 303(a).
(4) In any action brought under paragraph (1), if the court finds that the conduct does
comply with the standards of section 303(a), the court shall award to the person against whom
the claim is brought the cost of suit attributable to defending against the claim (including a
reasonable attorney's fee).
(5) The Attorney General may file suit pursuant to section 15 of the Clayton Act (15
U.S.C. 25) to enjoin conduct threatening clear and irreparable harm to the national interest.
Export Trading Company Act of 1982, supranote 276, § 306, 96 Stat. at 1243 (to be codified at 15
U.S.C. § 4016).
288 Section 311(1) of the Export Trading Company Act states that "the term 'export trade'
means trade or commerce in goods, wares, merchandise, or services exported, or in the course of
being exported, from the United
States or any territory thereof to any foreign nation."
Id. § 311(1), 96 Stat. at 1245 (to be codified at 15 U.S.C. §4021).
essence, have no anticompetitive effect in the United States and will not
result in resale of the applicant's goods or services in the United
States. 2 9 1 Within ninety days of receipt of an application, the Secretary
is required to evaluate the potential for anticompetitive effects or
resale, and if no anticompetitive effects or likelihood of resale exist, the
Secretary, with the concurrence of the Attorney General, will issue a
certificate of review to the applicant specifying the export trade, export
trade activities, and methods of operation to which the certificate
applies.292 An applicant or any other aggrieved person has a right to
judicial review of the Secretary's grant or denial, whether in whole or in
part, of a certificate.2 93
Other, less important provisions of title III state that the Secretary,
with the Attorney General's concurrence, may issue guidelines about
the application of the antitrust laws to export trade.294 In addition, a
certificate holder must file an annual report with the Secretary. 2 95
Finally, any information submitted by any person in connection with the
issuance, amendment, or revocation of a certificate is generally exempt
from the public disclosure which is required of executive agencies.2 96
A review of the foregoing provisions' potential effect on the
establishment and operation of American ETCs follows.
Revision of American Banking Laws
The Export Trading Company Act made provision for bank
ownership and involvement in ETCs primarily by amending 297 the Bank
Holding Company Act of 1956.298 The pertinent definitions are
contained in title I of the Export Trading Company Act.29 9 General
provisions and operative provisions are found in title II, called the "Bank
289 Section 311(3) of the Export Trading Company Act states that "the term 'export trade
activities' means activities or agreements in the course of export trade." Id. § 311(3), 96 Stat. at 1245
(to be codified at 15 U.S.C. § 4021).
290 Section 311(4) of the Export Trading Company Act states that "the term 'methods of
operation' means any method by which a person conducts or proposes to conduct export trade."
d. § 311(4), 96 Stat. at 1245 (to be codified at 15 U.S.C. § 4021).
291 Id. § 303(a), 96 Stat. at 1241 (to be codified at 15 U.S.C. § 4013).
292 Id. § 303(b), 96 Stat. at 1241 (to be codified at 15 U.S.C. § 4013).
293 Id. § 305(a), 96 Stat. at 1243 (to be codified at 15 U.S.C. § 4015).
294 Id. § 307(a), 96 Stat. at 1244 (to be codified at 15 U.S.C. § 4017).
295 Id. § 308, 96 Stat. at 1244 (to be codified at 15 U.S.C. § 4018).
296 Id. § 309(a), 96 Stat. at 1244 (to be codified at 15 U.S.C. § 4019).
297 Id. § 203, 96 Stat. at 1236 (to be codified at 12 U.S.C. § 1843).
298 12 U.S.C. §§ 1841-1850 (1976 & Supp. IV 1980), as amendedby Export Trading Company
Act of 1982, supra note 276, § 203, 96 Stat. at 1236 (to be codified at 12 U.S.C. § 1843).
299 Export Trading Company Act of 1982, supranote 276, § 103, 96 Stat. at 1234 (to be codified
at 15 U.S.C. § 4002). The reader should be aware that there are two sets of definitions in the ETC
Act, those in section 103, which apply to bank export services (i.e., title II), and those in section
Export Services Act."3 °
An ETC is defined as a company doing business in the United
Statesprincoialy for the purpose of exporting goods and services
produced in the United States. and assisting unrelated companies to export
their products overseas. 3°' An ETC can either export goods and
services for its own account or provide facilitating services for unrelated
exporters, but cannot do both. 30 2 Even though an ETC is a company
"principally" engaged in exporting, it can engage in importing and
trade with third countries. Moreover, the Act permits foreign
ownership of ETCs. 3 3
Bank holding companies 304 and bankers' banks may invest up to
5% and loan up to 10% of their consolidated capital surplus in an
ETC.305 They may also own up to 100% of the stock of an ETC, and
the ETC may have the same name as its bank organization parent.0 6
Although the Federal Reserve Board (FRB) must approve any
investment, an investor company simply needs to notify the FRB of the
intended investment and, if the FRB fails to object within sixty days, the
bank may proceed with the intended investment.30 7 Finally, it should
be noted that a bank is exempted from the collateral requirements in
the Federal Reserve Act for loans to its ETC.30 8
311, which apply to export trade certificates of review (i.e., title III). Seeid. §§ 103, 311, 96 Stat. at
1234, 1245 (to be codified at 15 U.S.C. §§ 1234, 1245).
300 Id. § 201, 96 Stat. at 1235.
301 Id. § 103(4), 96 Stat. at 1234 (to be codified at 15 U.S.C. § 4002). This section states that:
the term "export trading company" means a person, partnership, association, or similar
organization, whether operated for profit or as a nonprofit organization, which does business
under the laws of the United States or any State and which is organized and operated
principally for purposes
of(A) exporting goods or services produced in the United States; or
(B) facilitating the exportation of goods or services produced in the United States by
unaffiliated persons by providing one or more export trade services. ....
302 Id See also ETCs, A New Tool, supra note 285, at 5.
303 ETCs, A New Tool,supra note 285, at 5.
304 12 U.S.C. § 1841(a) (1976 & Supp. IV 1980). Section 1841, in essence, defines a bank
holding company as a company that owns or controls, either directly or indirectly, a bank or another
bank holding company. In addition to its normal meaning, "control" also is deemed to include
ownership or voting control of 25% or more of the voting securities of a bank or bank holding
305 Export Trading Company Act of 1982, supranote 276, § 203, 96 Stat. at 1236 (to be codified
at 12 U.S.C. § 1843).
306 H.R. REP. No. 294, 97th Cong., 2d Sess.
(Conference Report on S.734, Export TradingAct
of 1982, and Conferees' Explanatory Statement on Bill)
, reprintedin 43 ANTITRUST & TRADE
REG. REP. (BNA) 719, 724 (Oct. 7, 1982) [hereinafter cited as Conference Report].
307 Export Trading Company Act of 1982, supra note 276, § 203(3), 96 Stat. at 1236 (to be
codified at 12 U.S.C. § 1843).
308 Id. Other provisions of title II, although interesting, are largely unrelated to this article;
they cover such problems as export-import guarantees of loans to ETCs, id. § 206, 96 Stat. at
This revision of the United States banking laws should make
available to ETCs the financial support and international trade
experience that have helped make the sogoshosha successful. As we have
seen, city banks are the main source of capital for the sogoshosha, both
through stock ownership and the extension of loans. For example, in
1973 Mitsubishi Bank owned 7.84% of the stock in Mitsubishi Corp.3 °9
and provided 14.8% of its loans.31 0 In short, Mitsubishi's main bank
provided 22.64% of its total funds in 1973. C. Itoh & Co. is an even
more interesting example, in that two main banks accounted for 41.24%
of its loans and equity; Sumitomo Bank owned 8.72% of its stock and
held 12.9% of its debt, while Daiichi-Kangyo Bank also owned 8.72%
of its stock and held 10.9% of its debt.3t1 In total, the Sumitomo Bank
group and the Daiichi-Kangyo Bank group accounted for 50.04% of C.
Itoh's equity and debt.31z
Similar ownership patterns are not impossible for American ETCs,
because under the Act a bank holding company may own an ETC
completely. The only limitations on such ownership are that: (1)the
investment by a bank holding company in the stock of an ETC not
exceed 5% of the bank holding company's consolidated capital and
surplus, and (2) the total extensions of credit by a bank holding company
to an ETC at any one time not exceed 10% of the bank holding
company's consolidated capital and surplus. 313 The Act specifically
provides that "an extension of credit shall not be deemed to include any
amount invested by a bank holding company in the shares of an export
trading company." 314
As we have seen, the ability of the sogoshosha to export goods
successfully is closely tied to the amount of funds they have to loan to their
related firms and customers and that they can use to integrate the
various operations involved in exportation. The Export Trading Company
Act will allow ETCs to receive significant amounts of their funds from
banking organizations. It also ensures that banks will be able to
participate in ETCs and thus make available to ETCs the knowledge and
facilities which the banks have developed in their international
dalings. Thus, the ETCs should have the financial ability, trained
person§ 1239 (to be codified at 12 U.S.C. § 635a-4) and bank acceptance of ETC drafts or bills of
exchange, id. § 207, 96 Stat. at 1239 (amending 12 U.S.C. § 372 (1976)).
309 A. YOUNG, supra note 22, at 54.
310 Id.at 43.
311 Id.at 43, 54.
313 Export Trading Company Act of 1982, supra note 276, § 203(3), 96 Stat. at 1236 (to be
codified at 12 U.S.C. § 1843).
nel, and physical presence necessary to compete efficiently with the
sogoshosha and to export American products in large quantities.
Competitive Limitations on American Export
Although the Export Trading Company Act should help
significantly to increase United States exports-assuming, of course, that
American industry and agriculture take advantage of export markets
and the presence of ETCs-several structural and operational
differences will exist between American and Japanese trading companies.
These differences could have an enormous impact upon the success of
American export trading companies.
The most bothersome problem is that, although all export trade
organizations, whether they have the statutory certificate of review or
not, will enjoy a limited exemption from the operation of the Sherman
Act and the Federal Trade Commission Act, the exemption may be
construed by the Department of Commerce, the Attorney General, or
the courts to apply only to export trade activities. As previously
explained, however, one of the three major functions of an international
trading company is to minimize the risk in international trade of
fluctuations in demand and fluctuations in exchange rates. One method by
which the sogoshosha accomplish the latter is to "marry" the
exportation of goods from Japan under one contract with the importation of
goods from abroad under a different contract. 15 They thereby limit
transactions across different currencies to minimal levels and thus
reduce the risk of fluctuations in exchange rates. In other words, to
minimize the risk of exchange rate fluctuations, the sogoshoshamust engage
in both export and import activity. And, it is not always possible for
them to keep exports above imports because international demand
rates change continuously and because changes in exchange rates may
at times require imports greater than exports. Thus, during the period
1963 to 1972, for example, the sogoshoshaimported 62-65% of all
Japanese imports and exported 47-52% of all Japanese exports.3 16 In no
year during this period, however, did the exports of the sogoshosha
exceed their imports. 3 17
Neither the certificate of review procedure set forth in title III nor
315 See supra text accompanying notes 27-28.
316 Krause & Sekiguci, supra note 28, at 392.
317 By fiscal year 1976, the export to import ratio had improved. In that year only two of the
big ten had imports exceeding exports, and exports amounted to 21.3% of their sales while imports
amounted to 20.9%. A. YOUNG, supranote 22, at 29. For a breakdown ofthis data by sogoshosha,
see Table A-5 in the appendix.
the limited antitrust exemption for export trade set forth in title IV
establishes clear guidelines for ETCs with certificates of review or export
trade organizations lacking such certificates to determine the amount of
import trade in which they can engage without losing their antitrust
exemption. This uncertainty within the Export Trading Company Act
will hamper seriously the ability of such companies to "marry" their
transactions and thereby reduce the risk of exchange rate fluctuations.
Their overall effectiveness may thus be hindered from the start3. 1 8
ETCs must deal with the inevitable fluctuations in international
demand and in foreign exchange rates by-engaging in varying levels of
import activity so as to maximize their effectiveness.
Secretary of Commerce and the Attorney General, in drafting the
various guidelines, rules, and regulations called for by the Export Trading
Company Act,319 should pay particular attention to the need to balance
domestic antitrust concerns with the need of ETCs to engage in both
import and export trade.
Perhaps the most difficult problem facing the government and the
courts in determining
whether the activities of a certificate-holding
ETC have a domestic anticompetitive effect, in violation of the four
antitrust standards of section 303(a) of the Act, 2' is factoring into the
318 The experience of the Japanese sogoshosha in this area, however, may be inapplicable to
"American sogoshosha" and requires the following qualification. Japan is woefully lacking in
natural resources and the raw materials necessary for the construction of finished products.
Therefore, she must import vast amounts of raw materials that are processed and then used in the
industrial process. The sogoshosha play a key role in importing these raw materials and then
exporting the finished products manufactured therefrom.
In contrast, America has an abundance of raw materials and is able to manufacture many of
her finished goods largely from domestic sources. Thus, it may be necessary for American trading
companies or their client firms to import more than 50% of the fair market value of the finished
goods eventually exported by them.
319 Under section 307 the Secretary of Commerce may, with the concurrence of the Attorney
General, draft guidelines regarding the application of the antitrust laws to export trade. Export
Trading Company Act of 1982, supra note 276, 96 Stat. at 1244 (to be codified at 15 U.S.C.
§ 4017). Section 310 requires the Secretary, with the concurrence of the Attorney General, to
promulgate any rules or regulations necessary to carry out the purposes of the Act. Id.
320 The certificate of review is issued to any applicant that has established that its specified
Id. § 310, 96 Stat. at 1245 (to be codified at 15 U.S.C. § 4020). § 303(a), 96 Stat. at 1241 (to be
codified at 15 U.S.C. § 4013).
decision-making processes the very competition from the Japanese
sogoshosha and their counterparts in China, Korea, and Brazil that
spurred the development of the Export Trading Company Act.321
Arguably it is the very existence and operation of the sogoshosha which,
having contributed to the necessity for development of American
ETCs, will operate to prevent the formation of American monopolies
and the imposition of anticompetitive and monopolistic practices upon
American consumers. In other words, it is the competition from the
sogoshosha and their foreign counterparts within the American market
that has hurt the American trade balance and that thus encouraged
passage of the Export Trading Company Act. In their various
activities, the American ETCs' challenge is to contend with the competition
that helped foster their creation. The process of determining whether
the export trade, export trade activities, and methods of operation of an
ETC substantially lessen competition, restrain trade, or unreasonably
affect prices within the United States, therefore, necessarily requires an
evaluation of sogoshosha activity within the United States in the same
relevant product market areas as the export trade activity under
The same problem of determining how much import activity an
ETC can engage in without running afoul of the Act plagues title II,
which covers bank investment in ETCs. The definition of an export
trading company, regardless of whether it is the section 103(a)(4) or
section 203(3)(F)(i) definition, states that an ETC must be "organized
and operated principally for the purposes of exporting goods or services
produced in the United States or facilitating the exportation of goods
or services produced in the United States by unaffiliated persons.""
Nowhere in the Act, however, is the word "principally" defined.
Presumably, the Secretary of Commerce, with the concurrence of
the Attorney General, will clarify this deficiency in the guidelines,
rules, and regulations mentioned above. Given the need of ETCs both
to import and to export, however, it would probably be best if the
Secretary's pronouncements adopt a flexible approach, rather than simply
declare that ETCs must generate more than 50% of their annual
revenues from export activities. One possible method by which the
Secretary could help ensure the success of the ETCs, thereby promoting the
purposes of the Act, while at the same time making sure that ETCs are
principally engaged in export trade as required by the Act, would be to
321 See infra text accompanying notes 323-26.
322 Export Trading Company Act of 1982, supra note 276, §§ 103(a)(4), 203 (3), 96 Stat. at
1234, 1236 (to be codified at 15 U.S.C. § 4002, 12 U.S.C. § 1843).
draft regulations imposing a specific limitation on the number of years
in a given period during which an ETC could have imports in excess of
exports. For example, the regulations could require an ETC to
maintain exports greater than imports on a rolling five-year basis. This
approach would give ETCs greater flexibility in "marrying" their export
trade to import trade and thereby increase the ability of the ETCs to
minimize the risks of international trade.
A similar result could be reached by requiring an ETC to have
average exports greater than average imports during a given period of,
perhaps, three, four, or five years. In this way, the ETC would be able
to take advantage of any unexpected drop in prices for large quantities
of component raw materials found abroad late one year and
incorporated into a finished product that would be exported early the following
year. Thus, not only would the trading company be able to minimize
the fluctuations in exchange rates, it would also be able to effect
economies of scale-another crucial function of an export trading company.
The Export Trading Company Act should provide American
business with the apparatus necessary to export its goods more aggressively,
easily, and cheaply. No longer will small- and medium-size firms be
forced to confine their sales to the domestic market, for the ETCs
should provide the same type of funding, expertise, and facilities that
have made Japan the second largest economy in the world and that
have allowed Japan consistently to post a trade surplus. The only
serious impediment is that the ETCs may constantly have to maintain
exports above imports. This may not be possible given the risks of
fluctuation in both international demand and international exchange
rates with which the ETCs must cope.
Despite these limitations, the ETCs now have a framework that
should allow them to minimize these risks, to reduce transaction costs
by taking advantage of economies of scale, and to make efficient use of
capital because of the preceding two functions. The ETCs will also be
positioned to benefit greatly from the Japanese experience-they will
know how successful trading companies such as the sogoshosha are
organized, how they have handled shifting patterns in international trade,
and how they have expanded their operations. If the American ETCs
can build on the Japanese experience, American business may not
regret that it has sold large amounts of technological knowledge to Japan,
which Japan has improved upon and marketed throughout the world.
Given the undeniable success of the sogoshoshain exporting
nese goods worldwide on a massive scale, thereby allowing Japan to
maintain an enormous trade surplus, it is possible that American
trading companies organized and operating in a similar fashion will
alleviate America's trade deficit to a large extent. American trading
companies should be able to reach new markets with many American
goods already sold abroad and establish markets for American goods
that have heretofore been sold only in the United States. In doing so,
American trading companies presumably will create many new job
opportunities, both within their own organizations and for their
customers, who would be producing for the world market rather than for the
American market alone.
The only apparent alternatives to American development of
privately held ETCs are to tolerate a continuing trade deficit or to rely on
massive government involvement in marketing American goods
abroad. These options appear infeasible, yet successful international
trade is a complex, expensive undertaking. The solution may lie in the
establishment of American ETCs similar to those of the United States
trading partners. In addition to the Japanese sogoshosha, the Koreans
have built similar organizations.323 China has begun organizing and
supporting state-run trading companies.324 In 1971, Brazil's Minister of
Finance helped found a trading company (Cobec), which was 30%
owned by the government's Banco di Brasil, with the remaining shares
primarily held by commercial banks from around the world.32 5 Not
surprisingly, Brazil's exports of manufactured goods rose 115% from
1976 to 1977.326
The passage of the Export Trading Company Act was a major
legislative step toward making America a powerful exporting nation. It is
now the responsibility of the government and of American business
leaders to develop the structures and methods necessary to realize the
Congressional hopes for export-based growth.
323 SoGosHosHA, supra note 3, at 67-72.
324 Asian Wall St. J. Weekly, Oct. 26, 1982, at 6, coL 1-4.
325 SOGOSHOSHA, supra note 3, at 65-67.
326 Id. at 66.
The Multinational Presence of the Ten Leading Trading
Companies (March 31, 1973)*
SUBUNITS OF NUMBER OF
THE BRANCHES PERSONNEL
WHOLLY- OR BRANCHES FROM THE NUMBER
OWNED OF THE PARENT OF LOCAL
BRANCHES SUBSIDIARIES SUBSIDIARIES COMPANY PERSONNEL
* Reprintedby permissionof Harvard University Press from M. YOSmNO, JAPAN'S
MULTINATIONAL ENTERPRISES 29 (1976).
Product Categories of the Two Leading Trading
Companies in Percent*
Iron and steel
* Reprinted by permission of Harvard University Press from M. YOSHINO, JAPAN'S
MULTINATIONAL ENTERPRISES 28 (1976)
** Because of rounding, Mitsubishi percentages do not add exactly to 100 %.
Major Activities of Subsidiaries of the Ten Leading Trading
Companies (March 31, 1973)*
ACTIVITY NUMBER PERCENT
Manufacturing 455 65.4
Sales (other than general trading) 85 12.2
Service 83 11.9
Extractive 36 5.2
Resource development (other
than extractive) 37 5.3
Total 696 100.0
* Reprinted bypermission of Harvard University Press from M. YOSHINO, JAPAN'S
MULTINATIONAL ENTERPRISES 123 (1976)
Table A-4. Foreign Subsidiaries of the Ten Leading Trading Companies
by Industry (March 31, 1973)*
Textiles and related
Chemicals and related
Pulp and paper
Other 24 5.3
Total 455 100.0
* Reprinted by permission of Harvard University Press from M. YOSHINO, JAPAN'S
MULTINATIONAL ENTERPRISES 123 (1976).
Sales of the Ten General Trading Companies by Types of
Trade for FY 1976 (in percent)*
Mitsubishi Corporation Mitsui & Co. Marubeni Corporation C. Itoh & Co.
Ataka & Co.
* Reprintedbypermissionof Westview Press from THE SOGO SHOSHA JAPAN'S MULTINATIONAL
TRADING COMPANmS 29, by Alexander Young. Copyright © 1979 by Westview Press, Boulder,
Colorado. "FY" stands for Fiscal Year.
Table A-6. Percentage Breakdowns of Annual Turnover of Ten Largest
General Trading Companies by Product and by Activity
Annual Turnover by Product International
TradingCompany Textile MetalsMachineryFoodChemicals Others**Total Turnover
Reprintedwithpermission from THE JAPANESE ARE COMING: A MULTINATIONAL
INTERACTION OF FIRMS AND POLITICS 129, Copyright 1976, Ballinger Publishing Co.
** "Others" include the importation of timber trade and of crude oil, coal, and pulp
The Ten Largest General Trading Companies of Japan (1974)*
Y2& 0 Bil
* Reprinted with permission from THE JAPANESE ARE COMING: A MULTINATIONAL
INTERACTION OF FIpms AND POLrICS 128, Copyright 1976, Ballinger Publishing Co.
; , 0
Profit Rates of Japanese General Trading Companies,
Manufacturers, and all Industries, 1962-1971*
Year companies Manufacturers industries
companies Manufacturers industries
a. Current profits before tax divided by total assets.
b. Current profits before tax divided by the sum of retained earnings reserved plus paid-in
capital plus net profit after tax before dividends. Annual figure is an arithmetic average of semiannual
Reprintedbypernissionof The Brookings Institution from Krause & Sekiguchi, Japanandthe
WorldEconomy, in AsiA'S NEw GIANrT. How THE JAPANESE ECONOMY WORKS 395 (H. Patrick
& H. Rosovsky ed. 1976), @ 1976 by the Brookings Institution.
The Six Largest Trading Companies (1973)*
* Reprinted by permission of Harvard University Press from M. YosinNo, JAPAN'S
MULTINATIONAL ENEmwRPtsEs 28 (1976).
Source: Y. SuzuKI, MONEY Am BANKINo IN CONTEMPORARY JAPAN 8. 0 1980 by Yale
University Press. Reprinted tqth permission.
6Il,'t Io! I3
" 1 I I I
jC7,djo n A w
0'0 ~~0O~o0W0 O C %'
CuM cau0 a
the University of Washington in Seattle. B.A., 1974 , Northwestern University; M.A., 1978 , Uni-
versity of Chicago; J.D., 1980 , Northwestern University. I E.g., Cole, EstablishingAmerican TradingCompanies ,2 Nw. J. INT'L L . & Bus . 277 ( 1980 )
trading companies) . 2 The Export Trading Company Act of 1982 , Pub. L. No. 97 - 290 , 96 Stat. 1233 ( to be codified 8 The interaction of these American trading company personnel with the peoples of the world
of many American companies . P. SIMON, THE TONGUE-TIED AMERICAN 1-40 ( 1980 ). A recent article trenchantly notes that over 12,000 Japanese are currently studying in the
United States, with more than 50% of them studying technical subjects . The most popular subjects
are electrical engineering and computer science . In sad contrast, however, only 500 Americans are
Oct. 26 , 1981 , at 15, col. 1 . 9 SOGOSHOSArsIu,pra note 3, at 83. See also Abbott & Totman, "BlackShips" and Balance
Sheets: The Japanese Market and U.S.-Japan Relations , 3 Nw. J. Ir'L L . & Bus . 103 , 132 - 34
( 1981 ). 88 Id. 89 THE JAPANESE ARE COMING, supra note 51, at 13. 90 Id. 91 Id. 92 Id . 93 JAPAN'S MULTINATIONAL ENTERPRISES , supra note 21, at 63. 94 THE JAPANESE ARE COMING, supra note 51 , at 13. The role that MITI played in Japan's
son, MITI and Japanese Economic Policy, in THE FOREIGN POLICY OF MODERN JAPAN 227
(Scalapino ed. 1977 ). Some foreigners have even called MITI the "ministry of one-way trade"
GROWTH 223 ( 1973 ). See also R. CAVES & M. UEKUSA , INDUSTRIAL ORGANIZATION IN JAPAN
0 - g