International Trading Companies: Building on the Japanese Model

Northwestern Journal of International Law & Business, Dec 1982

Passage of the Export Trading Company Act of 1982 provides new opportunities for American business to organize and operate general trading companies. After presenting a thorough history and description of the Japanese sogoshosha, Mr. Dziubla gives several compelling reasons for Americans to establish export trading companies. He also examines the changes in United States banking and antitrust laws that have resulted from passage of the act and offers suggestions for drafting guidelines, rules, and regulations for the Export Trading Company Act.

A PDF file should load here. If you do not see its contents the file may be temporarily unavailable at the journal website or you do not have a PDF plug-in installed and enabled in your browser.

Alternatively, you can download the file locally and open with any standalone PDF reader:

https://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1123&context=njilb

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 0 This Article is brought to you for free and open access by Northwestern University School of Law Scholarly Commons. It has been accepted for inclusion in Northwestern Journal of International Law & Business by an authorized administrator of Northwestern University School of Law Scholarly Commons - 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 below. 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. 4:422(1982) 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 cap (...truncated)


This is a preview of a remote PDF: https://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1123&context=njilb

Robert W. Dziubla. International Trading Companies: Building on the Japanese Model, Northwestern Journal of International Law & Business, 1982, Volume 4, Issue 2,