No. 36 — September 22, 2000

Feature Article

JEI THEN AND NOW: PART I

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Summary

The coming shutdown of the Japan Economic Institute is a time for reflection about the implications of its absence for informed, objective analysis of economic, business, political, diplomatic, defense and security developments in Japan and of the U.S.-Japan relationship broadly defined. It also is a time for retrospection.

The contemporary JEI, known on both sides of the Pacific for its independence despite primary funding from the Ministry of Foreign Affairs, has evolved far from its start as the United States-Japan Trade Council. That organization was cofounded by Nelson Stitt and Noel Hemmendinger, both Washington lawyers, in 1957 to represent Japanese trade interests in the United States. For 20 years, the Trade Council supported this objective by publishing reports and pamphlets on U.S.-Japan trade and such associated subjects as activities on Capitol Hill and in the White House affecting Japanese exporters as well as by undertaking a variety of public relations initiatives, appearing before congressional committees and interacting with the executive branch.

The transformation of the Trade Council from a public relations and lobbying group to a think tank-like institution began in 1976, triggered, in quick succession, by the death of Mr. Stitt and the filing of a civil lawsuit against the company by the Department of Justice. The reinvention process gathered momentum after Robert C. Angel joined the Trade Council in 1977 as deputy director and later became its top executive. He envisioned an organization that would be recognized through its publications program and other activities as an authoritative, unbiased source of analysis and information on a broad range of Japan-related issues, including the vital bilateral relationship.

Implementation of the new operational thrust, marked by the adoption of the Japan Economic Institute name in 1981, was not problem-free. The main challenge occurred in 1984 when the Embassy of Japan in Washington and the Foreign Ministry, which previously had supported the reorientation of JEI's activities away from public relations, began to question the value of an organization that did not necessarily convey the official Japanese government position on various matters. At that point, the future existence of JEI was very much in doubt.

To add detail and insight to this overview, JEI President Arthur J. Alexander discussed the history of the organization through the mid-1980s with two of its former principals. Mr. Hemmendinger recounts the formation of the Trade Council and its operations over the following 20-plus years. Edward J. Lincoln, who was the executive vice president and chief economist at the time that he left JEI in June 1984, then picks up the story. In the next — and final — JEI Report, William J. Barnds, the president from early 1985 to the spring of 1990, and Mr. Alexander will continue the review.

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The Early Years: A Discussion with Noel Hemmendinger
Currently, Of Counsel, Willkie Farr & Gallagher
Formerly, Deputy Director and Counsel,United States-Japan Trade Council

Mr. Alexander: Let's start at the beginning.

Mr. Hemmendinger: Nelson Stitt worked for the Embassy of Japan in Washington. In about 1954, after serving in the U.S. occupation, he joined the domestic staff of the Japanese Embassy and, in 1955, got its permission to open a law office. During his first year of practice, his desk was the end of the conference table in the office of an aged lawyer on 15th Street. In that first year, Nelson had a retainer from the Japanese cotton spinners to produce a series of pamphlets that defended the Japanese position against U.S. cotton textile restraints. Arnold Dadian, also a local employee at the Japanese Embassy, worked with him on that project. To give those pamphlets some credibility, Nelson got the Japanese Chamber of Commerce of New York to become a member of what he called the Council for Improved United States-Japanese Trade Relations. The council provided the imprimatur for those pamphlets, which were published once a month. I joined Nelson October 1, 1956, when he still had a couple of pamphlets left to do under his contract and worked with him on one or two of those.

Mr. Alexander: Was that your first job out of Harvard Law School?

Mr. Hemmendinger: No. After graduating in 1937, I had been a law clerk for a federal judge in New York, an assistant U.S. attorney, served in the allied military government in Europe and had 10 years in the State Department's Office of Occupied Areas and then the Office of Northeast Asia Affairs. I decided that since I did not want to join the Foreign Service, my opportunities would be limited and I should go into private practice. Nelson, whom I knew slightly, invited me to lunch one day. At the table, he pulled out a piece of foolscap and said, "I want to ask you to join me in the practice of law. I've been at it a year now. This is what I did the first year, and this is how I propose to share it with you if you join me."

When I joined Nelson in the law practice, he had, as I said, a contract with the Japanese cotton spinners. That contract, though, was allowed to expire because the first cotton textile arrangement had been made, pushed through by Sherman Adams, President Eisenhower's chief of staff. That made the retainer unnecessary from the Japanese standpoint. Certain people at the Japanese Embassy, however, had been watching this closely, particularly the MITI [Ministry of International Trade and Industry] man who was closest to Nelson. They began to talk about using Nelson's services in some broader way. So, a proposal — with my cooperation by this time — was elaborated and sent to Tokyo in 1957 for the establishment of what became later that year the United States-Japan Trade Council.

I had joined Nelson at the other end of the conference table on 15th Street, but with the new contract from the Japanese, we moved into a new building at 1000 Connecticut Avenue. We designed our office as a joint office of the law firm of Stitt & Hemmendinger and the United States-Japan Trade Council. We had three or four small offices and a conference room — a very compact space because, after all, only one person had been hired for the Trade Council. I think that was Mike Daniels, although Mike was also an associate of the law firm.

We soon decided that we needed an executive secretary for the Trade Council. I think Bob Gilkey became the first one. We worked out bylaws that established the Trade Council as a trade association that had the functions of research, publication and representation before public agencies. That's the way it was for 20 years. Bob Gilkey soon saw to it that the Trade Council got its own space in the building. The Japanese Embassy put up the money. I don't recall how much it was, but we never had to put up our own capital. They financed the establishment of the Trade Council and built the office.

Mr. Alexander: And you continued to do the same kind of cotton textile work?

Mr. Hemmendinger: No, our work on cotton textile issues had ended. The Trade Council began with a series of pamphlets that painted the picture of the U.S. stake in trade with Japan, noting that Japan buys in all 50 states. The message was, "If you want to sell to Japan, you must buy from Japan." Making a number of assumptions, these pamphlets showed the interest of every state in trade with Japan — especially the stake of farmers. Those were glossy pamphlets. They were propaganda but were still pretty respectable.

Then there was the trade association function, which produced materials designed to serve the needs of importers. These publications were rather parallel to the work done by what is now the American Importers Association in New York. We established a very good rapport with AIA that lasted for many years. The Trade Council provided a service that focused on Japan for people in the business. We solicited members for the Trade Council, going beyond the Japanese Chamber of Commerce, although chamber members always were Trade Council members.

Mr. Alexander: As members, they paid a subscription fee and got all the pamphlets?

Mr. Hemmendinger: As individuals, they got reports. Reports were not done in a glossy form. They were not propaganda at all — they were factual. In addition, we produced a series of statistics that also was extremely factual. We were mindful that some trade associations, such as the American Iron and Steel Institute, were the recognized source for statistics on their industry. The Trade Council became the recognized source for statistics on what was going on in U.S. trade with Japan and in the Japanese economy.

Mr. Alexander: So, you had the statistics, the reports and the pamphlets on trade?

Mr. Hemmendinger: That's right. And the Trade Council also testified before congressional committees. It's hard for me now to recall the way in which each of these functions became fully developed, but it didn't take very long. They were all in the original conception of what the Trade Council would do because we had the experience of the textile organization to work with.

The membership dues were cheap and, pretty soon, every U.S. corporation, bank or other institution that was interested in the Japanese economy found that the publications were useful. The roster got as large as 800 to 1,000 members, exceeding the few hundred that also belonged to the Japanese Chamber of Commerce.

At first, everyone, including ourselves, was somewhat naive about legislative affairs. After a while, it became clear that some bills were more important than others and that it was not necessary to marshal the organization to campaign against every bill that was introduced. Our channels for that sort of decision were mainly the various sections of the Japanese Chamber of Commerce of New York, which were counterparts to export associations in Japan. If something came up, we would report it to the Japanese Chamber of Commerce, which would report it to the appropriate association in Japan. These groups were extremely adept at dealing with the information, deciding, for example, whether to retain counsel.

At that point, as far as representing Japanese trade interests was concerned, there was very little competition in Washington. There were two other principal competitors, one of whom was Bill [H. William] Tanaka. At the request of the Japanese Embassy, Bill became associated with the Trade Council, but there was a certain jealousy between him and us. He didn't choose to participate personally, but he would send someone from his office to our staff meetings. The other competitor was Mike Masaoka, who was not a lawyer.

Our law firm, for its part, was simply taking retainers to handle trade cases — for example, escape-clause cases. Dumping complaints against Japan had not developed yet. To a certain extent, the Japanese Embassy also was a source of recommendations for the law practice. There was really quite a sharp differentiation between representing Japanese clients before a U.S. government agency as lawyers and the work of the Trade Council.

Mr. Alexander: Did the law office get a fee for managing the Trade Council or did the money just come straight to the Trade Council?

Mr. Hemmendinger: The Trade Council had a direct budget. Nelson and I were paid salaries as officers. Nelson was the director; I was the deputy director and counsel. The two of us regarded the fees we got from the Trade Council as part of our professional income, and the payments were treated as fees from clients. But it was an anomalous relationship, which did become fuzzy in certain areas.

For instance, it wasn't feasible to represent Japanese interests directly before Congress. We could not, for example, ask the House Ways and Means Committee to hear us as the counsel to the Japanese steel industry, which was an early client and, for many years, the most important client of the law firm. We would appear as the United States-Japan Trade Council in the interest of particular industries when a dispute arose. As time went on, we were very much involved in coalitions with all the other Washington representatives of business interests, which included such very respectable names as the U.S. Chamber of Commerce.

Mr. Alexander: Looking at some of the old memos, I saw that there was someone who made films. What was he doing?

Mr. Hemmendinger: At the beginning, we thought that there should be a staff member who dealt with public relations, but as time went on, we realized that we were better off retaining people in particular areas. Charles von Loewenfeldt was a very creative PR man who worked in San Francisco. He had a lot of good, interesting ideas. We used other PR people, by the way. For instance, we used Scott Runkle, a Washington consultant who was very skilled at selling ideas to newspaper columnists.

Von Loewenfeldt also got us invited to give speeches to various organizations. The most memorable thing he did was to arrange a trip through the South for Nelson and me. Our intent was to promote the idea that to sell to Japan, you had to buy from Japan. We took along two Japanese girls (they were really nisei from California) wearing kimonos made from American cotton. We went before the Alabama legislature, for instance, and were warmly received. After all, the sale of cotton to Japan was a big deal.

Mr. Alexander: Did you do many other things outside of Washington?

Mr. Hemmendinger: Yes, we did — mostly with the help of von Loewenfeldt. We went to meetings of Rotary Clubs and international affairs societies in various cities. The contracts with von Loewenfeldt went on for quite a period. Nelson and I did most of the talking. After a while, Allen Taylor, by then the Trade Council's executive secretary, did some speechmaking.

Mr. Alexander: And this all came out of the Trade Council's budget?

Mr. Hemmendinger: That's right.

Mr. Alexander: How many people were on the staff?

Mr. Hemmendinger: Nelson and I were part-time. Allen Taylor was full-time. There was someone who worked Capitol Hill. In order to get the person we wanted, we had to use somebody who was also employed in the law firm because it would be a more interesting job. So, one after another, starting with Mike Daniels, the Trade Council staff included a person who was both an associate of the law firm — and, later, a partner — and the organization's legislative affairs specialist. This person received a salary from the Trade Council. There also was a chief economist and a statistician.

Mr. Alexander: You had a regular Trade Council staff that put out the statistics, reports and pamphlets. Were these being published on a regular schedule?

Mr. Hemmendinger: We would plan a project at a staff meeting and then work on it. I suppose that sometimes things took longer than originally planned. I think we published on roughly a monthly basis, but that was based on the schedule in the original contract between Nelson and the cotton spinners. Those were the glossy pamphlets. The reports to members were regular.

Mr. Alexander: What happened as the Japanese economy developed, trade grew and Japan started running a trade surplus with the United States?

Mr. Hemmendinger: We had 10 to 15 years when the economic facts were highly favorable to our line of propaganda. And in those years, we found ourselves always aligned with the parts of the U.S. government that were interested in U.S.-Japan relations, particularly the State Department. And after the Office of the Special Trade Representative [now the Office of the U.S. Trade Representative] was established, we had very strong relations with it also. We worked with other agencies that had a voice in trade policy, for example, the Treasury Department.

It's hard to say when we did that as Trade Council staff and when we did that as lawyers. When we had an escape-clause case, for instance, the Tariff Commission, later the International Trade Commission, proceeded, as it would now with a Section 201 case, to report its findings to the president. We would have to make the rounds of all the agencies that had a voice in trade policy, which included the Departments of Commerce, Labor, State and Treasury and the Council of Economic Advisers.

Mr. Alexander: So you would go around, talk to them and try to convince them of the merits of your case?

Mr. Hemmendinger: That's right. This was done directly and was not public at all. Of course, the other side would do the same. The relevant domestic industry obviously had access, but we also had very good access.

Mr. Alexander: During the period that you were lobbying, had a lot of emotion developed behind some of the cases and issues or did they pretty much involve technical work by lawyers?

Mr. Hemmendinger: There was very little emotion during the first 20 years. That had begun to change, of course, but we were working in an extremely favorable climate. We had editorial opinion on our side of trade issues, and we had good relations with many journalists. Toward the end of my Trade Council tenure, maybe the last five years, we had begun to be apologists and were writing pieces advocating the liberalization of Japan's trade regime. It was a numbers game in which you would point out how restrictions had been reduced. However, we personally were well aware at that point that the Japanese were moving too slowly. Indeed, the people with whom we were in contact at the Foreign Ministry and at Keidanren [Japan Federation of Economic Organizations] also were of that opinion, but Japan doesn't move quickly in these respects. In fact, it moves tragically slowly as we have seen in recent years.

Mr. Alexander: In all of this, how close were your relations with the Japanese Embassy and Tokyo? Did you talk to them daily, weekly, monthly or hardly at all?

Mr. Hemmendinger: The answer to that question is extraordinary and not credible to many people. The Japanese government allowed us enormous independence. We did make reports that had to go back to Tokyo because, after all, the Foreign Ministry had a budget to defend. So, they got thorough reports, the compilation of which was part of the executive secretary's job. I don't remember having much to do with those reports.

Generally, Trade Council staff members would conceive their own projects. On very exceptional occasions, someone at the embassy would request a specific report. It was never a foreign service officer; sometimes, it was the agriculture representative. I remember we did a pamphlet regarding a fisheries dispute. I appeared at a hearing in Portland, Oregon and for the Trade Council before a joint Senate and House fisheries committee.

Whenever it seemed to us that a project that we had in mind had any delicacy — for example, admitting regrettable protectionism on the part of Japan — we would clear it with the embassy. The embassy had a person, a Foreign Ministry representative, who was in charge of dealing with the Trade Council. We would tell him what we had in mind, and sometimes he would refer the matter to Tokyo. The answer was always the same: "You are not the Japanese government, so do as you see fit."

Mr. Alexander: Did you ever get complaints about something that you had done?

Mr. Hemmendinger: You know it would seem strange never to have gotten negative feedback. I just don't remember any complaints — at least, not against any major activity like a publication. It would be rash to say that they never suggested that something was out of line, but I don't remember any such case.

Mr. Alexander: Did you ever go to Tokyo to talk to the people there who oversaw the budget?

Mr. Hemmendinger: Yes, we did. Not usually for that specific purpose, but Nelson and I had to go to Japan frequently for the law practice, and we would always touch base with the Foreign Ministry and with MITI.

Mr. Alexander: At some point, the Foreign Ministry established organizations similar to the Trade Council in other places — London, Ottawa and Sydney.

Mr. Hemmendinger: They thought the Trade Council model had its value, and they tried to duplicate it. They established similar organizations in other capitals and began to have meetings in Tokyo of representatives from the various locations. Each office, though, was unique in terms of its host country.

Mr. Alexander: I heard that establishing these offices was an attempt by the Foreign Ministry to start something similar to MITI's Japan External Trade Organization, which sent representatives to other countries to promote Japanese trade. Did you ever get a sense of that?

Mr. Hemmendinger: I dare say that was true, but we didn't get a strong sense of it. We were always aware of a rivalry or at least a jockeying for position between the Foreign Ministry and MITI. Perhaps I should clarify. The Trade Council's relationship was with the Foreign Ministry. Our relationship as trade lawyers was indirectly with MITI because that ministry had close ties with the various associations that represented exporters.

We had wanted very much to represent a private Japanese organization, such as Keidanren or the Tokyo-based Japanese Chamber of Commerce; there were several possibilities. But after working on that for months or maybe even years, we gave up because we realized that although the Foreign Ministry was most directly connected to the Trade Council's work, MITI was the government agency with the primary connections to such private organizations. The Foreign Ministry was not in a position to change that. However, it managed for many years to keep MITI out of Washington. JETRO was established — a much later organization, by the way — but its U.S. location was in New York.

But, as lawyers, we worked with JETRO a lot. We did a number of studies that were published in Japanese under contract from JETRO. That was largely my work. They would put forward or, more likely, we would put forward a project. For instance, I wrote a long paper on the development of U.S. trade policy going back to the last century. We wrote technical papers.

Once, we even did a study on how duties on Japanese products were assessed by the U.S. Customs Service. Customs valuation was a controversial subject, but there was very little written on it. This project required some quite extraordinary steps. I got a letter from Customs headquarters here in Washington introducing me to top Customs officials in various ports and requesting that they cooperate with my inquiries. When I met with them, I asked them to explain how they valued one product after another. There was no book on this or even an internal procedure that was very clear or consistent. We wrote up my findings in a report that was translated into Japanese.

Mr. Alexander: You mentioned Keidanren. When did it start sending people to the Trade Council?

Mr. Hemmendinger: I don't remember exactly when it originated, but Masaya Miyoshi was the first — maybe about 1960. The Keidanren people were nominally our Japanese economists, and they dealt with questions involving the Japanese economy. Depending on their skills and personalities, they did various things.

Mr. Alexander: Let's move forward to the time that you started to end your association with the Trade Council and [Robert C.] Bob Angel came in. What happened during this period?

Mr. Hemmendinger: The critical time was 1976. Nelson had contracted lung cancer. He was diagnosed in late 1975 and died in February 1976. That obviously called into question the future leadership of the Trade Council. Very soon after Nelson died, the Justice Department suddenly brought, out of the blue, a civil suit against the Trade Council, Allen Taylor and me, naming also the chairman of the Japanese Chamber of Commerce of New York.

I should have said at the beginning that the Trade Council had to have a label on all of its publications for the purposes of the U.S. government's Foreign Agents Registration Act [of 1938]. But because putting on all our documents that we represented the Japanese government or its embassy would have made it very difficult to do some of the representational work — for example, appearing before Congress — we established a cutout at the very beginning. We claimed that the Trade Council represented the Japan Trade Promotion Office, which simply was a function of the Japanese Chamber of Commerce of New York. The chairman of that organization concurrently served as chairman of JTPO, and the money was sent by the Japanese government through that office to us. This arrangement was challenged by Justice as inappropriate. Calling ourselves a trade association was also challenged in the civil suit. The statute in question provided that Justice could instruct foreign agents as to how they described themselves, among other things.

The Justice Department action came about a year after one of its representatives had audited the Trade Council's books. He worked in an office supplied by Allen Taylor, who ran the organization on a day-to-day basis, and he went through all the records. I was hardly aware of the audit. It began while Nelson was still alive, but I don't know whether he knew about it or not since Allen dealt with the auditor exclusively. I had assumed that if the auditor found what were regarded as irregularities, the Justice Department would tell us and we would have an opportunity to do something about it. So, the suit was a very big shock to me, to the embassy and to Tokyo.

The reason for the audit and lawsuit was that there had been some criticism in Congress, particularly by Sen. [J. William] Fulbright [D, Ark., 1944-74], about Justice's failure to enforce the Foreign Agents Registration Act. A decision obviously had been made that Justice was going to make a splash by showing that it really knew how to do that. I got a telephone call from someone at the department saying that the suit was about to be filed and advising me that I should retain legal counsel.

The lawsuit created quite a flurry of activity for us, especially since it occurred just before a visit to Washington by the Foreign minister. It was pretty outrageous timing from our standpoint. The Trade Council retained Adrian "Butch" Fisher, one of my law school classmates and the dean of the Georgetown Law School at that time. He represented us out of comradeship rather than any question of financial gain. He did all the negotiating with Justice. We managed to stall them for a little while to get the minister's visit out of the way. Then, they insisted that we accept a consent decree, which we did. We never fought it.

I was outraged by the lawsuit. Years earlier, when we had produced some hard-hitting pamphlets in the later phase of our involvement in the textile battle, an assistant secretary at the Commerce Department by the name of Peterson had asked, "Who the hell are these guys?" When told who we were, he complained to [Rep.] Wilbur Mills [D, Ark., 1939-77] that we were really representing the Japanese government and that we shouldn't be appearing before Congress. By the way, we had a very good relationship with Wilbur Mills because he valued this nongovernmental channel of communication to the Japanese leadership; he appreciated not having to go through the State Department.

The Justice Department had investigated us at the request of this particular assistant secretary of Commerce and had decided initially to do nothing. What outraged me was that Justice knew everything we were doing for many years and chose not to act. Then, when the department did decide to act, instead of telling us or writing us a formal letter — which they could have done — they chose to bring a lawsuit. That made me angry. I guess I still get hot under the collar when I think about it.

On the other hand, our arrangement with the Japanese Chamber of Commerce of New York clearly was vulnerable had anyone wanted to make something of it. Nobody in Washington was deceived, however, because it was well-known that the Trade Council was close to the embassy. I have failed to mention one function that was a frequent one in the initial years, which was to have receptions and lunches for visiting Japanese delegations. This was something that the embassy did ask us to do. So everyone knew of our connections.

Mr. Alexander: You would invite people from Capitol Hill and government agencies?

Mr. Hemmendinger: Yes, and they always came. What would happen is that somebody new in the government — because, after all, the senior people would change — would ask, "Who are these guys?" The State Department would answer, "Well, they virtually represent the Japanese Embassy, but they're good guys."

Mr. Alexander: Did the consent decree require eliminating the Trade Council's cutout through New York?

Mr. Hemmendinger: That's right. We were forced to rewrite the label on our documents to say that we represented the Japanese government and to put it on all the things we published, not just the pamphlets, and also to cease calling ourselves a trade association. These changes really didn't make that much difference. This all happened, however, in the year after Nelson died, when the Trade Council was 20 years old. It had become obvious to me — and, I guess, at the embassy as well — that we would have to have a change of leadership.

I became the director of the Trade Council pro tempore and was asked by the embassy to institute a search for a successor. I started by going to the universities that had Japanese studies departments and asking them for proposals. Then, I narrowed the list to two names. I asked Phil Trezise, who had recently retired from the State Department and who was friendly with both the Japanese Embassy and the Trade Council, to interview the two leading candidates and give his opinion. He recommended Bob Angel. This reflected my own opinion, which was that both candidates were well-qualified but that Bob would be more interesting.

Bob actually turned out to be much too interesting, but that's another story. When he took over, he realized that the anomaly of the Trade Council's close relationship with the law firm could not go on and, for that reason and others, including the lawsuit, proposed the name change to the Japan Economic Institute. When Bob came in — and it's to his credit — he was respectful to me. We worked together from time to time, but he never invited me to a staff meeting. Nor did he ask me to participate in discussions. He took his ideas directly to the embassy. What Bob did was to have lunch with me from time to time but keep me at a distance.

The other main thing that he did was to eliminate the organization's lobbying function. At the time, I was offended by that change because, after all, it was something that the Trade Council had done for a long time, and he was changing its activities in a very major way.

In retrospect, though, I suspect that the time had come for such a change. For roughly 20 years — and particularly in its early years — the Trade Council was the leading lobby in Washington for Japanese trade interests. But, by the late 1970s, there were innumerable representatives of Japanese interests in Washington. Major Japanese corporations had established offices here or had appointed counsel.

Mr. Alexander: Looking back, has the Trade Council/JEI existed a lot longer than you ever expected back in 1957?

Mr. Hemmendinger: Frankly, I was a little surprised that after becoming a think tank in the late 1970s or early 1980s, the organization was able to maintain its position for another 20 or so years. With all due respect to the value it undoubtedly has had, JEI's staying power was attributable to the persistence of bureaucratic interests in Tokyo.

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The Transitional Years: A Discussion with Edward J. Lincoln
Currently, Senior Fellow, Foreign Policy Studies, The Brookings Institution
Formerly, Executive Vice President and Chief Economist, JEI

Mr. Alexander: When did you join JEI?

Mr. Lincoln: I got to JEI — then, still the United States-Japan Trade Council — in September 1978. Having just come out with a Yale Ph.D. that May, I spent the spring looking around for a job, assuming that I wanted a teaching position. The situation at that time was even worse than it is today. If you walked in and told a department head that you wanted to teach economics and do something on Japan, there literally were no jobs to be had. So, I knew that approach would go nowhere.

I came to Washington and looked around. There were a couple of possibilities in the government, but they were positions that might open up in the next year or two, and I needed something more immediate than that. I visited JEI and got the impression of a place that was changing very rapidly and moving in some interesting directions.

Bob Angel had been there for about a year at that point, and he was very eager to recruit the staff that the organization needed to put out a reputable publication. Part of his strategy was to recast the Trade Council because it really was in trouble then.

Everybody does lobbying in Washington, but the Trade Council had misrepresented itself and had done so deliberately. It's not clear to me that people on Capitol Hill really understood exactly who the organization represented.

If Messrs. Stitt and Hemmendinger had gone to the Hill as the law firm of Stitt & Hemmendinger, saying that they represented the cotton spinners association or the steel industry, their big client later on, that would have been OK. But they went as the United States-Japan Trade Council, claiming to be an association of American and Japanese companies. That wasn't true, and that's why they got in trouble. In fact, when the connection was revealed in 1976, The Washington Post carried a front-page article reporting on the government's suit against the Trade Council.

The Japanese Embassy was faced with a decision. Obviously, the situation was terribly embarrassing for officials there. They had to decide whether to shut the Trade Council down or find some way to reshape it. They hired Bob Angel to come in and take over. As I recall, he had presented his ideas about how the Trade Council could be reshaped to try to escape the problem of a lost reputation in a long conversation with the economic minister at the embassy.

Bob's idea was to stop lobbying and focus instead on producing a publication that people would actually read. His view was that anything that looked like propaganda wouldn't be read because people would know where it was from. So, he encouraged the embassy to adopt a model in which it supported the organization's publications but had no editorial input. That way, he could produce something that would be credible to an American audience.

By the time I got there, Mr. Stitt had passed away, Mr. Hemmendinger had physically moved and Bob was taking over. A couple of other people who had been on the staff for a while also were in the process of leaving. Allen Taylor, for example, who had been running the Trade Council on a daily basis, was being eased out.

Bob hired some new people. Fumiko Mori and I were the two principal additions that first year. Bob felt that any respected publication had to be published on a regular basis, so we moved fairly quickly to begin a weekly report. Before that, the publications had been very sporadic. That's when we split up what became JEI Report into the B report and the longer A report, which the staff wrote on a rotating basis. There was some resistance since the Trade Council was not a place that was terribly eager for change.

The next thing we pushed for was the adoption of a new name because there was a lot of confusion about the old one. Our publications carried a big disclaimer that identified the organization as an agent of the Japanese government and, for a period of three years, the disclaimer had to be double the normal size. That was part of the consent decree imposed by the Justice Department. The disclaimer occupied more space, and it had to be on the front page of the weekly reports.

Even with the disclaimer, a lot of people who saw the Trade Council's name thought that it was some kind of trade association or a consulting firm that could help them sell their products in Japan. So, we thought for a long time about renaming the place and eventually came up with a new name and a new logo in 1981.

Bob did all of these things to recast the organization as a research and publications outfit and to get away from the lobbying aspect. I'm not sure whether it was ever his intent to make the no lobbying change permanent. I don't think that I ever testified on the Hill when I was at JEI. But. again, I don't believe that Bob thought that JEI would have to avoid that forever. Certainly until the organization had rebuilt its reputation, it was best to stay away from that or people would point fingers and say, "I remember you guys. You are the bad United States-Japan Trade Council that got into trouble in the 1970s." I don't remember that anybody testified during the five years that I was at JEI. I think that sort of activity was regarded as something we should just stay away from for a period of time to let the controversy of the mid-1970s fade away.

During this time, the embassy was generally supportive. They accepted Bob's ground rules, which were that JEI would publish its publications and the embassy would provide the money to do that but would stay out of the editorial business. That worked, partly because for the first couple of years, the person most responsible for the decision to hire Bob was still at the embassy and because that man's next few successors basically couldn't have cared less. Things went along fairly well. JEI brought in additional staff. We hired Barbara Wanner, Jon Choy — who was one of my students at SAIS [the School of Advanced International Studies of the Johns Hopkins University] — and then Michael Chinworth to replace Fumiko Mori.

Unfortunately, in 1983 and especially in early 1984, the relationship with the embassy began to deteriorate. Part of the decline had to do with the individuals on the staff there. The embassy got a particularly aggressive — I am sure he would say diligent — economic minister, who apparently asked, "What is this JEI asset that we have over here?" He began to read our output and assigned his staff to read it and find out what we were writing. And once he realized that JEI's publications were not official PR from Tokyo and that the language used in the analyses did not necessarily include the particular words that the Japanese government felt were the safest, he got worried.

The understanding between JEI and the embassy broke down. The economic minister had embassy staffers from other ministries who were reading JEI's reports call up and say, "We are terribly sorry and we know we can't interfere, but there just happens to be some mistakes in the report you wrote last week."

Then, we began to get the same message directly from the Foreign Ministry people at the embassy. Previously, they had generally acted as a buffer between JEI and other ministries. Their attitude changed to one that seemed to say: "If you've got a problem with JEI, call them up and complain." I remember one telephone call in particular that Susan [MacKnight] had from the agriculture minister that went on for 45 minutes. He apparently was determined to convince her that she really couldn't call Japan's purchase of rice from Korea to cover a domestic shortfall an import transaction. Susan explained and explained — it was like talking to a brick wall. That was the phone call that made us realize that we had a problem.

Mr. Alexander: Did these calls relate to issues of fact or were they policy-oriented?

Mr. Lincoln: None of them concerned discrepancies of a factual nature. It was a matter of JEI's choice of adjectives. For myself, I think the crunch came when I'd gotten tired of writing shorter things and wanted to write a longer piece on industrial policy. At that time, industrial policy was the big new issue in Washington, and I knew a little bit about the subject. I wrote a monograph [Japan's Industrial Policies] that JEI put out in the spring of 1984. As I was working on that paper, we actually pulled in extra money from the embassy to hire a research assistant to help out and to cover the printing costs.

Because we had asked the embassy for an extra budget for the study, they knew that I was doing it. They considered the monograph to be a little bit outside the regular rules for our publications and demanded to see the manuscript. They literally passed the draft around the embassy, and people in different ministries all got to read it. They had a meeting to consolidate all their criticisms. Then, I spent eight hours on a page-by-page review with a representative of the embassy who had been assigned the job of conveying all the comments to me. A few of the complaints actually involved factual problems — for example, "This number should be seven instead of five" — but many did not. A lot of it was, "This is sensitive, and it really would be best if you didn't write about this topic." Or, the person would say, "You know, this is good and you should have written a lot more about this." By the time I had finished that eight-hour review and realized what the thrust of the bulk of their comments was, I had decided that it was time for me to leave JEI.

Mr. Alexander: How long had you been thinking that?

Mr. Lincoln: I told myself that it had been fun for five years but that I really didn't want to work in a situation where the sponsors had decided that they should have if not editorial control, then at least editorial input. During the review of my manuscript, the embassy representative kept saying, "I know we can't force you to do this, but in the spirit of cooperation, let's talk about it." That's not the sort of arrangement I wanted to work under, so I announced that I was leaving. I believe that my resignation prompted Bob, who had been thinking about leaving for several months himself, to finally decide that he was going to jump ship, too, which he did.

Mr. Alexander: Other things presumably influenced him?

Mr. Lincoln: Yes, but he had nothing lined up. He had not finished his Ph.D. He was in an all-but-dissertation status when he came to JEI and then just got so busy running the organization that he put his academic work aside. The last year I was there, he had gotten back to working on his dissertation. I think he realized that to do what he wanted to do in life, which was to pursue an academic career, he needed to finish his doctorate. So, when he left JEI, he took time off to crank out the rest of his dissertation.

Mr. Alexander: What was the embassy's reaction to the announcement that you and Bob were going to leave?

Mr. Lincoln: They were very upset. I wrote a letter of resignation to the embassy, explaining in some detail the reasons for my departure. They were worried and upset that anybody would leave JEI because he or she felt that the embassy was behaving in a way that was not consistent with the operational ground rules for JEI. In fact, they sent a formal answer back to me that responded to my letter point by point and denied that any of the issues that I found troubling were problems.

The fact that Bob left about two weeks after I did was an embarrassment for the embassy. It was obviously clear to them that people around town knew why we had resigned. So, once again, they had come to a turning point. They simply could have ended the awkward situation by shutting JEI down, but they decided to go on. And, as far as I can figure out from talking with you and anybody else who has worked at JEI since Bob and I left, our departure actually had a beneficial impact. The embassy must have scared itself because it backed off at that point.

Mr. Alexander: Some people have said that the embassy wanted Bob out, that Tokyo had become dissatisfied and wanted to see him leave. From what you know, was it anything like that?

Mr. Lincoln: No. From the summer of 1983 to the summer of 1984, as we started to get the phone calls and Bob would meet from time to time with the economic minister and explain to him our concerns, I think the embassy realized that we were getting increasingly unhappy. So, quite possibly, the Foreign Ministry was getting concerned about that. But there was absolutely no move to get rid of Bob. That would have been difficult for them to do because I'm sure he would have made it clear to everyone why he'd been moved out. And that would have been damaging for the organization.

Mr. Alexander: Were internal operations collegial?

Mr. Lincoln: Yes. In general, the place was quite collegial. Obviously, there was new staff and old staff, and some of the people who were there when I came had been with the Trade Council for quite a while. Allen Taylor had been there almost since the beginning. The accountant had been there a long time. Romi [Kobayashi] and Larry [Allen] also had been there for a number of years by the time I showed up. And Susan had arrived at the Trade Council in the early 1970s. And then there was this bunch of new people.

When I came, the JEI staff didn't include a single person with an academic background in Japan. The only person with a formal background in Japan matters was the Keidanren assignee. The rest of the staff had none. Susan learned everything she knew about Japan after she came on board. When I got there in 1978, JEI employees were just a bunch of Washington people.

Eugene Kaplan, then the Trade Council's chief economist, knew a fair amount about Japan, but Japan was only one of the many Asian countries that he had dealt with in his previous position at the Commerce Department. His background was in economics, not Japan affairs. In fact, he'd had no formal Japanese training. So, the potential for tension was there, but it rarely came up. When I first arrived, Gene, for example, was very uneasy because he apparently felt that I'd been hired to replace him, which, in a sense, was true. But, Gene and I very quickly became good friends, and he remained a close personal friend until the day he died last winter.

Mr. Alexander: You had weekly staff meetings?

Mr. Lincoln: By the time I arrived, the weekly staff meeting was routine. I don't know when that practice started, but I assume it went back a fair way. Having a regular meeting became all the more important when we began publishing on a weekly basis because we used the meeting to determine what topics we would cover the following week.

Mr. Alexander: What about circulation?

Mr. Lincoln: Circulation always was a problem — or paying circulation, at least. We didn't have a really good handle on who our readers were. In the five years that I was at JEI, there were one or two times when the readership was going down, and we started solicitation campaigns to see if we could push the number back up again. By the time I left, it was a little easier to figure things out because we finally had the subscriber information on a computer. When I arrived, the subscriber list was on a set of metal address plates. I guess the accountant had a book she used for billing purposes, but we were unable to use that data to find out what kinds of subscribers we had.

One of the significant changes that happened while I was there was that JEI made its first foray into the modern world. We had bought some memory typewriters in 1980 or so, and then around 1982, we installed a small Wang computer system. I was one of the first people to use it. It took me three days to figure out how to print something! Wang had a good product, the top-of-the-line minicomputer of its day. So, we went through the transition of getting everything on the computer, which made it a little bit easier to do things like find out where our publications were going and to talk about strategies to expand the readership. Our circulation generally stayed in the 900 to 1,000 range.

The other thing that changed — which had been one of the things that Bob had inherited that both he and I were very unhappy about — was the embassy's practice of funneling money through JEI. For example, funds went to a lawyer in Washington who was on retainer but never did a single thing for us. Mr. von Loewenfeldt also worked directly for the embassy at that time, but the money that went to him was channeled through JEI so that it wouldn't appear to be coming from the embassy. And then there was money funneled through JEI for an annual conference on U.S.-Japan agricultural trade. Over the course of a couple of years, Bob got rid of many of those arrangements.

Mr. Alexander: Did you go to Japan on occasion?

Mr. Lincoln: No. There was no money in the budget for any of the staff to go to Japan. Actually, I did go once for Bob, who generally went once a year to do the rounds — the Foreign Ministry and the Ministry of Finance — usually in December or in January. The embassy thought that was a good idea for budget purposes, mainly to make sure that the Finance Ministry realized that they should not do anything to the JEI budget item. Other than that one year that I went for Bob, nobody on the staff went to Japan on JEI business.

Mr. Alexander: The reputation of the reports started to grow when JEI ceased to be a PR tool?

Mr. Lincoln: It started to pick up while I was still there. I think that the strategy that Bob put in place worked. If you publish a respectable product, people eventually will say that it's good even if they know what the funding source is. Phone calls from the press increased because journalists saw JEI as a place to get reliable information.

Mr. Alexander: Presumably, when you began to look for a new job, JEI's stature and your own reputation were solid enough so that there were no suspicions about the quality of your work?

Mr. Lincoln: That's correct. That's in part because the two people who probably were most responsible for getting me into Brookings were familiar with both me and with JEI. In the spring of 1984 when I was thinking about leaving JEI, I talked with both of them and let them know that I was in the job market. Both of them urged me to come to Brookings because Brookings had no Japan specialists.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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