BRIAN LAMB, HOST: Pat Choate, author of the book "Agents of Influence: How Japan's Lobbyists in the United States Manipulate America's Political and Economic System," what do you think of the Japanese?
PAT CHOATE, AUTHOR, "AGENTS OF INFLUENCE: HOW JAPAN'S LOBBYISTS IN THE UNITED STATES MANIPULATE AMERICA'S POLITICAL AND ECONOMIC SYSTEM": I think they're a very productive people. I think they have enormous organizational skills. I think they build first-rate products. And I think they have the capacity to come and understand our political system and be able, when necessary, to work their will to their own economic advantage here.
LAMB: Have you spent much time in Japan?
CHOATE: Yes, I have. In fact, one of the things that I did in the process of doing this book was go and study the Japanese political system, talked with many members of the Diet in the government. Talked to the private secretaries in the Japanese system, the people who raise and dispense the moneys. What I wanted to do was to try to understand the Japanese mind-set on politics there, to just see how it works. What I found was very interesting: that in Japan there are really three power centers. There are the bureaucrats, who are very competent and very good; they represent the very best out of their educational system. You have the politicians. And then you have the business interests.
The business interests attempt to influence the bureaucrats, who play a much more important role in Japan than civil servants do here in this country. But they are able to influence the Diet, their parliamentary body, through money. And quite literally, the money that is expended is enormous, far beyond anything that we know in this country. In the last election cycle in Japan, in the year leading up to it, over $4 billion was raised for political purposes. To put it into perspective, that was five times the amount that was spent in 1988 on all of our political races -- presidential, House and Senate.
So when the Japanese come to the United States they just see political expenditures and lobbying as just another business expenditure. And equally important, they see the levels required to buy influence here very cheap in comparison to what they're used to in their own home market.
LAMB: Do they have any public requirements -- I mean, public accountability for that $4 billion that they raised for politics over there?
CHOATE: They, in the home office, will report part of that money. What we will see is somewhere in the neighborhood of about $2 billion of that is reported. Another $2 billion, according to knowledgeable insiders, is unreported money. In the process of doing this book, I talked to the private secretary of a former prime minister -- former Prime Minister Tanaka, who was really the person behind the scenes in Japanese politics for almost 20 years. And he talked about going out and raising money in cash, and then coming back and taking that cash in literally a satchel where he would have as much as a million and a half dollars in Japanese currency at a time and passing it out to the supporters of Mr. Tanaka.
Something else that's very different in the Japanese political system than here is each member of the Japanese Diet is given enough money to hire two or three staff people. Each member will need a minimum of 16 to 18 staff people. The money to pay for those additional staff people must be raised from the special interest groups themselves. And so, in a very real sense, the special interest groups -- the business, agricultural and other interests -- finance the staffing of the individual Diet members, in addition to financing the political cost. It would be as though special interests in this country paid for the congressional staff.
LAMB: In your book, there is a picture here of former President Jimmy Carter. Who is the gentleman he's running with there?
CHOATE: Ryoichi Sasakawa, who is a man that formed one of the more radical Fascist parties in Japan in the 1930s. He was a man that agitated for nationalist policies, agitated for war, had his own private 15,000-person army, black-shirted army. Benito Mussolini was one of his idols. He went and spent time in Italy with Benito Mussolini; was a member of the government during the war; was imprisoned after the war by the occupation authorities as a class-A war criminal. He controls a major part of the legal gambling industry in Japan today. His gambling interests produce hundreds of billions of dollars. He has given away estimates of up to $400 million over the past couple of decades. He has invested over $20 million in the activities, the library, of former President Jimmy Carter. And what is not in that book, but what I discovered after the book was completed, earlier this year he gave $1 million to help finance the Nixon Library.
LAMB: Here's another picture of him. Who's he here with?
CHOATE: Benito Mussolini, who he says in his writings was one of his political heroes.
LAMB: Pretty tough on Jimmy Carter in your book?
CHOATE: Yes, I'm fairly tough. The point that I make is that we have a new post-presidential standard, and that standard is that they can accept money from a variety of sources. In fairness to Jimmy Carter, his activities are charitable and otherwise. President Reagan took some money personally for his speaking tour -- $2 million -- but he also solicited money from Japanese corporations, Sony among others, to help him build and equip his presidential library.
One of the points that I'm making here is that we have a flaw in our laws that, in effect, say that a president must raise private moneys to build these presidential libraries, which are, in a sense, a memorial to the president. They are their own pyramids, in effect. And yet the federal government will only take over the operating expenses after the facility has been built. I think what we really need to do is have the federal government pay for these libraries because it gives too many opportunities for rich people, here and abroad, to curry influence with the president while they're still in office as the presidents seek this money to build the libraries.
LAMB: As you know -- you've lived -- how long have you lived around Washington?
CHOATE: Oh, 15 years.
LAMB: Where's home, by the way? Originally?
CHOATE: Originally, it was a little town called Red Oak, which is by Waxahachie. It's between Waco and Dallas. My parents were cotton farmers.
LAMB: In Texas?
CHOATE: In Texas.
LAMB: OK. But as I was saying, as you know, there are a lot of people in this town that really don't like you.
CHOATE: Well, they don't like me now.
LAMB: And, you know, a lot of it's just word-of-mouth and you hear people around town talking about -- why do you think they don't like you? Why do you...
CHOATE: I think the dislike comes in some element because many people are lobbyists. They've been through the revolving door. They're making a great deal of money. I'm raising the question that what they do and what they have done may not be in the national interest. And I'm certainly saying that it does not elevate the concept of public service in this country to have this revolving door. So I don't think that they like that criticism. None of us like criticism.
Other people, I think, are criticizing me because they think that in raising these issues, that I'm arguing specific positions on trade or on foreign investment or on economics. I'm not. What I'm, in effect, arguing is that our political system has some flaws, both how we raise money, how we recruit people for the top jobs and what we permit when they leave office. So I think it's natural, since I am raising criticisms, that people would respond negatively.
LAMB: Are you feeling the heat?
CHOATE: Well, I certainly don't like being criticized. But on the other hand, I think the issue is sufficiently important that it merits raising, and I'm certainly not hesitant, obviously, about raising it.
LAMB: Let me read the toughest criticism I could find in print.
LAMB: Michael Kinsley...
LAMB: ... TRB ... New Republic, "Choate is a classic Washington type, a variation on the lobbyist and superlawyer he excoriates, the policy hustler."
CHOATE: Well, it's a ...
LAMB: What do you say ...
CHOATE: I think that's a silly comment. I've written a book describing how politics operates. I'm saying that there are flaws; that we should not permit the revolving door; we should not permit foreign corporations to operate within our society. I'm raising a legitimate political criticism. I'm putting it in a book. I'm standing forth to stand behind the book and take the criticism. I don't think that's hustling.
LAMB: (Reading) "He makes his living marketing ideas. His income depends on keeping those ideas simple, extreme and appealing. Until recently, he was vice president for policy analysis at TRW Corporation. Nice work if you can get it."
CHOATE: Do you think the idea of wanting to close the revolving door is extreme? Or is the idea of wanting to cause all of the exemptions and the lobbying acts that would require all who lobby to register so you could have sunshine, so you could know who is speaking for whom, extreme? Is it extreme to say that we do not wish foreign money within our politics? Those are the three central recommendations of this book. I think that he really went overboard on that criticism.
LAMB: Do you have any idea why Michael Kinsley was so critical of you?
CHOATE: No, I really don't. I think ...
LAMB: Do you know him?
CHOATE: No. I do not know him; I've not met him. But I think that that piece was filled with many personal and ad hominem attacks that, in truth, skirt away from the main issue. And the main issue is that we have a political system today in which money plays far too important a role, and we have a political system today where too many people, in effect, use their public office as a means eventually for personal gain. And in the process, I think, we discourage many competent and dedicated people from coming into government.
LAMB: OK. There's some more, and I want to ask you ...
LAMB: ... because everybody talks about this behind the scenes, as you, I'm sure, know.
LAMB: (Reading) "Just lately Choate and TRW parted ways, apparently over agents of influence. Choate isn't talking for the record." This was written some time ago. Are you talking for the record today? Did you part over this book?
CHOATE: Yes, I did part over this book. And Michael Kinsley is very wrong in his statement. Later on in that piece he talks about a martyr with a golden parachute. I have no golden parachute from TRW. I have no consulting arrangement with TRW.
LAMB: But did you ever?
CHOATE: No. I had no severance arrangement with TRW. Had he checked with me, he could have confirmed that very easily.
LAMB: How long did you work for TRW?
CHOATE: Ten years.
LAMB: Why did they fire you over this book?
CHOATE: The difficulty over this book is the Japanese government and the Japanese are very insensitive to any criticism. And what would have happened is TRW would have suffered on their sales in Japan because it would have been construed that this book represented the corporate view. It did not. You know, quite honestly, the Japanese have some difficulty understanding that in America books are written by authors and they represent individual views. They find it very difficult to understand how someone in an organization might have a view that is different than the organization, or that it may or may not represent the views of the organization itself. There's a saying in Japan, which is that the nail that stands out must be driven down. And what I document in the book is how time after time critics of Japan will suddenly find themselves under enormous pressure or there will be attempts to discredit them.
Jim Fallows, for example, was discredited. Jim Fallows is one of America's most distinguished journalists. I think his reporting is fair and accurate.
LAMB: Writes for the Atlantic.
CHOATE: Writes for the Atlantic Monthly. Carol Von Wolfren, who is a very knowledgeable and distinguished Dutch journalist, found himself in a circumstance when he wrote a book that described how the politics in Japan works, in which the Japanese ambassador in The Netherlands, where his headquarters of his newspaper was located, went to his publisher and said, "This book will cause great difficulty in Dutch/Japanese relationships." Carol Von Wolfren has been subject to intense personal attack that has nothing to do with his work. Clyde Prestowitz did a very good book that describes the inside of American trade negotiating relationships with the Japanese. And he has been, very falsely, labeled as a racist, as a Japan-basher, as anti-Japan.
It's a standard technique. It's a standard ad hominem approach where, when criticism arises, the Japanese and many of the people who are paid to represent them will attempt to discredit the critic so that they do not -- so the public discussion focuses on that person rather than on the substance of the debate. That is the purpose of ad hominem attacks.
LAMB: Let me then go to -- continue on the attack side of it.
LAMB: In some other articles that have been written, people say, "Well, Pat Choate criticizes, but, really, in effect, all he's doing is making lots of money off this book, and the Japanese have bought the rights to this book for $300,000."
CHOATE: Well, it means I'll get my expense money back, at least, that it cost me to do the investigation. I'm at least pleased for that.
LAMB: Is that the reason you wrote the book? To make the money?
CHOATE: Oh, absolutely not. I mean, I've written three other books where I've lost money on every book. As an author, when you write a book you just must assume, to be realistic, that you're not going to make any money on the book. I wrote this book because I think this is a very important issue. I think that one of our basic problems of governance today is the systemic, identifiable public corruption that exists -- legal, but nonetheless corrupt -- and that that corruption is, in effect, perverting our ability as a nation to honestly talk about our future and to honestly deal with many of our problems.
The problem that I describe here is the same problem in Washington that permitted the HUD scandal, where a series of insiders were able to get preferential treatment and misused roughly $2 billion worth of money; where savings and loan people were able to get members of Congress and the administration to look the other way while they plundered the S&L industry. And now, since influence is for sale here, foreign governments and foreign corporations are coming here, attempting to buy decisions in such a way so that, through political means, they can gain an economic advantage.
And the important thing that I show in this book is that while Japan is the example I used, because they have the largest, the most sophisticated and the most effective political effort, in the appendix to the book I identify 200 former officials during the 1980s that held the highest, most sensitive, positions, but then subsequently registered with the Justice Department as foreign agents and went to work to represent foreign governments and foreign corporations in Washington -- is two-thirds of the clients that are listed there are clients other than Japan or Japanese countries -- companies. The point being is the rest of the world knows that you can buy influence so easily in this town, and so they're coming here and buying it.
LAMB: We're showing the audience a little of these. It's hard to read this, but what we did do, in order to be able to discuss this, we've taken some of these names and the dollar amount and the countries that they represent and put them on graphics.
CHOATE: Oh, good.
LAMB: And we're going to go to that right now and show you the first one. You can look over there on the screen. Richard Allen was the national security adviser in the Reagan administration early years. Explain what that's telling us there.
CHOATE: What it says is that he represented an organization from South Korea that helped organize the Olympics; that had some political involvement, perhaps back with the federal government, and he was paid $972,000 during the decade of the '80s, or some period of the '80s, for that representation. The $1.58 million was paid to him by a Taiwanese governmental group.
LAMB: Let's look at the next one. Christine Bliss, assistant general counsel and a US trade representative. The law firm of Mudge, Rose in New York.
CHOATE: What that says is that Mudge, Rose, the law firm, was paid $11 million and that Christine Bliss was one of what turned out to be several people who were paid to assist the Toshiba Corporation in a variety of activities, including defeating the congressional efforts to impose sanctions on Toshiba in 1987 and 1988, when Toshiba sold technology to the Soviet Union that permitted them to manufacture propeller blades where their submarines could go undetected by the US Navy.
LAMB: Next name. Robert Cassidy, general counsel -- again, the United States trade representative, which is here in Washington. Wilmer, Cutler and Pickering law firm in Washington. Lufthansa Airlines of West Germany: $7,700,000.
CHOATE: That reflects again that his firm was paid that amount of money. Other people from that firm were also involved, including Lloyd Cutler, who had been general counsel to Jimmy Carter.
LAMB: Do you know who Robert Cassidy is? Do you remember what administration he served in?
CHOATE: I believe he was briefly in the Carter administration, wasn't he?
LAMB: Next, John Culver, former United States senator. The law firm of Arent, Fox. Toyota Motor Company: $1.1 million; and, also, another firm in Japan for $941,000.
CHOATE: You know, what was interesting to me in doing this research is my publisher would give me roughly 50 pages to do this appendix. And in essence, what I'm doing there is just going to the public records, where people have signed that they are the representative and they present the documentation of how much money that they've been paid, and reporting what is on the public record. Now it took some difficulty to track and put this down. But what really -- there were two things. Well, there were really three things that struck me in doing this.
One of those things is I just as easily could have done 100 pages as I did 50 pages. And the second thing that struck me in doing this was that the vast majority of the people, unlike the people that are shown in these graphics, are people that essentially are unknown, even by and large into the Washington community.
LAMB: Let me just stop you here a second because we've got Stuart Eisenstat's name on the screen. I want to show the audience that this amount of pages in your book right here was devoted to this chart showing all of the money that has been made by insiders in Washington and then law firms that people used to serve here.
CHOATE: That's right.
LAMB: I didn't mean to interrupt.
CHOATE: No, no. No. I thought it was necessary to demonstrate the magnitude of this and to be quite specific in showing how much money and what is available. And also to show what we don't know because I don't know, and we can't find out from the existing public records, specifically who they talked to and what they did in most of the cases. And equally important, what struck me in doing this is that since many of these people are really not high visible public-known people, such as a senator or a counsel to the president or a domestic policy adviser, is that many of these people came into government, stayed roughly 18 to 20 months, developed a contact list and then moved right on out into the lobbying arrangement.
But there was something more subtle that popped out -- there's a very real difference between the executive and the legislative branches. When you see a member of Congress in that list or other lists, such as Senator Culver, by and large what it reflects is a broken political career. It is someone that has lost an election and is now going out to make a living, in effect, using the skills and knowledge that they've acquired here in town.
LAMB: Paul Laxalt's on the screen now...
CHOATE: Yes, yes.
LAMB: ...another senator.
CHOATE: With a couple of countries -- Spain and Barbuda/Antigua.
LAMB: You are suggesting that there is a broken political career.
CHOATE: It's a broken -- for the members of Congress; and, in many cases, for the senior staff members in Congress. It's when their boss lost the election and they're out. When one takes a look in the executive branch, however, it's a very different circumstance. Oh, yes, a deputy trade representative for some organization in Bermuda -- almost $2 1/2 million. But for the executive branch what happens is an increasing number of people come into office with the idea that they're going to make the contacts; that public service is just really a route, or a path, to public gain. And that's only possible because we have this revolving door.
LAMB: Still looking at a member on the list. That's a former senator from Georgia -- Herman Talmadge. All these figures are during the years 1980 to 1990.
CHOATE: Only. Only. This -- and...
LAMB: Burson-Marsteller's a PR firm?
CHOATE: ...a press secretary to Nancy Reagan, and then she was one of the press spokespersons for George Bush during his 1988 presidential campaign.
LAMB: Let me ask you about Pat Choate for a minute.
LAMB: You said you were born in Texas?
LAMB: When did you leave it?
CHOATE: I went to the University of Texas and went to the University of Oklahoma to do my doctorate in economics. Went into state government there as a planner for the state. And spent, really, until 1980 -- I left Texas in the early 1960s -- in public service. I worked for the Department of Commerce, worked for the state of Tennessee, was involved in he Appalachian program -- lived and worked in West Virginia in the poverty programs for three years.
LAMB: Were you political at all during those years? Were you tied to a party?
CHOATE: No. What happened is I was nonpartisan. I'm still nonpartisan. I was hired as a professional economist. Development economics is my specialty. And over the years what I've done is move from worrying about state or regional development to national development. And during the 1980s that's what my books have been about.
LAMB: When did you move to Washington?
CHOATE: 1975. I came during the Ford administration years -- as director of economic research for an agency called the Economic Development Administration. And there, I administered a staff of Ph.D. economists where we studied what kinds of federal investments could make a difference in the underdeveloped parts of the country; that would assist them to do training, to build hospitals, roads, those things that are necessary for basic development of local economies.
LAMB: Was that a political appointment?
CHOATE: No. No. It was a career civil servant.
LAMB: When did you leave that job?
CHOATE: I left that job -- I went over to the White House during the Carter years and was senior economist on the reorganization project of economic and community development. And then from there I went with an organization called The Academy for Contemporary Problems, which was founded by the Batelle Memorial Institute and, in fact, worked out of the same building where C-SPAN is located, doing studies and books. And in April of 1981 I was hired as an economic adviser and policy analyst for TRW to assist its senior officers in their external relations on broader public policy issues -- not lobbying, but to talk about competitiveness and other issues and to write and assist them.
LAMB: When did you leave TRW?
CHOATE: In August of this year. August 1990.
LAMB: Were you surprised that TRW got irritated about this book and said, "We've got to sever relations"?
CHOATE: When I began the book I had an extended conversation with the then- chairman, and in the process of that discussion I thought it important that they understand the book and the nature of the book. And as you may remember, in 1988, I did a long piece in The Washington Post, in the Outlet, which, in effect, is the synopsis of the book. And so I was a bit surprised, yes.
LAMB: What do you do now?
CHOATE: Well, I'm going to wait until this particular book has run its life, which will be sometime, I would think, early next year. And I've had a couple of offers from think tanks and other organizations; I'm going to seriously consider them. And wherever I am I'll probably pitch myself into another book.
LAMB: In the middle of this book are lots of stories. It seems like there's a heavy emphasis on US trade representatives. I remember the name Harold Mahl -- Mahmgrem...
LAMB: ...the name William Everly...
LAMB: ...the name Robert Strauss...
LAMB: ...and the current US trade representative Carla Hills.
CHOATE: Yes. Correct.
LAMB: Did she ever do any work for Japanese firms before she became current US trade representative?
CHOATE: In the mid-1980s she registered with the Justice Department as a foreign agent for Daewoo, which is a Korean corporation. And in her disclosure files, when she became USTR, she listed that she had given business advice to Matshusita, which is a large Japanese electronic conglomerate, the firm that is bidding on MCA.
LAMB: Does that give you a problem, that somebody has had that experience before they get to the USTR?
CHOATE: It is somewhat troublesome. Harry McPherson, who was a general counsel to Lyndon Johnson, a very distinguished and knowledgeable lawyer around Washington, made the point that no lobbyist is born with a position on catalytic converters. That what happens is after a lawyer takes a client, they, in effect, begin to develop arguments for that client. They come to the point where they knock down the arguments against that client. And bit by bit, what happens is the attorney begins to integrate the client's view and the representation of that view into their own world views.
And that what happens is long after the client is gone, the attitudes and the views are integrated into the views of the lawyer or the advocate themselves, and it becomes, in effect, their views. It is literally an interesting metamorphose. I think it would be less troublesome to me of having foreign agents or lobbyists move into these positions if we had a clear understanding when they moved into these positions that when they moved out of them, that they would never again be a lobbyist for anyone -- domestic or foreign.
I mean, I think, within the context of our political system, is that it would be very wrong to have a discriminatory -- and if not unconstitutional -- standard between what we permit American companies to do and foreign companies to do, except on some basic things, such as contributing or participating in the elections itself. So what I'm advocating is that for positions such as the United States trade representative or national security adviser or secretary of State or Commerce is that a condition of employment is that when they leave office, they can be a lobbyist, adviser, counselor on political matters to no one, domestic or foreign.
LAMB: Do you have any hopes that that will ever be enacted by this government?
CHOATE: I think it will not be enacted by this government under normal political circumstances. Quite literally, there are too many Republicans and Democrats, too many liberals and conservatives, that are participating in this type of political enrichment. Watergate was only possible because a Democratic Congress was taking on a Republican administration and president. Ronald Reagan's success was only possible because he was able to mobilize a conservative constituent against what he at least characterized as a liberal political establishment. As I point out in this book, and as I illustrate in the appendix, I evenly divide it between Republicans and Democrats, liberals and conservatives, to say that this is neither a partisan nor an ideological issue.
What that requires, I think, in this town, if we're going to have changes and have the type of integrity that we require in the administration of our public affairs, is the American people themselves are going to have to make special demands upon their elected officials to institute these kinds of reforms. Quite literally, when you break it down almost to a trinity of reform, is to say: Those who represent us can never profit from that by being a political representative of a foreign government or a domestic corporation; that we want full registration of all lobbyists, so that we can know who is speaking for who; and that we will not permit through backdoor means foreign money into our political system.
This is a minimal set of standards. And it is very difficult for the political establishment to resist that when the cry and demand is made. And that's one of the reasons I wrote this book, is to say to the people -- is that the corruption that now exists in our democratic system and principles really does threaten much that we hold dear in this country, and that we must do something about it; that we cannot depend on the normal political processes to solve this.
LAMB: Wasn't that what you were doing for TRW, though, for the last nine years?
CHOATE: That's correct.
LAMB: Did you have a conscience problem doing it?
CHOATE: Oh, no. Doing what?
LAMB: Lobbying the...
LAMB: ...government and...
CHOATE: No, no.
LAMB: ...buying your way into politics?
CHOATE: No. In the TRW structure, it was split very carefully. TRW maintains lobbyists that lobby. My work involved no lobbying whatsoever. It was to work on longer, broader issues such as: What kinds of changes are required in public policy to promote better training of the work force? What kinds of changes are required that would permit us to have a trade policy that could be sensitive to the differences in cultures between Canada, Europe, Japan, Latin America? So in a very real sense, the work that I was doing at TRW was very much akin to the work I was doing when I was at a think tank.
LAMB: Isn't it all the same though? I mean, you were writing and appearing on television and radio shows and representing TRW. And you were the economist with integrity and knowledge and all that, and everybody gets a good feeling from what you would say. You had testified on the Hill. And isn't that an indirect way of lobbying?
CHOATE: No. It is, in effect, arguing an issue and arguing it totally in public. And in all of my statements that were put out, in all of my books, I was always very meticulous to make sure of two things: One is to make the point that I was an employee of TRW, so the listener or the viewer or the reader could have that information so they could make a judgment on what I'm saying; and at the same time, to also make the point that many of the views may or may not necessarily reflect the corporation. And, again, putting that out so the viewer or the listener could balance off their views of what they were seeing.
And one of the points that I make in the book is that very often, in the lobbying arena, what happens is those that are advocating certain positions never really reveal the source of the funds behind them. And policymakers, the general public, the press, at a minimum, need to know that. It may well be that there's no relationship between people's source of livelihood and their views, but the public deserves to know the information so they can make their own judgment.
LAMB: Go back over the amount of money that Japan spends in the United States every year lobbying. How much?
CHOATE: I go on the record that they invest $100 million per year in this community, and then the Japanese are investing roughly $300 million a year into what we would call grass-roots politicking; what in their publications they call "long-term" lobbying activities.
LAMB: What can they do in this country in this kind of activity that we cannot do in theirs?
CHOATE: We cannot hire high-ranking former government officials in Japan
on a mass scale to go back and petition the Japanese government and provide
CHOATE: Because in Japan it is simply against the culture of Japan. I interviewed officials in the Ministry of International Trade and Industry in the Foreign Ministry in Japan.
CHOATE: MITI. MITI.
CHOATE: And one of the questions that I would ask them is: What would be the reaction here if your current vice minister were to leave and come back in a year's period of time and be representing Ford or General Motors trying to change the rules and regulations here? It was a shocking question to even ask the people. And they'd say, "Well, we would be very courteous, but we wouldn't pay attention because we would realize this would be a bought man." And more importantly, when you would go out late at night and have candid conversations, as tends to be the case in the dynamics of Japanese social relationships, the people would say, "Not only would the person be disgraced, but his family would be disgraced."
Now that is not a standard that's unique to Japan. That is found in Germany; it's found in Britain; it's found in France; it's found in Italy. What it says is that other societies expect those who have charge of decisions that will affect the fate of the nation to comport themselves in such a manner where there is absolute assurance that there's full integrity in the decisions that they make. It is a standard that I admire. It is a standard that we should adopt.
LAMB: There are no more American television sets save part of the Zenith Television. I think even some of that's...
CHOATE: Made in Mexico. It's assembled in Mexico. But fortunately, the best jobs are still here in the United States. But it's the lone remaining American television manufacturing company.
LAMB: Did the American system of politics have anything to do with that? I mean, were we our own worst enemy in that?
CHOATE: Yes. What happened is the Japanese in the early -- in the mid-1950s formed a cartel inside their own country.
LAMB: What's a cartel?
CHOATE: A cartel is several companies coming together where they're going to act in restraint of trade; where they're going to, in effect, join together and use anti-competitive practices to attempt to totally control the market, to squeeze out competitors and to squeeze from the consumers a profit level that would not normally exist if there were full competition. So the Japanese companies came together, they formed a cartel. They, in effect, agreed upon prices. They agreed upon the levels that they'd permit their distributors to charge. They agreed that in their own distribution networks, that other manufacturers -- Japanese or foreign, would not be given access to those distribution networks.
They went to the Japanese government, and they were able to get the Japanese
government, who worked hand-in-glove with them, to exclude competitive foreign
sets. The Japanese manufacturers then raised significantly the price of television sets in Japan. As recently as 1975, a 19-inch set that would sell for $350 in the United States would sell for over $700 in Japan. They used that excess profit then to come to the United States and sell their products here at, in many cases, less than production cost in an attempt to drive the American manufacturers out of business.
LAMB: They do that on purpose?
CHOATE: Deliberately. The Japanese government...
LAMB: How do you know that, by the way?
CHOATE: I know that from documents from the Japanese Fair Trade Commission. In the post-war period, the occupation authorities set up something called a Fair Trade Commission, which was interested in consumers, sort of an anglo-American or a Western view, to promote competition that prohibited antitrust a -- like activities or cartels or monopolies.
And soon after this cartel was formed, the Japanese Fair Trade Commission found out about it, gave them an order to cease and desist. But what also was happening at the same time within the Japanese bureaucracy there was another fight under way in another agency called MITI. And it was interested in strengthening producers. So it was consumers vs. producers. The producers and the industries won out. And so though there were the orders, there were the findings, there were the investigations, it's on the public record. And in Japan, the policy of the Japanese government has been benign neglect.
As we move into the 1960s and '70s, the Japanese government has sanctioned 92
former cartels and a whole host of other areas where the industries get the protection of a closed market -- competitive foreign goods can't come in, at least in the point where the foreign good could make a dent into the market. There's a sharing of information. Some money is put up to assist the firms at the pre-competition stage. And then these firms move abroad in a predation that attempts to drive the foreign manufacturer out of business with activities that are illegal, to be quite honest.
LAMB: Let me ask you about all these sets that we're used to here: the Sonys, Toshibas, Mitsubishi -- all those sets that we see and a lot of Americans buy. Can the Zenith be sold in Japan?
CHOATE: No. As recently as 1975, when five million sets were sold in Japan, only 500 foreign sets were imported. But ...
CHOATE: Because they're excluded. I mean, quite literally...
LAMB: Why do we allow that to happen?
CHOATE: Well, we allow it to happen because the Japanese have enough political influence to deflect it. The story that I tell in the book, which is, I think, illustrative of a broader case, is -- what happened in this particular circumstance is when the American manufacturers discovered that Japanese sets were being dumped, they filed a petition. The Treasury took three years to make a ruling on their petition. In other words, they were denied relief from this predation that they were owed under the law.
Then we moved into the Nixon years and, again, economic matters were of a low
priority to Richard Nixon and Henry Kissinger. I mean, quite honestly, foreign policy and defense considerations were priority. They would trade off economic interest. But this predation continued, and as it continued we moved into the Carter years. And in that eight-year period from 1968 to 1977, we went from 28 to six American-owned manufacturers. When we came into the Carter years, something very interesting happened.
LAMB: Television manufacturers.
CHOATE: Television manufacturers. When we moved into the Carter years, it had then begun to be learned that not only were the Japanese dumping sets, but they were paying illegal rebates -- kickbacks, in effect -- to many of the American distributors of $35, $40 a set, which, in addition to the dumping price, was really just cutting the ground out from under the American manufacturers, illegally. They were filing false custom duties as these goods were brought into the United States.
LAMB: So no one knew that the distributors...
CHOATE: Couldn't know it. Couldn't know it.
LAMB: ...were getting $40 kickbacks.
CHOATE: Couldn't know. Perfect crime.
LAMB: How did you find out?
CHOATE: Well, what happened is one of the distributors went into the Customs Service and reported, at the advice of their lawyer, what they were doing. And once they reported what they were doing, the Customs Service took it to the Justice Department and began a grand jury investigation across the country. And then that particular scheme was revealed.
And so -- but what was also happening as this was unraveling in the early 1970s, the Japanese hired a former deputy United States trade representative, a man named Harold Malgrem. Five Japanese companies paid him $300,000 to help effect an agreement with the Carter administration. And the essence of that agreement was, first, that the Japanese -- in public at least -- would agree to something called an orderly market agreement, where they would limit their imports to a million and a half sets a year. That was essentially a meaningless agreement because they had roughly a million sets in American warehouses and they had bought many of the old American companies for 30 cents on the dollar. And so they could produce the sets and fill it there. But what was most important ...
LAMB: Produce them here in the United States.
CHOATE: Produce them here in the United States -- assemble them, really, in the United States. But what was also not reported at the time is that a secret protocol was made between the US and the Japanese. And under the secret protocol, the US agreed that it would go against Zenith in a countervailing duty case that it had won in a lower court. And the United States, literally, went against Zenith as a friend of the court brief all the way to the Supreme Court.
LAMB: Where was this secret agreement made? Who made this agreement?
CHOATE: It was made by the Carter administration. It was signed by Robert Strauss in the spring of 1977, soon after they came into power.
LAMB: And he was in -- he was a US trade representative, Robert Strauss.
CHOATE: I think he was a special trade representative at the time. He
was the person in charge of America's trade relationships with the Japanese. But with ...
LAMB: Now let me jump before you finish that ... But then if you go to your appendix, you'll find that Robert Strauss and Akin, Gump, law firm which he is a major partner in, gets a tremendous amount of money today from Japan?
CHOATE: His law firm does. Robert Strauss is not registered as a lobbyist for any foreign interest. Briefly, after he left the Carter administration, he registered as a lobbyist for the People's Republic of China. But that lasted only briefly. And subsequently, he has not officially been a foreign agent for any foreign government or any foreign corporation, though his law firm does represent a Japanese corporation.
LAMB: Well, what does that mean, though? Does that mean he cannot pick up the phone and call anybody and talk to them about a Japanese problem?
CHOATE: He could, but the registration laws are so porous today it would not be incumbent upon him to register there.
LAMB: So a lawyer in his firm can go and say, "I'm with Bob Strauss' law firm, and I'm here to talk to you about such and such." And so you get the connection.
LAMB: I guess really what I want to ask you is whether or not if you took the
Bob Strausses and the Harold Malgrems and all of these people that used to be
in the government who are now making money off of representing foreign
companies out of this process here in Washington, would it make a difference?
And would we have 28 American television manufacturers still in this country?
CHOATE: I think it would make a big difference.
LAMB: Would it make the difference?
CHOATE: It would make...
LAMB: Can you buy your way into this town and into the politics?
CHOATE: If the American companies were making first-class goods and services -- and the American companies were with the televisions. If you closed the revolving door, it would make the difference because what would happen is those who are in office, who are negotiating from America, would know that the person across the table with whom they were negotiating would -- there would be no possibility that they would be a client. And so they could be hard-nosed on them.
LAMB: Can you buy American politicians?
CHOATE: You've always been able to buy American influence, let's say, in this country. The difficulty that we have today is that many of the decisions are made by the executive branch. They have great latitude and authority. Many of the people who come and make the decisions are simply passing through, only going to be there for 18 months. When they come and pass through, they're attempting to develop a client list.
LAMB: Well, put yourself -- and you were around the Carter administration; you were around the...
CHOATE: And the Ford.
LAMB: And the Ford administration. Put yourself back in...
CHOATE: As a civil servant?
LAMB: Or anybody.
LAMB: Even a politician. And so here you have a scheme that the cartel in Japan has come up with to run American television manufacturers out of business, and these people come to the door. And you know that they're going to run American television manufacturers out of business. Why would you go along with that?
CHOATE: They're only going to run them out of business if you permit them to run them out of business. There are American laws to stop this. And now...
LAMB: But why do you permit them, though? That's what I'm getting at. Why would somebody with a clear conscience, an American, serving in an American job in American government say to whoever, whether it's Bob Strauss or Mr. Everly or any of these people -- say, "Sure, we'll work out this deal"? Why would they want to do that?
CHOATE: There are many justifications for it. You might make it under the argument, is that, "We'll do it because we want the Japanese to continue to have military bases." You might do it under the basis that we want the Japanese to stay into the GATT negotiations. You might do it because you're worried about US/Japan relations. The Japanese really do understand how to play our politicians like a Stradivarius. I mean, quite literally, they are fully prepared -- and have been fully prepared -- to make a commercial issue, a litmus test, of US/Japan relationships. Now in the past, when we had an easy economic superiority, it was of less significance. The point is it's becoming much more costly when we trade off our jobs and our industries for foreign policy reasons. There's a million self-justifications for this.
The other thing that -- though, that I point out is we have had cases of what I consider just to be sheer, irresponsible greed. We had a senior official in the Justice Department who was responsible for extraditing criminals back to the United States, including members of the Medellin cocaine cartel, left office and goes to work for the bosses of the Medellin cartel.
LAMB: Did you name that person?
CHOATE: Yes, I do. Michael Abbell. And moreover, this person went to Spain when one of the Colombians had been captured by the Spanish government and testified against the Justice Department, his old colleagues, to help the guy not come back and has worked to weaken our extradition treaties. We've had, in the midst of trade negotiations on textiles and auto parts, people change sides in the middle of negotiations. This is aberrant behavior; it is not the norm. But what we've also had is this much more sophisticated movement of people, soon after they leave office, onto the foreign payrolls and onto the payrolls of the foreign corporations.
LAMB: We're running out of time rapidly, and there's another chapter that I want to touch on very quickly. And I want to ask you to define these six different excuses that you say the Japanese make -- quickly if we could, so we can go through them. This is a whole chapter. You say that Japan always has these excuses.
LAMB: Whenever it comes to the challenge of why this is all -- why there -- you know, why the differences of opinion between our two countries. Excuse number one: Japan creates jobs for Americans.
CHOATE: The fact of the matter is all foreign investment in the United States in 1988 only created 32,000 new jobs. What is counted as new jobs in this propaganda are the jobs in the companies that are taken over. And when you take a look at many of these companies, you've actually had close-outs of part of those facilities. I think that the real job situation is that there's been a negative. But, remember, for all foreign investment -- European, Canadian and Japan -- it's only 32,000. That's only 5 percent of the new jobs that were created.
LAMB: So all those automobile companies built around the United States only amount to this many jobs.
CHOATE: Yeah. But what you had is you had seven Japanese plants created; you had seven American plants close.
LAMB: OK. Excuse number two: Japan's critics are racist.
CHOATE: This is the ad hominem attack that we were talking about earlier. If one raises a criticism about Japanese practices, one can almost assume automatically that you'll be attacked as a Japan-basher or a racist. I mean, the first line of defense is to make an ad hominem attack against critics.
LAMB: What's ad hominem mean?
CHOATE: It means personal.
LAMB: Excuse number three: It's America's fault.
CHOATE: The argument here is that Americans don't build goods that are top quality, that they're worthy; that the Americans don't try to understand the language; that we don't try hard enough. The reality is when American goods come up against Japanese goods in Europe and other countries, we win a good number of the cases. The reality is the America's fault argument is really saying to us: Try harder. It's just an excuse to keep us out of their market when we have competitive goods.
LAMB: Excuse number four: globalization.
CHOATE: Globalization is the argument that it really doesn't matter who owns the companies and controls the manufacturing in the world. That we're -- policy sophisticates shouldn't worry about this. The reality is that in Europe, the Europeans will permit foreign investment on a massive scale. Nine percent of the manufacturing base in Germany is foreign-owned; in the United States, 9 percent. In Japan, only 8/10ths of 1 percent of the manufacturing base is foreign-owned. Only 15 Japanese companies were purchased by foreigners last year. So globalization is for us and not for them.
LAMB: And these are the excuses that the Japanese make when we...
CHOATE: Attempt to get them to open their market or take our competitive goods.
LAMB: Excuse number five: Japan is unique.
CHOATE: We've had a number of arguments here that Japan can't take American-made blood analyzers because Japan's blood is different; that Japan can't take foreign-made skis because Japan's snow is different; that Japan can't take American timber because Japanese earthquakes are different. The Japan-is-unique argument is used to deflect attention, except when the revisionists have made the argument that Japan is different and should be treated different. And then the Japanese reject the argument.
LAMB: This paragraph jumped out at me. You quote an unnamed American Japan watcher, and this is what that person said. `It says quite a it about the innate race consciousness of Japan. A non-Western, non-Christian, non-Arab country with no native Jewish population and no history of conflict with Israel, that it is now reaching out into other cultures to find new categories and new outlets for its own racist impulses.'
CHOATE: The Japanese are very insular. And we have these instances that appear, over and over again, of this rash of attention to clearly anti-Semitic literature within Japan. We have the high-level government officials, time and time again, making slurs against black Americans. The Japanese are obsessed by the question of race, and so...
LAMB: We're running out of time. I've got to read this to ... this observer says, "But then the Japanese tend to think of all non Japanese as inferior."
CHOATE: This is a real problem. And so this is the basis of many of these charges of racism. If, in effect, one makes a criticism, they say it's racism. In many cases, it's just merely a projection.
LAMB: As a last question, but you say when somebody criticizes you, that this is not a Japan-bashing book.
CHOATE: This is a Washington-bashing book. What we're seeing is the corruption of our democratic principles. It's our country. Americans are the only ones that can stop this.
LAMB: It's called "Agents of Influence." The author is Pat Choate. Thank you very much for joining us.
CHOATE: Thank you, Brian.
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