The Journal The Authority on Global Business in Japan

COVER STORY | GOVERNOR

OCTOBER 2014

Samurai & Cowboys
Rick Perry: Japan is America’s most important ally

By Brandi Goode

Unlike his 19th-century predecessor with a shared surname, the governor of Texas extolled the Japanese hospitality received on his first visit.

“It’s another time, another Perry, and any American who visits Japan can feel he is among friends,” said Governor Rick Perry, referring to Commodore Matthew Perry’s incursions into Japan in the 1850s.

Making friends across the Pacific seems a priority for Perry, who has been rumored as a potential presidential candidate in the next election. The governor added Japan to his itinerary after receiving an invitation to the World Economic Forum in Tianjin, China, saying it was important “to come and sit down while we’re in the neighborhood.”

Like the current US government leaders, Perry is keenly aware of maintaining diplomatic relations with Japan and China, and was quick to skirt political questions during an interview with the ACCJ Journal.

Instead, his speech to a sold-out crowd at an ACCJ event on September 8 focused on trade—specifically the Trans-Pacific Partnership (TPP) agreement—energy, and the shared values that fortify the US-Japan alliance, which he called America’s most important.

The Texas miracle
Rick-PerryHe also did a fair share of boasting about his achievements and the Texas economy, which, in contrast to a majority of US states in the past few years, has posted remarkable growth. Media have come to refer to the phenomenon as the “Texas miracle,” a term that does not sit well with Perry.

“I don’t like to call it a miracle. Miracles are things you can’t explain; this you can, and it’s pretty simple,” he said.

Perry went on to outline his four steps to economic progress.

1. Keep the tax burden light enough to encourage growth. There should be just enough income to allow government to fulfill people’s expectations, such as maintaining roads and education standards.

2. Establish a regulatory policy that’s fair and predictable. This is crucial, he said, to attracting investment, as companies will spend money and hire staff in a place where they know the rules are not going to change in the middle of the game.

3. Maintain a legal system that doesn’t allow for oversuing. Perry said Texas has enacted the most sweeping tort reform in the nation, which discourages frivolous lawsuits. Perhaps this is not Japan’s greatest concern, however.

4. Improve policies regarding public schools, which should be held accountable for educational standards. This translates into a skilled workforce. Perry said a key reason for eBay and other companies’ decisions to relocate to Texas hinged on the availability of skilled labor in the state.

This is great for Texas, but can the model be replicated in Japan?

According to Perry, it can be copied anywhere. “The hard part is finding men and women to implement these changes in policy,” he said, perhaps hinting at his own ability to reform the US economy if elected president.

A key part of this four-step formula is lowering corporate tax, an issue at the forefront of debates in Japan. Just this April, Toyota Motor Corp. announced its decision to move its headquarters to Plano, Texas, after 50 years in California. The lower cost of living and tax structure were primary factors in the decision.

Perry is well aware of the tenets of Abenomics, which he supports wholeheartedly. He endorses a reduced corporate tax, because, “It just works. People will argue against it forever, but the reality is that businesses will risk their capital and hire people if government makes this commitment [to lower taxes].

“All it takes is the courage of the leaders to replicate what happened in Japan in the 1980s, and I am quite confident it can happen again.”

Much of Perry’s talk reaffirmed his belief in a limited federal government, a topic that is also pertinent in Japan as new responsibilities are shifted to regional governments under the Abe administration.

“There are always governments that act as if they can overtax, overregulate, and just generally interfere in business and employment, without inviting bad consequences,” he said.

“Whether it’s Europe, Asia, the Americas, or anywhere else, the same broad principles are going to hold true. The more a nation respects labor and capital, the more it will prosper over time. The more secure a country is in the rule of law—with equally clear limits on the power of the state—the better off its people will be in so many ways.”

With this he highlighted how the greatest periods of economic growth in the United States, including under the administrations of John F. Kennedy and Ronald Reagan, coincided with the times of greatest economic freedom. Businesses in Japan are certainly hoping his message rings true with leaders here.

Vote yes for TPP
Japan and the United States, as the two biggest economies participating in the TPP, have a “singular responsibility,” Perry said, to advance negotiations.

Calling the agreement “one of the defining opportunities of this generation,” Perry stressed that both nations must stay focused on all they stand to gain if the pact is approved, and that secondary interests should not be allowed to interfere with the larger goal of freer trade.

He pointed out how our two economies account for nearly one-third of global domestic product, and share some $300 billion in annual trade.

“Measured by their combined economic potential, you’re not going to find two allied nations as essential to one another as the United States and Japan, in the progress we can make and the good influence we can have,” he added.

“This is a test of leadership.”

Partners in energy
As commerce was Perry’s primary motive—at least that which was stated—for visiting Japan, energy trade was a key theme.

With the shutdown of nearly all of the nation’s 42 nuclear reactors, Perry said Japan “could and probably will be a major purchaser” of Texas’s liquefied natural gas (LNG), which he called Tokyo’s “new fuel of choice.”

The state has been ramping up its production of shale gas and is keen to set up purchasing agreements with other economies. In fact, many Japanese concerns have become involved in shale-gas production in Texas, in anticipation of new policies under debate.

Japan currently relies on outside sources for 90 percent of its energy, and thus any potential long-time supplier must be “secure, stable, and friendly,” to guarantee cheap and abundant energy.

Energy security is a global concern, Perry emphasized. “For years in America, we’ve talked and talked about the goal of energy security. Just about the last thing this or any country needs is to depend on foreign governments that use energy as a strategic lever, manipulating supplies to suit their own designs,” he said.

Shared values
Japan and the United States—even Texas—share common values. On the state level, both sides are conservative. Texan and Japanese businesses are compatible in many ways, and commerce is as strong as ever between US and Japanese companies.

After the ACCJ event and interview, Perry met with JR Group to discuss plans for a high-speed rail line between Houston and Dallas. So far, the commercial partnership has gone well.

One media outlet described the interaction of Japanese and Texas interests as “the spirit of the cowboy meeting the spirit of the samurai,” which Perry calls “a formidable consideration.”

On the national level, Perry emphasized our nations’ shared beliefs in democracy and the rule of law. Geopolitics and economic interest are but some of the things that unite us, he said, but above all “we are joined by conviction in an alliance of values.”

And this, he said, if we continue to manage it well, will bolster the security architecture of the Asia-Pacific region.

While Perry declined to admit ambitions for the presidency, he was not shy about his goal of increasing opportunities for Texas businesses in Japan, in the defense sector in addition to energy. Lockheed Martin Aeronautics Co. has its headquarters in Fort Worth, Texas, after all.

Governor Perry concluded by praising Japan’s achievements and current direction of reform.

“A strong Japan is good for America and this region.”

cover-chart

[The United States and Japan] are joined by conviction in an alliance of values.

placeholder