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Write a   reviewing the past two weeks of materials and discussions by responding to the following questions. Note that this is not short answer, and should be written as one , conforming to the guidelines under Syllabus & Couse Info.  a) Based on the article “The growing business power of the Pacific Rim  ”(Bosch & Kleiner, 2001), explain why is it critical to differentiate between the Pacific Rim as a geographic region and as an economic region. In your post, highlight the international business implications of such differentiation. b) Highlight three key ideas from the article “The reality of the Eastern business mind  ” (Boettcher, 2007) and explain how each would influence your thinking when conducting business in the Pacific Rim countries. Management Research News The growing business power of the Pacific Rim Thomas Bosch, Brian H. Kleiner, Article information: To cite this document: Thomas Bosch, Brian H. Kleiner, (2001) "The growing business power of the Pacific Rim", Management Research News, Vol. 24 Issue: 3/4, pp.141-144, https://doi.org/10.1108/01409170110782766 Permanent link to this document: https://doi.org/10.1108/01409170110782766 Downloaded on: 27 March 2018, At: 07:48 (PT) References: this document contains references to 0 other documents. To copy this document: [email protected] The fulltext of this document has been downloaded 248 times since 2006* Users who downloaded this article also downloaded: (2001),"Effective personnel management practices in the Philippines", Management Research News, Vol. 24 Iss 3/4 pp. 149-152 <a href="https://doi.org/10.1108/01409170110782784">https://doi.org/10.1108/01409170110782784</a> (2001),"How to manage personnel with positive drug test results", Management Research News, Vol. 24 Iss 3/4 pp. 145-148 <a href="https://doi.org/10.1108/01409170110782775">https://doi.org/10.1108/01409170110782775</a> Access to this document was granted through an Emerald subscription provided by emerald-srm:247805 [] For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services. Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. *Related content and download information correct at time of download. D ow nl oa de d by J oh ns on & W al es U ni ve rs it y A t 07 :4 8 27 M ar ch 2 01 8 (P T ) https://doi.org/10.1108/01409170110782766 https://doi.org/10.1108/01409170110782766 THE GROWING BUSINESS POWER OF THE PACIFIC RIM by Thomas Bosch and Brian H. Kleiner The Pacific Rim can be defined in two ways. Geographically, the name refers to the areas containing volcanoes located on the east and west coasts of the Pacific Ocean. These areas include the west coasts of North and South America, the east coasts of Asia and Australia, and the many islands in the Western Pacific including Japan, the Philippines, Indonesia, and New Zealand. When referred to in an economic or business context, the Pacific Rim is usually used to indicate just the United States and Canada and their significant trading partners in the Western Pacific. This latter group of coun- tries consists of Japan, South Korea, China, Hong Kong, Taiwan, the Philippines, Thailand, Malaysia, Singa- pore, Indonesia, Australia, and New Zealand. It is the latter definition of the Pacific Rim that will be discussed in this article. The Pacific Rim covers a vast area of the globe. Countries within this region range from large in area and rich in natural resources, such as the U.S., Canada, Australia, and China, to very small in area and almost non- existent in natural resources, such as Hong Kong, Singapore, Taiwan, and Japan. Over 60% of the world’s popu- lation lives in the Pacific Rim and because of the high economic growth rates in many parts of this region, the Pa- cific Rim will soon become the world’s largest market for consumer and industrial goods. The Soviet Union has demonstrated the importance it places on the region by maintaining a Pacific fleet of approximately 440 surface ships and 135 submarines, which is larger than either the Russian Black Sea or Atlantic fleets. 1 Growing Economic Power in the Pacific Rim Of growing importance to corporate management in the U.S. is the rise in trade with the Asian nations of the Pa- cific Rim and the resulting rise in their economic strength. In 1959, trade with these countries represented only 6% of American GNP. By 1986, trade had grown to 17% of GNP. Trade with the Pacific Rim has reached 25% by the year 2000. 2 As of 1980, trade with Asia had surpassed trade with Western Europe; and Asia has been the number one trading region with the U.S. ever since. The rapidly expanding trade in the Pacific Rim has allowed many Asian countries to raise their per capita in- comes dramatically. In addition, the higher savings rates of these countries (17% in Japan versus around 2% in the U.S. 3 ) has allowed Asian banks to accumulate large asset pools which have been used to expand industries at home and, recently, to invest abroad. The ability to accumulate and concentrate capital has allowed Nippon Tele- graph and Telephone Company of Japan to replace IBM as the world’s largest public company and allowed Dai Ichi Kangyo of Japan to surpass Citicorp as the world’s largest bank in terms of assets. 4 The Japanese have also invested heavily abroad. In 1980, Japan had only $11 billion in net overseas holdings. Since then that total has risen to over $180 billion. During the same period American net overseas investments fell from $106 billion to -$264 billion. This year alone the Japanese are expected to buy over $50 billion in American stocks and bonds and loan billions more on commercial ventures. 5 The Japanese banking system has become so strong and the Japanese have invested so much money in the U.S. that decisions made in Japan’s Min- istry of Finance presently affect stock prices on Wall Street and even the mortgage rates paid by American home buyers. Although Japan is clearly the economic leader of the Asian Pacific Rim, the newly industrialised countries of Taiwan, South Korea, Hong Kong, and Singapore have also made enormous economic gains in the last decade. Averaging close to 10% annually, the newly industrialised countries have an economic growth rate which far surpasses every other region of the world. Along with Japan, these countries have developed strong export economies in spite of the fact that they all have small areas, large populations, and weak resource bases. They have been successful because they share the several critical ingredients for economic development necessary to succeed in today’s world economy—a strong work ethic, an openness to new ideas, and the ability to co-operate within groups to achieve goals. As a result of their successful export economies, over 50% of the United States’ current trade deficit is with Pacific Rim countries; and the currencies of these countries have appreciated consid- erably versus the dollar. 141 Volume 24 Number 3/4 2001 D ow nl oa de d by J oh ns on & W al es U ni ve rs it y A t 07 :4 8 27 M ar ch 2 01 8 (P T ) Opportunities and Threats The strong economic gains of the Asian Pacific Rim nations present many potential opportunities and threats for American businessmen to consider. The opportunities will be in the areas of exporting and finance, while the threats will be mainly from more vigorous competition and corporate takeovers. Exports The major opportunity for American businessmen is in the area of world trade, where an unprecedented opportu- nity exists for exporting American products. The opportunity has been created by the following factors which are the direct result of the Asian Pacific Rim’s growing economic power: - Rising per capita and disposable incomes in Asian nations along with a strong desire by young Asians for foreign name brands. - The successful pressure byworld trade agencies toreduce tariffs inJapan, Taiwan, and South Korea. - The recent encouragement of the Japanese government for more internal consumption and less sav- ing by the Japanese people, which has stimulated the demand for imports in that country. - Reduced shipping rates for American goods because ships that bring cargo from the Western Pacific often cannot find cargo for their return trip. - The comparative advantage American high-tech products still have over the Japanese, especially in Asia where the Japanese often attempt to export low quality goods. AWord of Caution Although the returns can be quite high for a successful exporter, many of these ventures also carry a high degree of risk. Any exporter should plan carefully and move cautiously in any prospective market. The exporter will need to familiarise himself with the language, customs, and institutions of the particular market he is entering so as not to alienate his product from his potential customers or local authorities. One method used by some compa- nies is to send an Asian-American sales force who are fluent in the language and are already familiar with many of the local customs. To be successful, exporters should also maintain sales facilities in the prospective coun- tries, advertise, price competitively, produce specially designed products, and build research facilities in these countries (especially in Japan in order to gain product acceptance by the older generations and to monitor new developments in Japanese technology). Exporters of technology have an additional risk to consider. They must weigh carefully the immediate profits of such a venture against the possibility that the technology they export may eventually be used competitively against them. This can happen easily because many Asian nations do not have strong laws that will protect an ex- porter against patent infringements. The risk is particularly great in China where laws and contract terms change constantly with the political environment. An American businessman hoping to take advantage of the great mar- ket potential in China will normally face the following conversation: “‘What protection or redress do I have if things go wrong with a deal?’an American executive is likely to ask. ‘You have our good will’, a Chinese official is likely to reply with a smile. ‘You can trust the word of the Chinese people’. Negotiating in China has reduced many strong men to tears”.* Financing Growth Opportunities Another opportunity for American businessmen is in the area of finance. The large savings rates in Asian nations have left Asian banks with large sums of money to invest while the recent devaluation of the dollar, high Ameri- can interest rates, and low returns on Asian investments have made American investments look quite attractive to foreign investors. American businessmen can take advantage of this situation by borrowing money from Asian banks to finance growth opportunities within American companies. Organisations which have already taken advantage of foreign investment capital are VF Corporation, Boston College, Marriott Hotels, and Bank of America. 6 Another method of taking advantage of foreigners’ willingness to invest in the U.S. is the use of sale and lease-back arrangements. American companies can raise capital for new projects or retire debt by selling their office buildings and real estate assets in major American cities to foreign investors and then leasing the assets 142 Management Research News D ow nl oa de d by J oh ns on & W al es U ni ve rs it y A t 07 :4 8 27 M ar ch 2 01 8 (P T ) back. The Japanese are willing to pay extremely high prices by American standards for these assets because of the relative strength of the yen and the low returns on real estate investments in Japan. An example of this type of Japanese investment is Shuwa Corporation’s purchase of the Arco Plaza in Los Angeles for $620 million in 1986. This was the highest amount paid for a piece of property in L.A. history and a much higher amount than any of the competing bids. 7 Many other Japanese investors are overpaying for prime real estate in other cities, al- though not to the excess that Shuwa Corporation did. Threats to American Business The strong economies of the Asian Pacific Rim also pose several threats and concerns for American business- men. Some potential problems American executives should be aware of are: - Increasing competition in the market place both here and abroad for the sale of manufactured goods and high-tech products, especially as China, Indonesia, Thailand, and Malaysia industrialise and en- ter the competition. - A greater production advantage for many developing Asian nations whose higher birth rates, younger populations, and larger rural populations will keep industrial wages low while American labour rates continue to rise because the U.S. will have no such sources of labour. - American businesses that have not already moved their production facilities overseas will have to give serious consideration to doing so or be priced out of the market. An example of this is the soft- ware industery where the cost of designing, producing, or adapting software programmes is ap- proximately 50% less in Asia than it is in the U.S. 8 - The possible take over of American companies by foreign competitors. The strength of foreign cur- rencies versus the dollar and the recent drop in American stock prices makes this an attractive oppor- tunity for foreigners. The Japanese are currently attempting to buy financial companies as well as entertainment and manufacturing companies. - The possibility of retaliatory measures by foreign governments if the U.S. passes protectionist legis- lation, a likely occurrence if there is no significant improvement in the balance of trade. - Continued building of subsidiaries in the U.S. by the Japanese in order to avoid American trade laws. Production from these factories will also compete with American exports in Europe where many restrictions apply to products produced in Japan but not to products produced by their Ameri- can subsidiaries. Conclusion Stronger economic power in the Pacific Rim will provide both positive and negative prospects for American management. Some industries will be able to take advantage of the situation by increasing exports or using Asian nations as a source of financing while other industries will need to develop new strategies to fight a new wave of competition, corporate takeovers, and competition from foreign built subsidiaries. Because of the latter two possibilities, managers in American companies as well as graduates entering a business career should re- member that some day they may be working for a company whose headquarters are based in a foreign land and whose management may expect things done in a manner that most Americans are unaccustomed to. Endnote *Aikman,David(1986).PacificRim:Areaof Change,Areaof Opportunity.Boston:LittleBrown&Co.,p.67. References 1. Aikman, David (1986). PacificRim:AreaofChange,AreaofOpportunity. Boston: Little Brown & Co., p.14. 2. Ibid., p.5. 3. Milner, Brian (Nov. 14, 1987). “Home Ownership in Japan is a Fading Dream”. The Register, p.F3. 4. Dow Jones & Company (Sept. 18, 1987). “Tracking the Leaders”. Wall Street Journal, p.23D. 5. Sesit, Michael R. (Sept. 18, 1987). “When Tokyo Picks Up the Tab”. Wall Street Journal, p.5D. 143 Volume 24 Number 3/4 2001 D ow nl oa de d by J oh ns on & W al es U ni ve rs it y A t 07 :4 8 27 M ar ch 2 01 8 (P T ) 6. Ibid. 7. Lowenstein, Roger (Sept. 23, 1987). “Maverick Tokyo Firm Acquires Office Towers in U.S. at a Fast Pace”. Wall Street Journal, p.1. 8. Besher, Alexander (Nov. 15, 1987). “Asians Put Hard Sell on Software Firms”. The Register, p.M2. Bibliography Aikman, David (1986). Pacific Rim, Area of Change, Area of Opportunity. Boston: Little Brown & Co. Besher, Alexander (Nov. 15, 1987). “Asians Put Hard Sell on Software Firms”. The Register, p.M2. Darlin, Damon (Nov. 20, 1987). “Feud With U.S. Drains Japan’s Diplomats”. Wall Street Journal, p.20. Darlin, Damon (Nov. 10, 1987). “Japan Turns Corner on its Trade Surplus”. Wall Street Journal, p.30. Dow Jones & Company (Sept. 18, 1987) “Tracking the Leaders”. Wall Street Journal, pp.23D-25D. Lowenstein, Roger (Sept. 23, 1987). “Maverick Tokyo Firm Acquires Office Towers in U.S. at a Fast Pace”. Wall Street Journal, pp.1,22. Milner, Brian (Nov. 14, 1987). “Home Ownership in Japan is a Fading Dream”. The Register, p.F3. Schoenberger,Karl(Nov.20,1987).“JapanesePricesForPropertyStartingtoFall”.WallStreetJournal,p.20. Sesit, Michael R. (Sept. 18, 1987). “When Tokyo Picks Up the Tab”. Wall Street Journal, pp.5D-7D. Sesit, Michael R. and Herman, Tom (Nov. 20, 1987). “Plan For U.S. Trade Bill Could Allow Big Japanese Ex- pansion in Bond Market”. Wall Street Journal, p.20. Williams, Jack F. (1983). “Patterns of Economic Development”. In Clifton Pannel (Ed.), East Asia. Dubuque Iowa: Kendall/Hunt, pp.127-154. Yoder, Stephen K. (Nov. 12, 1987) “Western Research Labs Sprout in Japan as Firms Lured by High-tech Boom”. Wall Street Journal, p.32. 144 Management Research News D ow nl oa de d by J oh ns on & W al es U ni ve rs it y A t 07 :4 8 27 M ar ch 2 01 8 (P T ) THE REALITY OF THE EASTERN BUSINESS MIND Jacques G. Boettcher During World War II American troops sent to Europe were provided with small handbooks which contained a smattering of words and phrases and comments on customs designed to permit those troops to exist with the Dutch, the French, and even the Germans. When dealing with people in the Pacific-Rim area mod- ern American businessmen still use the ‘‘handbook approach,’’ and they are frustrated when they can’t understand the attitudes, subtleties, and procedures of Pacific-Rim business practice. They know the details of the ‘‘handbook,’’ but they fail to understand the roots of cultural differences. They fail to understand that they are dealing with thousands of years of philosophy, ethics, and culture, and for this necessary understanding they have to realize both how and why their counterparts think as they do. The modern business person should go back to Taoism and Confucius for an explanation of contemporary business practices. * * * * * I. INTRODUCTION One time when the author of this article was conducting a seminar at the University of Detroit in American legal systems and anti-trust for a group of visiting Chinese government officials he resorted to a tactic common in American law schools. He began to challenge the visitors in a Socratic approach with questions that Jacques G. Boettcher is Associate Professor of Management at the University of Detroit Mercy in Detroit, Michigan. THE INTERNATIONAL TRADE JOURNAL, Volume XXI, No. 3, Fall 2007 275 ISSN: 0885-3908 print/1521-0545 online. DOI: 10.1080/08853900701416374 forced them to be analytical and quick in the formation of answers--- questions that forced them to ‘‘think on their feet.’’ No one had told him that these Chinese delegations are always seated with the most important members sitting at the front of the room and the less distinguished at the rear. He, thus, directed a question to the man sitting directly in front of him, and the guest answered with a pained expression on his face. He lowered his eyes, and for some reason, even though his answer was slightly off course, the profes- sor responded by saying, ‘‘I think you have studied far more American law than what I was led to believe.’’ Immediately there was a very slight smile around his eyes, and the delegates at the rear of the room responded with affirmative nods. This professor was not aware at the time, but he had come dangerously close to humiliating that guest in front of his subordi- nates, and that his comment about the guest’s knowledge of American law permitted him to ‘‘save face.’’ II. THE FAR EAST AND THE WESTERN POSITION ‘‘Saving face’’ is a western expression legitimized in 1934 by the Oxford English Dictionary, which, actually, fails to express the importance of the matter. To the Korean, for example, or to the Chinese and, to an extent the Japanese, there is a sanctity to ‘‘saving face’’ which incorporates one’s ‘‘integrity,’’ ‘‘pride,’’ ‘‘honor,’’ ‘‘character,’’ ‘‘self esteem,’’ and ‘‘reputation.’’ It is based on over 2,500 years of history. It dates back, at least, to K’ung Fu Tau---Confucius---551--497 B.C. and there is little like it in the western world. This type of positional security or ‘‘saving face’’ is, at least, secondary in the minds of many American business people and even less important with American attorneys. We, at times, take pride in the President Harry Truman approach to business of ‘‘let’s cut out the crap,’’ or most commonly, ‘‘let’s get down to the bottom line.’’ For Americans there is a sort of strength in this 276 THE INTERNATIONAL TRADE JOURNAL approach and a feeling that it conveys a sense of forthrightness or honesty. It never occurs to us that this ‘‘forthrightness’’ is not only a source of embarrassment to our counterparts in the Pacific business arena, and that it is a very serious violation of their social-political business foundation. For these business counter- parts ‘‘saving face’’ is an art form which has been cultivated not only over generations but throughout centuries. The phrase ‘‘saving face’’ or the idea of ‘‘saving face’’ is obviously, only a part of the collage making up the far eastern business mind, but its importance cannot be over estimated. In the western world the idea of ‘‘crime’’ is coupled with the idea of ‘‘punishment.’’ It is individual and personal. In the eastern mind the keynote is ‘‘shame’’ which is followed by ‘‘disgrace.’’ This disgrace does not remain personal. It ripples out to infect friends, families, coworkers, departments, and even entire business units. For people inculcated with this fear the secret or solution is to avoid the occasion wherein shame might arise, and this leads to a formula wherein one does not make a decision and does not make a commitment but seeks an escape into a rigid vertical protectionism wherein one can hide within a committee or a bureau or an agency. The keynote is ‘‘I didn’t do it, and I can’t be held responsible.’’ III. INDIVIDUALISM VS. COLLECTIVISM When one tries to fathom this eastern self-protectionism one wonders how an attorney or business person form the far east, steeped in a neo-Confucian or quasi-Confucian non-confrontational heritage would interpret the American Declaration of Independence. We hold these truths to be self evident, that all men are created equal, that they are endowed by their Creator with certain inalienable rights. That among these are Life, Liberty and the pursuit of Happiness. Boettcher: The Eastern Business Mind 277 To the American business person the language of the Constitution or the Declaration of Independence is an invitation to individualism. And despite all of the efforts of the last ten years to inculcate team work or team thinking, the American mind still focuses on the ‘‘best team,’’ ‘‘on the best team thought,’’ and the ‘‘best team leader.’’ Individualism, personal accomplishment and personal rewards have not been eliminated. They are still rewarded, and they staunchly enforce the western approach to business. Americans still find romance in the concept of the ‘‘self-made’’ person---the Warren Buffit or Bill Gates---the person who rises from obscurity, faces adversity, challenges the establishment and finally triumphs. The northeast Asian---the Oriental world people are far more likely to look on this illusion as egregious or, at least, as an egocentric display. They are far more ready to move as a unified whole and turn to the benevolence of the State or the business director, (Clissold, 2004). To the American attorney, for example, who is even slightly infused with this individualism and who is drafting a contract, the essence is to legally dominate---to anticipate every contingency, to be prepared for every problem or question, and to be absolutely complete. This author who has drafted contracts for thirty years, has spent hours, if not days, in detailed analysis, and the phrase ‘‘but what if’’ becomes as common as punctuation. To attorneys drafting commercial contracts disgrace lies in not being all-inclu- sive, in not being prepared for a question, and in not considering every possibility. As a consequence their documents are as exact and detailed as possible. IV. THE FUNCTIONAL ASPECT OF GRACE To the Asian counterpart this approach is not only foreign, but it contains a horrible or unthinkable potential. ‘‘Saving face’’ is not only the most desirable personal attribute, but one can’t ‘‘save 278 THE INTERNATIONAL TRADE JOURNAL face’’ if one inflicts embarrassment on or humiliates his colleague by showing that person to be wrong. ‘‘Saving face’’ then is a two way street, which can only be preserved or achieved by sensitivity, harmony and grace, and ultimately, it is the balm which allows avoidance of personal accountability and, possibly, ‘‘disgrace.’’ It is this objective that governs the organization, presentation and undermining philosophy of the laws of many of the northern Pacific-Rim countries, and many western business people fail to realize that this personal characteristic not only dominates the thinking of their Pacific counterparts, but that it is the essence which permeates the being of their Pacific-Rim colleagues (Fishman, 2005). It cannot be attributed to any sense of inferiority or even personal modesty. It is the resultant of the amalgam of San Chiao---the Three Doctrines, Confucianism, Taoism, and Buddhism. It extends from the production worker in many Pacific northern Rim countries who is dominated by the idea that if his work becomes shoddy or if he doesn’t meet his quota he will ‘‘lose face,’’ even up to the Chinese Central Committee where a personal mistake may lead to disgrace (McGregor, 2005). V. THE GRACE OF HARMONY To the Korean people, for example, to the Chinese, the citizens of Singapore, or the Japanese, ‘‘harmony,’’ ‘‘sensitivity’’ and ‘‘grace’’ cannot be achieved by preparing for a syntactical war or by having one party to a contract dominate the premises by preparing a contractual analysis which purports to consider every eventuality, (McGregor, 2005). To the western business person this is not only impractical, but it is self-defeating. The western business person often is frustrated by the fact that his carefully prepared and orchestrated approach is not accepted immediately and at face value. This western busi- ness person fails to understand that his Pacific counterpart is not prepared to accept a previously prepared, all-inclusive package, Boettcher: The Eastern Business Mind 279 has not gone through a completely orchestrated arrangement or contract and is not fixed or dogmatic in his thinking. His approach is not to attempt to deal with the whole, but to begin with a step by step analysis, which allows adaptability in solution, circumvention of the painful, and, if necessary, retreat and digression. Accept problems as they arise, and if they never arise, then time has not been wasted in useless preparation. This approach begins with the first contact with the foreign counterpart. This contact allows the establishment of a personal base. It allows a time for ‘‘sizing-up’’ the foreign counterpart. It is a time for analysis and preparation, and it is not a time for negotia- tion. Americans, for example, at a business lunch, will look at the menu, and then immediately start negotiations. This puts the Korean, the Chinese, the Japanese, or the businessman from Singapore in a defensive mode wherein a mistake might be made, where prestige might be lost because of lack of preparation and/or ‘‘face’’ might be lost. The Koreans, for example, the Japanese, the Chinese are simply not prepared for this immediate exactness. They prefer the indirect, the vague or even ambiguous approach. Many Americans have been completely frustrated by their inability to come to grips with the Korean approach to business. When an American business person hears his Korean counterpart answer ‘‘yes.’’ He doesn’t know if that means, ‘‘Yes, I agree with you,’’ ‘‘Yes, I hear you but am waiting for more informa- tion’’ or ‘‘Yes I heard you, but I am trying to find a non- offensive way to tell you that you don’t know what you are talking about.’’ VI. HARMONY EQUALS SENSITIVITY The key is ‘‘harmony and sensitivity.’’ To achieve this the least precise terms, the least exact wording, the least direct approach allows an ongoing procedure which allows for analysis of problems 280 THE INTERNATIONAL TRADE JOURNAL as they arise, but what is most important is the fact that if the terms, words or approach used are not pointed, exact and direct, then the Korean, the Chinese, and the Japanese can’t be exposed as being wrong, can’t be held accountable and ‘‘face’’ is preserved or saved. VII. WHERE EXACTNESS IS INTENTIONAL Examination of the individual laws of various northern Pacific-Rim countries reveals somewhat of a strange paradox which is produced by accountability, (Cameron, 1952). In general, the laws of the individual north Pacific-Rim countries, as written, are exact and precise. For example, many of these laws reflect the changing conditions imposed by the end of World War II, and an indicator of this is to be found in the constitutions of these various countries. The Constitution of Singapore, for example, which was effective September 26, 1963, reflects, virtually, a civil law approach similar to that found in France and Germany. This approach purposefully avoids the vague and general and seeks to deal with virtually every contingency. The U.S. Constitution, on the other hand, reflects more of the ‘‘common law’’ approach wherein it purposefully anticipates change and growth and as such it breathes with the nation as the nation progresses. The Constitution of Singapore contains 163 articles and 204 sections. Article 10, for example, specifically prohibits slavery. Article 14 parallels the 1st Amendment to the U.S. Constitution, but is more detailed and then drifts into a rather vague escape clause. Article 14 reads: Article 14, Freedom of Speech, Assembly and Association. Subject to Clauses (2) and (3) All citizens of Singapore have the right to assemble peaceably and without arms and A1l citizens of Singapore have the right to form associations. (1) Parliament may impose Boettcher: The Eastern Business Mind 281 (a) on the rights conferred by clause (1)(a) such restrictions as it considers necessary or expedient in the interest of the security of Singapore any part thereof, friendly relations with other countries, public order or morality and restrictions designed to protect the privileges of Parliament or to provide against contempt of court, defamation or incitement to any offense. Always the precise is framed with an ‘‘escape clause.’’ Citizens have ‘‘rights’’ subject to ‘‘ restrictions which are necessary and expedient.’’ The Constitution of the Republic of South Korea, which was effective as of July 17, 1948, contains 136 articles with the same characteristics as found in the Singapore Constitution. Article 19 reads: Article 19 (Conscience) All citizens enjoy freedom of conscience. Why this is a constitutional provision only leads to speculation. Article 21 (3) is equally speculative. It reads: Article 21(3) The standard of news service and broadcast facilities and matters necessary to ensure the functions of newspapers is determined by law. The point to be considered is not the existence of the phrasing, but the fact that it is obviously another attempt to be exact. The exactness, however, allows considerable generality. Article 32(2) again contains this facet. Article 32(2) All citizens have the duty to work. The State prescribes by law the extent and conditions of 282 THE INTERNATIONAL TRADE JOURNAL the duty to work in conformity with democratic principles. One of the more startling premises is contained in Article 119. It states: Article 119 (Regulation and Coordination) (1) The economic order of the Republic of Korea is based on a respect for the freedom and creative initiative of enterprises and individuals in economic affairs. (2) The State may regulate and coordinate economic affairs in order to maintain the balanced growth and stability of the national economy, to ensure proper distribution of income, to prevent domination of the market and the abuse of economic power and to democratize the economy through harmony among economic agents. It is obvious that those who drafted these laws and provisions were attempting to be all-inclusive. The Constitution of Japan parallels the construction and intent of those of South Korea and Singapore. This constitution was effective as of November 3, 1946, and it is a lengthy and specific document similar to those previously considered. It is inclusive in that it attempts to deal with a multitude of considera- tions, and at times it wanders into the obscure. Article 13, for example, states: Article 13 All of the people shall be respected as individuals. Their right to life, liberty and the pursuit of happiness shall, to the extent that it does not interfere with the public welfare, Boettcher: The Eastern Business Mind 283 be the supreme consideration in legislation and in other government affairs. Article 27 states that all people have the right and the obliga- tion to work, which is similar to the clause found in the Constitution of Singapore. Article 13 couples with Article 35, which reads: Article 35 1. The right of the people to be secure in their homes, papers, and effects against entries, searches and seizures shall not be impaired except upon warrant issued for adequate cause and particularly describing the place to be searched and things to be seized. . . . It seems obvious that those who assembled the Constitution of Japan were familiar with the U.S. Constitution, (Inoue, 1991). But the Japanese Constitution also becomes most specific, and in Article 36 the ‘‘infliction of torture by any public official and cruel punishments are absolutely forbidden.’’ Article 88 even considers that the property of the Imperial Household belongs to the state and the expenses of the Imperial Household shall be appropriated by the Diet (Luney, 1946). There is little in the Constitutions considered that even indir- ectly deals with the problems of preserving ‘‘harmony, ‘‘sensitiv- ity’’ and ‘‘grace.’’ But with the Chinese Constitution one finds an amazing combination of the specifics found in the other Constitutions with the evasive vagueness sought in the establish- ment of ‘‘harmony,’’ ‘‘sensitivity’’ and ‘‘grace,’’ (Fairbank, Reischauer, and Craig, 1973). The Chinese Constitution dates only to 1982, and there is an essential difference to be noted when considering the constitutions of other Pacific-Rim countries. China is the last country, with the exception of Vietnam and North Korea, to emerge into the world of international commerce. At the time the constitution was 284 THE INTERNATIONAL TRADE JOURNAL adopted China did not have a civil code or a commercial code as did the other nations. Commerce was controlled by the Central Committee, China relied on a number of laws such as the 1982 ‘‘Economic Contract Law of the People’s Republic of China,’’ the 1985 ‘‘Foreign Economic Contract Law,’’ the 1986 ‘‘Civil Code plus a host of ‘‘Regulations.’’ With China, then, there is a major problem in reconciling the constitution with the developing codes and with the dictates of the Central Committee. VIII. A DIFFERENT MOTIVE Many Pacific-Rim countries have a commercial law, which deals in the public law involving business formation, contracts, sales, bailments, carriage of goods, insurance, etc. These countries, generally, have a separate civil law, which deals with such matters as banking, securities regulation etc. In order, thus, to understand the law of sales it is necessary to blend the civil law with the commercial law (Cameron, 1960). This introduces an interesting fact of life in the northern Pacific Rim. The drafters of laws tend to be exact. The interpreters of laws tend to lose this specificity, and those who use the laws do simply that---they ‘‘use’’ the law. China, for example, has a specific law for the protection of intellectual property. They take pride in tracing their intellectual property protection back to the Tang Dynasty of 932 A.D. China’s modern laws on the protection of computer software---‘‘Computer Software Regulation’’ date 1991. China’s Trademark Law of 1982 is based on the Chinese Constitution. It is very specific yet it recognizes protection to ‘‘famous marks,’’ yet it is interpreted as giving protection to ‘‘famous marks’’ which are ‘‘famous’’ in China. Coca-Cola might have trouble proving that its trademarks are ‘‘famous’’ in China. Thus the drafters are specific, the interpreters are less than specific and the ‘‘users’’ go their own way. The Business Software Alliance now estimates that 92% of all software in China is counterfeit. Boettcher: The Eastern Business Mind 285 The interesting point lies in the fact that on the one hand the Constitutions of these countries are, or try to be, exact. This is acceptable since few business people are going to debate constitu- tional law with their trading counterparts. But on the other hand, when it comes to the laws effecting such things as international sales, the sale or trading laws suddenly become less vivid, less accurate and even obscure. Most northern Pacific-Rim countries, with the exception of China, have a commercial code, which is a type of law of ‘‘private obligations.’’ The codes, generally, deal with sales, leases, manufac- turing, publishing, loans, insurance, trusts, forms of doing business, etc. These are matters, which arise from commerce. There is a separate ‘‘Civil Code’’ sometimes called ‘‘The General Private Law,’’ which deals with the obligations of contracts, detailed sale provisions, etc. While they are separate there is an obvious overlap, and the one is more specific than the other. The ‘‘specific’’ is to be preferred to the ‘‘General.’’ It is thus necessary to review both codes. In business relationships, commercial laws are the core of con- tracts and trading agreements, and while the parties may even ignore the constitution these commercial laws will be closely exam- ined by the parties. If these laws are too specific they produce an impasse---a situation wherein one of the parties cannot escape. The consequence is a loss of ‘‘harmony,’’ ‘‘self-esteem,’’ ‘‘reputation’’ or, again, ‘‘loss of face.’’ IX. THE SOUTH KOREAN PERSPECTIVE The Commercial and Civil Codes of South Korea, because of its late entry into international trade and the dramatic necessity of being able to compete in the marketplace, are less obscure than those codes of other countries, but they still evidence the lack of specificity. Article I of the Commercial Code reads: Applicable law to commercial matters: Where there is no provision in this 286 THE INTERNATIONAL TRADE JOURNAL Code as to a commercial matter, the commercial custom shall apply; and if there is no such law, the provision of the Civil Code shall apply. For an American attorney or business person the immediate question is what is meant by ‘‘commercial custom,’’ where is it to be found and what happens if neither the commercial code or the civil code treat the matter in question? This is the introduction to the ‘‘Escape Clauses’’ in South Korean law. (Kim and Lawson, 1989). It introduces to the western mind the fact that the South Korean businessman is not going to be pinned down to an exact wording or position. Exactness breeds contention and the potential for being shown to be wrong. The loss of ‘‘har- mony,’’ the loss of ‘‘sensitivity’’ leads to the loss of ‘‘dignity’’ or ‘‘face.’’ Probably the best example of this type of thinking lies in the escape provision of Article 51 of the Commercial Code. The article reads: ARTICLE 52. Binding Force of Offer of Contract inter absentes. (1) An offer to enter into a contract in respect of which no period of acceptance has been fixed, when made inter absentes, shall lapse if notice of its acceptance is not dispatched by the offeree within a reasonable time. (2) The provisions of Article 530 of the Civil Code shall apply mutatis mutandis to the case mentioned in the preceding paragraph. This translates to mean that if a contract offer is made to a person and that parties are not directly facing each other (inter absentes) the person to whom the offer is made must notify the other within a reasonable time. However, this is subject to Boettcher: The Eastern Business Mind 287 ‘‘mutatis mutandis’’ which is a phrase which translate as ‘‘With the necessary changes in points of detail.’’ This should mean that matters or things are, generally, the same but to be altered when necessary. This would, normally, apply, to names, offices, etc., yet the interpretation is wide enough to permit change. It is as though the South Korean is saying to his counterpart that, yes, we have a signed contract but you should realize that changes will be made when unanticipated conditions arise. Mutatis mutandis appears with consistency within the South Korean Code. The South Korean Codes, then, are perfect examples of the rhetoric of escape or vagueness, and they fit perfectly with the Japanese and the Chinese. X. THE JAPANESE POSITION The Japanese Codes, while not similar to the South Korean, still have this non-direct, non-confrontational aspect. The wording within the Japanese Commercial Code, while coming very close to the Uniform Commercial Code of the United States, still demon- strates the masterful art of evasion or generality. The section in the Commercial Code dealing with rescission of contracts reads: Article 50 (Rescission of contract) (1) Where the parties have not fixed the duration of the contract either may rescind it on giving two months notice. (2) Where compelling reason exists, either party may rescind the contract at any time irrespective of whether the duration of the contract has been fixed or not. Thus under this code, even though there is a binding contract, either party may rescind it if they can claim a ‘‘compelling reason’’ (Redden, 1989). 288 THE INTERNATIONAL TRADE JOURNAL XI. THE CHINESE ATTITUDE The Chinese, the last major entrant in international world of trade, have not lost the non confrontational basis of their new commercial code. Article 154 of the Code of 1999 which deals with the quality of goods sold, reads: Article 154---Absence of Prescribed Quality Requirements: Where the quality requirements for the subject matter were not prescribed or clearly prescribed and cannot be determined in accordance with Article 61 hereof, Item (I) of Article 62 applies. Turning to Article 61 we find: Article 61---Indeterminate Terms-Subsequent Agreement: If a term such as quality, price or remuneration or place of performance etc. was not prescribed, or clearly prescribed, after the contract has taken effect, the parties may supplement it through agreement; if the parties fail to reach a supplementary agreement such term will be determined in accordance with the relevant provisions of the contract or in accordance with relevant usage. Obviously, then this leads to Article 62 (1): Article 62 (1) If quality requirement was not clearly prescribed, performance shall be in accordance with the State standard or the industry standard; absent any State or industry standard performance shall be in accordance with the customary standard Boettcher: The Eastern Business Mind 289 or any particular standard consistent with the purpose of the contract. Obviously the parties to this contract would grow old arguing standards, customary standards, and consistent standards. On first analysis it may appear that the language of these codes is simply tactical rhetoric. That is, the language is consciously designed to give an advantage to the Korean, Japanese, or Chinese businessman. Such, actually, is not the case, and, …