By Stuart S. Malawer, J.D., Ph.D.,

Distinguished Professor of Law and International Trade, George Mason University and a former Chairman of the International Practice Section, Virginia State Bar.

Government and private sector representatives from Virginia and six other southern states recently explored first-hand how Japan's revitalized economy can mean more business, investment and trade opportunities for U.S. firms, as well as economic development back home.

This trade mission is the third in the last 16 months in which Virginia Governor Mark Warner has asked me to participate.  Governor Warner personally led the first two trade delegations to China and India. The most recent trade mission to Tokyo this October, led by the Commonwealth's Secretary of Commerce and Director of the Virginia Economic Development Partnership, was intended primarily to attract foreign direct investment into the Commonwealth.

Representatives of the six southern states and Virginia meet in Tokyo biannually to encourage foreign direct investment into the respective southern states as a catalyst to state and regional economic development.  (In the alternate years meetings are held in the United States.)

Governors of the states of North Carolina, South Carolina, Georgia, Alabama, and Tennessee personally led their state delegations. Participants had access to leading Japanese business and political leaders, including the Governor of Tokyo, former Chairman of the Tokyo Stock Exchange, Vice Chairman of Toyota, Deputy Governor of the Bank of Japan, Vice Chairman of Nissan Motors, President of Mitsubishi International, President of JETRO (Japan External Trade Organization), Vice President of Tokyo Electric, along with various members of the Japanese Cabinet Office concerning science and technology. The U.S. Ambassador to Japan addressed the delegations on the necessity of developing a new multilateral architecture in Asia to better accommodate Asia's booming trade relations and its rapidly changing political landscape.

The most remarkable experience stemming from this trade mission, in addition to experiencing two earthquakes and a typhoon, was realizing the significant growth of the Japanese economy. For instance, real estate growth in Tokyo is immense with recent development of numerous new commercial and residential skyscrapers:  more are being built and planned.

Japanese direct investment into the United States exceeds $10 billion per year. Japanese firms take part in cross-border merger and acquisition deals with American firms more than those from any other country. Virginia has more than 32 manufacturing plants in which Japanese firms hold major equity positions. After the NAFTA countries, Japan is the third largest buyer of U.S. exports. 

Foreign ownership of Japanese stock is at its highest in ten years.  The Nikkei average is near its highest since early 1990's.  Prime Minister Kozumi, who was reelected this fall, has been successful in pressing the Diet to pass historic legislation providing for the restructuring and privatization of the Japanese Post Office - something he has pursued from the start of his tenure in office.

 Japanese officials and corporate executives are extremely concerned and focused primarily on conducting business with China and in developing a new multilateral architecture for Asia.  While Japan and U.S. bilateral relations and military alliance are critical aspects of Japan's foreign policy the tripartite relations among Japan, China and India are central to future international political and trade relations in Asia. Fast developing business and trade ties are fueling this drive more than by any political or ideological imperative.  Business and trade are the drivers for fostering the new political and diplomatic landscape in Asia.

The challenge to the United States is how to engage in this process in light of the overly unilateral approach to international relations and foreign affairs throughout the Bush presidency and its emphasis on military and diplomatic confrontation.  Geopolitical and trade relations in Asia are moving rapidly in directions few thought possible just a few years or even months ago.

Globalization and private sector energy are the dynamics motivating this new political dance.  Japan's reliance on the World Trade Organization for constructing a multilateral approach to trade relations is complemented by its renewed efforts to negotiate bilateral trade agreements. Japan's future is best served by its active participation in multilateral institutions. Witness Japan's diplomatic effort to secure a permanent seat on the U.N. Security Council.

Enhancing business, financial and trade transactions were the main reasons for this biannual meeting of the southern states in Tokyo.  However, it has become exceedingly clear that the larger geopolitical context is as important to promoting trade and investment, as are the merits of specific commercial transactions.  This really is a historic time in U.S. - Asian relations. 

 Asia today is a far cry from the landscape existing during the Cold War or in the 1990's before globalization took off and transnational terrorism burst on to the world stage.

 If successful, these biannual meetings can help establish and build good personal relationships among private-sector participants and government officials.  The good will and personal relationships do more than anything else to ensure private transactions are successful.  They are also critical for fostering foreign policies that are imbued with more realistic understandings and empathy that would have a greater chance of successfully leading to a peaceful and prosperous global society.