Many States Close or Cut Japan Offices : Trade: The reason is budget crunches back home. Critics of the cutbacks say slicing trade promotion efforts is shortsighted.

TOKYO —  Barry E. Rosenstock, who directs Ohio’s trade office in Tokyo, can remember how good the getting was in the mid- to late 1980s, after the yen doubled in value, setting off a stampede of Japanese investment in U.S. real estate and business ventures.

At its peak, Ohio announced a new Japanese investment every week, Rosenstock recalled. Every month, a trade mission would go from Ohio to Japan or the reverse. It was part of an explosion of commerce and trade that doubled the number of Japanese ventures in the state to 240, including Honda Motor Corp.’s four facilities, which employ 12,000 Ohio residents.

But that gush has slowed to a trickle in the last few years as Japan’s economic bubble has burst.

As a result, what used to be a “must” for job-questing governors from Alabama to Wisconsin--trade offices in Tokyo--have become tempting targets for state budget cutters. Caught in the vise of the U.S. recession and a huge drop in Japanese investment, eight states--Connecticut, Louisiana, Maryland, Nevada, North Dakota, Pennsylvania, Texas and Utah--have packed up and headed home in the last year or two.

That exodus chagrins Rosenstock, who doubles as president of the American State Offices Assn. here. He says the states’ withdrawal risks painting Americans as quitters and undermines the message that state trade offices have tried to hammer into those who want to do business here.

“We advise plenty of companies that it takes patience, commitment and a presence in the marketplace to succeed here, and . . . you can say the same thing about a state,” Rosenstock said in his office, which displays popcorn and other Ohio products.

Short of closing down, other states are cutting costs by moving to smaller, cheaper locations in Tokyo, shuttering a second office in Osaka, trimming personnel, reducing travel expenses and the like.

California’s trade and investment office in Tokyo, opened in 1987, remains at the mercy of a battle in Sacramento over how to close a $10.7-billion budget deficit. Earlier this year, the Assembly cut all funding for Tokyo and the state’s three other overseas trade offices. The money was restored in negotiations with the Senate. But until a budget is signed, the Tokyo office’s future remains touch and go.

“Today we’re projecting to have a good budget, and tomorrow we may have no budget,” said Ira Goldman, who oversees the foreign trade offices for Gov. Pete Wilson.

California has not replaced its Tokyo-based director, James Vaughn, who returned to Sacramento earlier this year; Goldman said it remained unclear when and if a successor would be sent. Not having to pay the housing, education and other expenses for an expatriate and family can save a trade office hundreds of thousands of dollars a year. The office is now headed by acting director Akira Kitagawa, formerly with the Wine Institute.

The state has cut back travel expenses, Goldman said. It is being more selective about participating in trade fairs, which cost a few thousand dollars in registration fees plus travel expenses. Although there is nearly one trade fair daily in Japan, California has participated in just one this year--in Sapporo. And the office has begun using student interns to help with clerical work.

Oregon recalled its American director earlier this year but flies him back periodically. The state has also moved to an office half as large as the previous one.

Illinois has moved its Tokyo office to cheaper premises and closed its Osaka office, which had focused on investment rather than trade.

Washington has trimmed its staff by half and moved from its own office near the U.S. Embassy to a business center, where secretarial work is pooled among tenants.

Alabama and Michigan have also moved.

Such cost-cutting measures are vastly superior to closing an office, said Rosenstock and others. In California’s case, the trade office has already been opened and closed once--in 1973 and 1974 by then-Gov. Ronald Reagan. To close it again would make the state seem particularly flaky in this nation of long memories, trade officials said.

“Continuity is everything here,” said George Lancaster, managing director of Georgia’s office. “If you don’t have continuity, you may as well not be here.”

Rosenstock outlined several ways to maintain a presence in Tokyo without spending the $500,000 annually it often takes to run a full-blown office with an expatriate director and two local assistants.

* Become a non-resident member of the American State Office Assn., which would buy the privilege of being listed in the group directory and participating in all events. The fee is $1,000.

* Become a non-resident member plus maintain a post office box drop at a business center in Tokyo, which could also provide a telephone referral service for a flat monthly fee.

* Add a part-time consultant.

* Add a full-time consultant with or without office assistants.

“The choice you have is not $500,000 or nothing,” he said.

Despite the drop in Japanese overseas investment, officials here say that there is more than enough work to justify an office by promoting trade between the states and Japan. Indeed, most states have reversed their focus from investment to trade in the last few years--and New York official Francis T. Vaughan, for one, says the current focus is probably more politically palatable.

“It’s felt all the way from the federal government on down that Americans need to go overseas and try to sell products,” he said.

Vaughan added that U.S. interest in exporting has picked up, with the New York office getting 10 times as many requests for export help now compared to three years ago. Every dollar of goods exported results in 4 cents of state tax revenue, officials estimate.

Investment promotion, on the other hand, at times drew criticism when states engaged in outrageous bidding wars to land Japanese factories. In the thick of the battle, tax giveaways of $1 million or more were common. Mikio Kawasaki of the Oregon office recalled that other states would “shake hands with me one minute and turn around and steal my customers the next.”

Nowadays, most states spend the bulk of their time pitching local products. Kitagawa of California, for instance, estimates that he spends 60% of his time trying to match Japanese buyers and California sellers of everything from electronics to concrete to avocados. There is particular interest in food processing ventures by Japanese firms hoping to cash in on tariff-free commerce promised by the North American Free Trade Agreement, Kitagawa said.

He added that he has also begun getting cold calls from Japanese looking for something, anything, to buy because they’re feeling political heat from the government to buy American.

Lancaster of Georgia said business ups and downs are natural--the state is riding out its third Japanese recession since opening its trade office in 1973--and he urged his colleagues to take a long-term view: “America will come back, Japan will come back. And they’ll be without an office here and will have to start all over from square one.”