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Introduction
This consensus statement has two themes:
· The requirement that the United States maintain
strong domestic capacity for technological innovationr-to
benefit its domestic economy, its national security, and
its competition for global markets in technological
products and services.
· The need to reduce trade frictions that trouble
economic and political relations among the major indus-
trialized allies--principally, Canada, the Federal
Republic of Germany, France, Japan, the United Kingdom,
and the United States.
The leading industrial nations believe that their
future economic growth depends on their abilities to
create advanced technologies and to sell the resultant
products and processes in a global market. Consequently,
international trade in advanced technology is a high
priority.
International competition has led to concern within
the United States about our capacity to create advanced
technologies and to develop them into commercially suc-
cessful products in international and U.S. markets.
Competition also has led to frictions among countries
because of their differing national practices in sup-
porting development and international trade.
Frictions among the industrialized allies may be
inevitable now that many nations can adopt or innovate
frontier technologies and can manufacture and market
advanced technology products. Realistically, the United
States cannot expect to maintain the overwhelming market
share in advanced technologies that it had during much of
the postwar period. The United States, however, must
14
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preserve a strong capacity for technological innovation
that is vital to the entire American economy and to its
growth. The United States must adopt measures designed
to preserve this vital aspect of the American economy
within a healthy international trading system.
Trade frictions among the allies have developed in
part because of the measures that different countries use
to promote their advanced technologies. There are charges
that some countries use "nontariff n barriers and other
market distorting practices to exclude the products of
other countries from their home markets, charges of
~dumping" (selling below cost) advanced technology
products in order to gain rapidly a substantial share of
a foreign market, charges that foreign companies are
capable of underbidding American manufacturers through
major subsidization by their governments, and charges
that governments use so-called side inducements to cap-
ture sales in third-country markets. These perceptions,
whatever their validity, weaken the bonds among the
industrialized allies and may threaten the economic and
military strength of all countries of the alliance.
Government and industry are partners in many coun-
tries, each with a role in developing globally competi-
tive advanced technologies. In the United States, the
private sector traditionally has carried the responsibil-
ity for trade development. One result is that many
American companies perceive an international system in
which they are competing not against individual foreign
companies acting alone, but rather against foreign
companies and company groups operating in concert with
their governments.
While differences in governmental and industrial rela-
tions among various countries are to be expected, there
is a marked Difference between the American style and
that of other countries. That difference leads to the
prevalent American perception that the forms of guidance
and direct support that other governments offer specific
industries is "unfair, n in the sense of distorting the
free market and making it difficult for American com-
panies to compete on equal terms. Ill feelings are
exacerbated by the depressed economic environment. The
U.S. economic picture currently includes unemployment
that exceeds 10 percent, a recorded rate of utilization
of our industrial capacity of only 70 percent, depressed
corporate profits, and widespread business bankruptcies.
Comparable conditions prevail in other industrialized
countries. Industrial production in France, Germany, and
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the United Kingdom declined in 1982. The unemployment
rates in Canada and the United Kingdom are over 12 percent
and are projected to exceed 13 percent in 1983. In Japan,
export market demand declined substantially in 1982, and
only a modest growth in export volumes is predicted for
1983.~ As a result of these unfavorable economic con-
ditions, orders for new production are depressed, and
competition--including competition from imports--is
exceptionally stiff. The U.S. trade position has been
made more vulnerable by the very strong dollar relative
to other currencies, as well as by the 1982 high U.S.
interest rates.
In our approach to advanced technology competition in
international trade, we have tried to see beyond this
current economic trauma. Certainly much of the distress
that American firms now feel arises from these general
economic conditions. But we believe that some of the
problems the country faces in advanced technology go
deeper than these adverse economic conditions and need to
be addressed directly.
As stated above, each country creates different pol-
icies and stratagems to enhance the global competitive-
ness of its advanced technology industries. Advanced
technology sectors are important to the United States and
other industrialized countries because their future eco-
nomic growth depends in large part on the disssemination
of advanced technology throughout their economies. In
addition, advanced technology industries contribute sig-
nificantly to productivity growth and product innovation.
In the United States, ten industries2 that in 1980
accounted for only 5 percent of U.S. employment and 13
percent of the value of manufacturing product shipments
were responsible for more than 60 percent of total private
industrial R&D spending. These industries employed more
than 25 percent of the nation's scientists and engineers.
In addition, these ten industries had a $31 billion fav-
orable balance of trade. During the 1970s, labor produc-
tivity in these industries grew more than six times as
fast as in the business sector as a whole. Growth in
advanced technology industries benefits the entire
economy because it results in rapid employment growth in
other industries. B
Measures of shares of world exports for products and
services embodying advanced technology indicate a deter-
ioration in the U.S. competitive position. Between 1962
and 1980, the U.S. share of the industrialized countries'
exports of advanced technology products declined from 30
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to 24 percent. During the same period, Japan tripled its
industrial country export market share, while West Ger-
many's and France's shares increased slightly..
Underlying these trends in the aggregate are significant
changes in individual technologies. In electronics,
particularly semiconductors, Japan has made dramatic
inroads into the U.S. market;5 in aircraft, the
European consortium, Airbus Industrie, has captured a
substantial share of the commercial jetliner market in
which U.S. firms held a 97 percent share in 1976.6
These changes stem from many elements that have
affected international trade at different periods--for
example, the postwar renaissance of European science,
technology, and industry; long-term structural changes;
and the well-planned effort by the Japanese to raise the
technological intensity of their economy. Other factors
contributing to a diminishing of U.S. global market shares
include the extraordinarily high value of the dollar
relative to other countries in 1980 and other years.
There is some evidence, for example, that the pattern of
trade tensions between Japan and the United States has
tracked exchange rate developments. 7 In 1970-71,
1976-77, and again in 1981, a strong dollar against the
yen produced large favorable trade surpluses for Japan.
In the first two instances, subsequent appreciation of
the yen against the dollar reduced the imbalance after a
couple of years. In recent months, there has been some
strengthening of the yen, but it is too soon to know if
it has gone far enough, or how much of the current
Japanese surplus will be eliminated, or how any improve-
ment will be distributed across industries.
This setting of intensifying competition, rising fric-
tions among allies, and, for the moment, a bleak economic
outlook frames this consensus statement by the Panel on
Advanced Technology Competition and the Industrialized
Allies.
The panel discusses the extensive contributions of
advanced technology to U.S. economic welfare and military
security; the importance of maintaining a strong national
capacity for technological innovation, including a vig-
orous international trade position; and the domestic and
international measures required for this effort. It
describes the many variables affecting the nation's
advanced technology enterprise, including U.S. government
and private sector policies and practices, as well as the
actions of major trading partners. Finally, the panel
discusses how various national practices may be evaluated
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and negotiated among nations in support of a healthy
mutual international trading system and what steps the
United States must take to protect its interests should
international negotiations fail.
The panel recognizes that the United States has many
domestic and foreign policy objectives in addition to the
requirements for national strength in technological inno-
vation and trade competitiveness and that these, at times,
may take precedence with regard to allocation of resources
and policymaking. It concludes, however, that the U.S.
advanced technology enterprise has been undervalued in
the past in the national scheme of priorities and must be
held as one of the country's most valued objectives.
NOTES
1 ~ . . . _ _
-urgan~sat~on tor Economic Co-operation and
Development, OECD Economic Outlook, No. 32 (Paris: OECD,
1982), pp. 12, 15, 35.
2 Electrical equipment and components; aircraft and
parts; computers and office equipment; optical and
medical instruments; drugs and medicines; industrial
chemicals; agricultural chemicals; professional and
scientific instruments; engines and turbines; and plastic
and synthetic materials.
"An Assessment of U.S.
Competitiveness in High-Technology Industries, n a study
prepared for the Cabinet Council on Commerce and Trade,
revised draft, October 1982, p. 4. Statistical evidence
on U.S. competitiveness in advanced technology relies on
the isolation of technology-intensive industries, defined
as industries that have either high it&D-to-sales ratios
or industries with a high proportion of scientists and
engineers in their work force. Such evidence is useful,
but it must be used with caution for several reasons:
· The match between technologies and industries is
l
not perfect. Large parts of an apparently advanced
technology industry may involve routine production of
traditional products; on the other hand, seemingly
n low-technology industries have components that are at
the forefront of technical advance.
· The classification of technologies as advanced
ought to be, in principle, a dynamic one since it laraelv
depends on how new the technology is.
_ _ ~ _ _ · _ ~ ~ ~
Today's advanced
c~c~lnol~gy Becomes tomorrow s traditional method; on the
other hand, an industry that is low-tech now may become a
technological leader in the future. Statistical compari-
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son based on a fixed list of technology-intensive
industries are, therefore, potentially misleading.
· All available statistical evidence focuses
exclusively on manufacturing. Yet, service exports
should in many cases be regarded as technology-
intensive. This applies both to financial services and
to the overseas earnings of multinational firms, much of
which can be viewed as a return to technology.
Ibid., pp. 4-5, 29.
4Ibid., p. 10.
5For a discussion of the nature of Japan's competi-
tive challenge in semiconductors, see Semiconductor
Industry Association, The International Microelectronics
Challenge: The American Response by the Industry, the
Universities, and the Government (Cupertino, Calif.:
SIA, 1981) r ppe 33~35 e
6 Airbus Industrie orders represented 3 percent of
the total market for commercial aircraft in 1976 and 32
percent in 1980. Aerospace Industries Association of
America, Inc., The Challenge of Foreign Competition to
the U.S. Jet Transport Manufacturing Industry, an ad hoc
study project of the Civil Aviation Advisory Group,
Aerospace Technical Council (Washington, D.C.: Aerospace
Research Center, 1982), p. 41.
7C. Fred Bergsten, "What to do About the U.S.-Japan
Economic Conflict?n, Foreign Affairs, Summer 1982, pp.
1065-1067.
Representative terms from entire chapter:
advanced technologies
