Linking Trade and Technology Policies An International Comparison of the Policies of Industrialized Nations (1992) / Chapter Skim
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10. TECHNOLOGY CHALLENGES TO TRADE POLICY
10. TECHNOLOGY CHALLENGES TO TRADE POLICY
Pages 103-115
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From page 103... ...
Policymakers everywhere seem to believe that the externalities of industries like semiconductors and telecommunications are so great that fewer and fewer want to leave the fate of these businesses open to the vagaries of the "free market." Despite a worldwide movement toward greater conservatism on government policy, trade policies in high-technology sectors have spread beyond Japan, France, and a few newly industrializing countries to North America and the European Community at large. We have witnessed in the 1980s trilateral trade warfare among Europe, the United States, and Japan in sectors such as semiconductors and highdefinition television, with numerous bilateral conflicts in sectors such as aircraft (between the United States and Europe)
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From page 104... ...
Today's higher technology industries did not exist during the formation of the GATT and the creation of most modern trade law; and even agriculture was largely excluded from GATT scrutiny until the most recent Uruguay Round of negotiations. Although these traditional industries were diverse, they were typically characterized by long product life cycles (for example, it took almost 15 years for the textile industry to shift production from cotton materials into synthetics and blends)
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From page 105... ...
The flip side of this story was that trade liberalization was also a relatively straightforward task: governments, either bilaterally or through the GATT, could negotiate to reduce protectionist tariff and quota barriers and facilitate increased trading activity across national boundaries. Again, if the process of liberalization was slow, it might reduce short-term national welfare, but once trade barriers came down, countries could trade according to their comparative advantage, allowing firms to exploit their "natural" country-based cost advantages or advantages that might be associated with static, scale-based efficiencies.
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From page 106... ...
When foreign firms or governments use subsidies, predatory pricing, or other "unfair" practices as defined by the GATT, domestic firms may be seriously weakened or out of business. Although the same is true in traditional sectors, if foreign firms later try to raise prices in mature manufacturing businesses, domestic firms can reenter those businesses and retain national welfare gains from trade.
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From page 107... ...
For example, the United States and Europe protected the textile industry to ensure employment; the Japanese long protected their steel industry to build a domestic production base. Whether these policies were welfare maximizing is a matter for serious debate; nonetheless, trade policy was a viable tool to achieve the state's objectives.
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From page 109... ...
Even though tariffs or quotas can be used to encourage foreign firms to produce locally and even use local content (e.g., semiconductors and boards) , such trade policies will not necessarily promote the "right" value-added activities for a particular geographic location.
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From page 111... ...
, signed in 1986, is perhaps the best example of why trade policy is a blunt weapon in an age when precision bombing is required. The evolution of the agreement illustrates how speed, capital mobility, technical complexity, and brinkmanship are needed to make trade policy work in high-technology businesses; it also demonstrates how difficult it is to cover all the inevitable contingencies in high-technology sectors.
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From page 112... ...
The Department of Commerce, in turn, was given the responsibility to calculate foreign market values for each Japanese producer for each product, based on that producer's costs, and to monitor the production costs and prices of all Japanese products covered by the agreement. The United States reserved the right to add or drop products from the monitoring arrangement in the future.
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From page 113... ...
Spot prices for 256K DRAMs tripled over a four-month period,4 and American consumers reported significant difficulties in obtaining adequate supplies at any price. The price hikes and supply interruptions caused several U.S.
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From page 114... ...
The value of trade policy was that it helped induce Japanese policymakers and private actors to eliminate many of the vestiges of the past that have kept the market implicitly as well as explicitly closed to foreigners. Where trade and other barriers to high-technology trade persist in markets around the world, trade policy remains an appropriate tool.
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From page 115... ...
3. Note that given the way the Semiconductor Industry Association measures market access, if a Japanese firm sells a packaged and tested product to an American firm, the chip is counted as a Japanese chip regardless of who fabricates the die, whose label is on the package, or who sells the part to the eventual customer.
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