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America's Declining Industrial Competitiveness: Protectionism, the Marketplace and the State
Published online by Cambridge University Press: 25 November 2022
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A rising protectionist tide is threatening to undermine the domestic political foundation necessary to sustain America's liberal trade posture through the 1980s. U.S. trade officials and recent administrations remain committed to a liberal trade order, but severe crises in key economic sectors of the economy, regionally concentrated in the traditional industrial region of the country, are cutting the ground from beneath them internationally and domestically.
At the recent GATT ministerial meeting in Geneva, for example, the United States pressed hard for expanding international trade liberalization in agriculture, services, and high technology industries—all areas of economic activity in which the United States enjoys a strong competitiye position and trade surpluses. American trade officials in Geneva had the burden of advancing their arguments for further trade liberalization against the backdrop of recent U.S. actions, taken in response to domestic pressures, which imposed import quotas on European steel and Japanese automobiles and which adopted a more restrictive trade regime for textiles and apparel in the renewal of the Multi-Fiber Agreement. While the GATT meeting was in progress, the U.S. Congress was considering a domestic content bill that would require auto-makers selling over 900,000 vehicles in the American market to use 90 percent U.S. labor and parts by 1985. U.S. trade representative William Brock III called this “the worst piece of economic legislation since the 1930s.” The House passed the bill with 215 votes, but it died in the Senate. The bill will certainly be re-introduced in the more protectionist 98th Congress.
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References
1 Congressional Quarterly, XL (Dec. 18, 1982), 3072.
2 For studies indicating this is the case see Zysman, John and Tyson, Laura, “Making Policy for American industry in International Competition” (1980), paper prepared for the President's Commission for a National Agenda for the Eighties, Washington, D.C. (mimeo)Google Scholar; Walters, Robert, “Patterns in U.S. Domestic Economic and Foreign Trade Policies: Industrial Crises in Steel and Automobiles,” paper delivered at the XIIth World Congress of the International Political Science Association, Rio de Janeiro, August 9–14, 1982 Google Scholar; and Strange, Susan and Tooze, Robert (eds.), The International Politics of Surplus Capacity (London: George Allen and Unwin, 1981).Google Scholar
3 We are focusing here upon the so-called merchant semiconductor firms, as distinct from final systems producers such as IBM and ATT that produce semiconductors only for their own end use. The merchant firms are widely held to provide the extraordinary dynamism in product innovations and diffusion that has sustained U.S. dominance in world semiconductor markets.
4 Fear of the Japanese threat to the financial position of U.S. merchant semiconductor firms is viewed as a major reason for IBM's recent infusion of capital into Intel. See Business Week, Jan. 10, 1983, 96–98.
5 U.S., Congress, Joint Economic Committee, International Competition in Advanced Industrial Sectors: Trade and Development in the Semiconductor Industry, 97th Cong,, 2nd Sess., 1982, 7.Google Scholar
6 See ibid. and Cole, Robert (ed.), The Japanese Automobile Industry: Model or Challenge for the Future? (Ann Arbor: Center for Japanese Studies, 1981), 47, 79–85.Google Scholar
7 Japan's Ministry of International Trade and Industry (MITI) has exercised a much greater role in structuring the post-war steel and semiconductor industries, than it has in relation to Japanese automakers.
8 Such a position, of course, reflects the severe erosion of the steel, auto, and semiconductor industries' earlier dominant market power in the American economy. Relations between foreign governments and national champions have not changed that much over the years in most fundamental respects. Charges of unfair market interventions emerged from these American industries only after they lost market share and their capacity for price leadership and maintenance of price discipline in the U.S. market.
9 For a further elaboration of this point see Zysman and Tyson, “Making Policy for American Industry,” 12–17.
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17 Government policies directed at specific industrial sectors are more at odds with American mythology about the role of the state in the economy than they are with actual practice. Consider, for example, agriculture, shipbuilding, the merchant marine, energy and the importance of defense spending and the space program in establishing the U.S. semiconductor and computer industries as world leaders.
18 Anderson, Charles, “Political Design and the Representation of Interests,” Comparative Political Studies, 10 (April 1977), 141.CrossRefGoogle Scholar
19 In developing a policy for the steel industry, for example, should representation be accorded to the large integrated steel firms, the United Steelworkers, government agencies whose policies most directly affect the industry, small U.S. “mini-mill” competitors to the integrated firms, fabricators using steel products (like automakers), consumers, others? In the Carter administration's efforts to develop a steel policy only the first three interests were included in the Tripartite Committee structure established to assess the challenges and propose remedies.