Chipping Away at Competition

...Take the steel industry...

...In response to the latter, American producers brought a dumping complaint...

...Could there be a rational division of labor among nations...

...manufacturing sector, if by well-paid you mean about $40,000 a year plus a health and retirement benefit package that's worth around $15,000...

...Yet even the card-carrying economist who embraces her views on international trade will find little that's pleasurable in the volume...

...The jargon-laden prose is flat...

...average for all manufacturing, as are the wages and salaries they pay...

...But if Micron is successful, it will be the Japanese producers, who have more than 50 per cent of the market in this country, that benefit the most...

...This century's most pervasive electronic innovation, the microchip (a wafer of silicon etched with millions of transistor switches that form integrated circuits), was conceived and developed in the United States...

...25.00, paper...

...market...

...Efforts to rectify that matter gave the partisans of managed trade in Tokyo and Washington their moment in the sun...

...International Trade Commission deemed the price of Japanese drams lower than the cost of their production...

...dram makers were hurting on two fronts: They couldn't get a foothold in the Japanese market, and some of them were unable to match the low prices of Japanese chips in the U.S...

...In the 19th century Britain was a classic case in point...

...producers' share of Japan's dram market would be targeted by the Ministry of International Trade and Industry (Mm) and the electronics cartel at 20 per cent...

...electronic and aircraft producers and their rivals in Japan and Europe, the author is less than candid when confronting opposing views or evaluating conflicting evidence...

...The best sections of Tyson's book treat Washington's efforts to resolve the conflict with Japan over "dynamic random access memories" (drams), a type of chip used in personal computers...

...Such highly integrated and hopelessly inefficient producers as Bethlehem and USX?who constantly beg for protection from import competition—are low-tech...

...Japan's highly successful foray into the world of chips was, to be sure, bolstered by a tight domestic keiretsu (cartel) and predatory export tactics...

...By the mid-1980s U.S...

...In any case, the whole issue was soon made irrelevant by the rapid pace of technological change, as 64-kilobyte drams were superseded by 256-k's...

...Where and how would the subsidy lines be drawn...

...It is true that, on average, proportionately more well-paid production jobs are found in high-tech industries than in the rest of the U.S...

...Tyson's numbers on U.S...

...computer assemblers to move out of the country, with a consequent loss of jobs much greater than the 4,000 saved at Micron...

...The latest dram confrontation—the standard chip is now 4 megabytes?came last April when Micron Technology, a Boise-based company with 4,000 employees, brought a dumping charge against Korean producers...

...shares of the global high-tech product markets are admittedly alarming, but they need to be viewed from a historical perspective that is conspicuously absent in her book...

...poorly fashioned charts and tables, presented with no warnings about the softness of many of the numbers, are often a hindrance instead of a help...

...She is the first woman to sit on the Council and—far more significantly—its first member to challenge a cardinal tenet of the vast majority of economists: that the welfare of this country, and the rest of the world, is best advanced by free trade...

...Tyson's reasoning is that the value added by high-tech industries—that is, their contribution to total production, as measured by their sales minus purchases from other firms—is about 30 per cent above the U.S...

...But averages conceal significant differences: Not all hightech industry jobs are well-paid, and not all high-paying jobs are in the high-tech sector...

...the firm Nu-cor, today on the very cutting edge of hot metal technology, operates the world's most efficient steel plant...

...Yet many of the mini-mills that utilize steel scrap would qualify as high-tech by Tyson's value-added criteria...

...Her prescriptions are geared to prying open markets in Japan that are closed to imports by tight car-tels and a stubbom xenophobia...

...Subsidies, of course, pose political problems...

...Despite pieties to the contrary, both Congress and a succession of Presidents , beginning with Dwight D. Eisenhower, have freely indulged in protectionist sin...

...moreover, save for the Pentagon's programs, it has failed to provide adequate subsidies for the development of new technologies...

...access to Japan's market...

...Yet the gain from this export-expanding measure was swamped by adverse changes in price and production...

...All of this has focused a good deal of attention on Who's Bashing Whom?, published shortly before Tyson assumed her current post...

...it is a tight Unking of Japan's external defense to market reform...

...The efficient solution—assuming Micron is a viable competitor and worth saving—would be a Federal subsidy...

...Reviewed by Harvey H. Segal Author, "Corporate Makeover: How America's Business Is Reshaping for the Future" President Bill Clinton broke precedent twice with one appointment when he named Laura D'Andrea Tyson of the University of California, Berkeley, to head his Council of Economic Advisers...

...Then dram prices wouldn't increase and jobs, at least for a time, wouldn't be lost...

...The antidumping duties, though, did not address the problem of U.S...

...Under the terms of an agreement struck in 1986, the U.S...

...exports in Japan or Western Europe...

...Tyson never tackles that issue, and her statistical measure of what she calls "revealed comparative advantage" in high-tech manufacturing is sorely defective...

...Indeed, Tyson's polemics sometimes read as if they were briefs on behalf of Silicon Valley and Boeing...

...In addition, there are beneficial spillovers from high-tech operations, like new skills that can be transferred to other industries...

...It is not her affinity to such hi-tech giants as Intel and Motorola that is disquieting—after all, Leon H. Keyserling's ties to organized labor didn't preclude effective service as chairman of Truman's Council...

...Rather, it is her failure to pay adequate attention to the interests of consumers as opposed to those of producers...

...Perhaps the most serious danger posed by Laura Tyson's managed-trade stance is that it tends to legitimate the cruder views of Washington's hard-core protectionists...

...The untoward effect of the antidumping duties—which Tyson, to her credit, dissects with merited scorn—was to raise market prices generally, thus guaranteeing the least efficient producer a small profit and heaping super profits on the more efficient foreign and domestic suppliers, all at the expense of buyers of personal computers...

...With the rapid growth of China and prospects for a unified, perhaps nuclear-armed, Korea, Tokyo will have little choice but to accede to the market-opening demands of its only militarily strong ally...

...Therem-edy, I would submit, is not managed trade agreements, since they only strengthen mlti's bureaucrats and the keiretsu...

...This threatens the fragile fabric of the multilateral trading network that was restored at Bretton Woods in 1945...

...Tyson calls herself a "cautious activist," but itchy interventionist would be more accurate...

...It is Tyson's contention that our position in the high-tech markets is eroding, that we are losing global market shares because of passive and ill-conceived Federal trade and industrial policies...

...given the rapid diffusion of knowledge, however, there was no way to deny imitators a share of the market...

...Furthermore, dram prices would rise sharply, forcing U.S...

...Still, Clinton's seating an open proponent of "managed trade" on the Council—after lodging others in the Department of Commerce and the Office of the Trade Representative—is the symbolic equivalent of setting up a birth control clinic in the Vatican...

...and more substantively, in her case studies of the resolution of trade disputes between U.S...

...They won relief in the form of higher duties when the U.S...

...An administration concerned about better paying jobs should be looking at hightech companies and managements, not at entire industries...

...There is, as Thorstein Veblen pointed out long ago, a penalty for taking the lead: The innovating country is hurt by late entering imitators who are more efficient by dint of exploiting the most recent advances in technology...

...Congress will always be more willing to burden consumers with price-boosting tariffs or import quotas than to make less costly, direct appropriations...

...The gist of the book is that large shares of the international markets for "high technology"—electronics, aircraft, chemicals, drugs, and scientific instruments—are essential to the improvement of living standards in the United States...

...And if Micron were subsidized, should the likes of USX and Bethlehem also be succored...

...No sector should be written off, not even textiles...

...But it is also true that the Japanese played an important role in pioneering the mass production of quality chips...

...Washington, she argues, has not been sufficiently aggressive or canny in its efforts to eliminate barriers to U.S...

...Does Japan have a comparative advantage in mass production processes—in chips, electronic appliances and autos—while the forte of the United States is innovation and new product development...