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Ideology, interests, and the American executive: toward a theory of foreign competition and manufacturing trade policy

Published online by Cambridge University Press:  22 May 2009

Ellis S. Krauss  and
Simon Reich
Ellis S. Krauss
Affiliation:
Professor of Political Science at the University of Pittsburgh, Pennsylvania.
Simon Reich
Affiliation:
Associate Professor at the Graduate School of Public and International Affairs, University of Pittsburgh, Pennsylvania.
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Abstract

Faced with a formidable competitiveness problem, the American government chief executive appeared to offer a series of ad hoc responses in the 1980s. Contrarily, this article suggests that executive responses to foreign economic challenges follow a predictable pattern. Pointing to the interactive effects of ideology and interest, this article argues that both the degree and type of executive response, be it in the form of market-opening strategies, of temporary or permanent forms of protectionism, or of adopting a laissez-faire approach, can be predicted based on two factors: whether a sector is characterized as “high tech” and whether it is considered to be competitive. A major implication of this argument is that the U.S. chief executive has used trade policy as a surrogate for industrial policy; but in so doing, the strategic considerations associated with industrial policies have been bypassed. The major effect is that the executive fails to intervene only in the realm of an “infant industry” policy—the area most likely to generate a dynamic economy. The product of this combiantion of protectionist policies is a stagnant economy that we term “compromise protectionism.”

Type
Articles
Information
International Organization , Volume 46 , Issue 4 , Autumn 1992 , pp. 857 - 897
Copyright
Copyright © The IO Foundation 1992

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References

Research for this article was supported, in part, by grants from the University of Pittsburgh Office of Research, the Japan Council of the University of Pittsburgh, and the Pew Charitable Trusts. It was first presented in draft form at the International Studies Association Conference in Vancouver, B.C., in April 1991. We thank Alex Blair, Mac Fiddner, H. Richard Friman, Chalmers Johnson, William Keller, Stephen Krasner, Frank Langdon, John Odell, T. J. Pempel, Len Schoppa, and two anonymous reviewers who all made suggestions that significantly improved the quality of this article. We additionally extend our thanks to Steven Brener and Robert Weise for their valuable research assistance.

1 See Johnson, Chalmers, MITI and the Japanese Miracle (Stanford, Calif.: Stanford University Press, 1982), especially chap. 9Google Scholar; Johnson, Chalmers, ed., The Industrial Policy Debate (San Francisco: ICS Press, 1984)Google Scholar; Barfield, Claude E. and Schambra, William A., eds., The Politics of Industrial Policy (Washington, D.C.: American Enterprise Institute, 1986)Google Scholar; Prestowitz, Clyde V., Trading Places: How We Are Giving Our Future to Japan and How to Reclaim It (New York: Basic Books, 1989)Google Scholar; and Trezise, Philip H., “Industrial Policy is Not the Major Reason for Japan's Success”, The Brookings Review (Spring 1983), pp. 13–18Google Scholar. On the broader issue of the role of the state versus the market, see Johnson, Chalmers, “Studies of Japanese Political Economy: A Crisis in Theory”, Japan Foundation Newsletter 16 (12 1988), pp. 1–11Google Scholar.

2 See Reich, Simon, Between Production and Protection: Reagan and the Negotiation of the VER for the Automobile Industry, Pew Foundation Case Studies in International Negotiation, no. 119Google Scholar, Graduate School of Public and International Affairs, University of Pittsburgh, Pittsburgh, Penn., 1989Google Scholar; Krauss, Ellis S. and Pierre, Jon, “Targeting Resources for Industrial Change”, in Weaver, E. Kent and Rockman, Bert A., eds., Do Institutions Matter? (Washington, D.C.: The Brookings Institution, forthcoming)Google Scholar.

3 Citing Pareto, Krasner distinguishes the transcendent, autonomous national interest goals sought by the state as a form of “utility of the community”, whereas the sum of the desires of specific domestic groups is a form of “utility for the community”. Krasner spends little time discussing the influence of institutions, and because he seeks to test for the influence of autonomous state goals, he chooses to examine a policy area where the state's and interest groups' preferences diverge. See Krasner, Stephen D., Defending the National Interest: Raw Materials Investments and U.S. Foreign Policy (Princeton, N.J.: Princeton University Press), pp. 12 and 17–18Google Scholar.

4 See Ikenberry, G. John, “Conclusion: An Institutional Approach to American Foreign Economic Policy”, in Ikenberry, G. John, Lake, David A., and Mastanduno, Michael, eds., The State and American Foreign Economic Policy (Ithaca, N.Y.: Cornell University Press, 1988), p. 221Google Scholar. Ikenberry draws this conclusion based on the various case studies in the volume.

5 Judith Goldstein, “Ideas, Institutions and American Trade Policy”, in ibid., p. 216.

6 Ibid., pp. 196–97.

7 Alan Wolff identifies three components underlying U.S. trade policy: (1) resistance to protectionism (adherence to which he describes as being “almost religious”), (2) the economic theory of Adam Smith, and (3) legalism. These components are a good description of what we mean by the “free trade” aspect of American ideology. See Wolff, Alan Wm., “International Competitiveness of American Industry: The Role of U.S. Trade Policy”, in Scott, Bruce R. and Lodge, George C., eds., U.S. Competitiveness in the World Economy (Boston: Harvard Business School Press, 1985), pp. 302–303Google Scholar.

8 Krasner, , Defending the National Interest, p. 12Google Scholar.

9 For the purposes of this figure the variables are conceived as dichotomous, but, of course, in real life they each represent more of a continuum.

10 Helen Milner and David Yoffie argue that “government trade officials are more apt to favor” the “strategic trade demands” from high-technology industries. See Milner, Helen V. and Yoffie, David B., “Between Free Trade and Protectionism: Strategic Trade Policy and a Theory of Corporate Trade Demands”, International Organization 43 (Spring 1989), p. 271CrossRefGoogle Scholar.

11 Destler, I. M., American Trade Politics: System Under Stress (Washington, D.C.: Institute for International Economics and the Twentieth Century Fund, 1986), pp. 159–60, and chap. 3–8 passimGoogle Scholar.

12 See U.S. Congress, Office of Technology Assessment, Competing Economies: America, Europe, and the Pacific Rim, OTA–ITE–498 (Washington, D.C.: U.S. Government Printing Office [GPO], 1991), p. 3Google Scholar. For a description of the variety of indicators of national competitiveness see Cohen, Stephen S. and Zysman, John, Manufacturing Matters: The Myth of the Post-industrial Economy (New York: Basic Books, 1987), p. 61Google Scholar.

13 Interview with Keller, William, project director of the Office of Technology Assessment, 22 11 1991Google Scholar. For a discussion of the problems and variety of definitions and indicators of high tech see Markusen, Ann, Hall, Peter, and Glasmeier, Amy, High Tech America: The What, How, Where, and Why of the Sunrise Industries (Boston, Mass.: Allen & Unwin, 1986), pp. 10–23Google Scholar.

14 U.S. Congress, Office of Technology Assessment, Technology, Innovation, and Regional Economic Development (Washington, D.C.: GPO, 1984), p. 18Google Scholar.

15 The appropriate details concerning these firms are provided in the case study that follows.

16 Coles, Isobel Derouet, “The Public Works Access Dispute: Case Study of a Japan–U.S. Trade Conflict”, M. Phil, thesis, Oxford University, 1989, pp. 34–35Google Scholar.

17 Committee on Armed Services, Critical Technologies Plan, report prepared by the U.S. Department of Defense, 03 1990, p. 11Google Scholar.

18 Ibid, p. 19. See also Office of Science and Technology Policy, Report of the National Critical Technologies Panel (Washington, D.C.: GPO, 1991), p. 5Google Scholar; and U.S. Department of Commerce, Emerging Technologies: A Survey of Technical and Economic Opportunities (Washington, D.C.: U.S. Department of Commerce, 1990), p. 9Google Scholar.

19 Destler refers to “hyping” the protectionist threat from Congress in order to put pressure on foreign governments to compromise with the executive in negotiations as a “game familiar to trade practitioners”. Destler, , American Trade Politics, p. 28Google Scholar.

20 The description below is based on extensive interviews with government officials in Tokyo and Washington, D.C., as well as on the works cited. For further details on the domestic and international politics of the case, see Ellis S. Krauss, Under Construction: U.S.–Japan Negotiations to Open Japan's Construction Markets to American Firms, 1985–1988, Pew Foundation Case Studies in International Negotiation, no. 145, Graduate School of Public and International Affairs, University of Pittsburgh, Pittsburgh, Penn., 1988; Krauss, Ellis S. and Coles, Isobel, “Built-in Impediments: The Political Economy of the U.S.–Japan Construction Dispute”, in Yamamura, Kozo, ed., Japan's Economic Structure: Should It Change? (Seattle, Wash.: Society for Japanese Studies, 1990), pp. 336–47Google Scholar; and Cutts, Robert, “What the Construction Wrangle is Really About”, PHP Interest (09 1988)Google Scholar.

21 See Goldfield, H. P., Japanese Restrictions on International Competitive Bidding in the Kansai International Airport Project, Statement prepared by the assistant secretary of commerce for the Senate Foreign Relations Committee, 5 06 1986Google Scholar; and U.S. Information Service, Background Bulletin (Tokyo: U.S. Embassy, n.d.), p. 1Google Scholar.

22 U.S. firms (company specialties in parentheses) included AT&T Japan (telecommunications); Boeing International Corporation (jetfoils); Caterpillar Mitsubishi (heavy equipment); ITT Asia Pacific (telecommunications); Wang Computer (computer systems); American Science and Engineering (X-ray security systems); Westinghouse (electrical equipment, people movers); IBM Japan (computer systems, telecommunications); and Cray Research Japan (computer systems), among others. These and many other high-tech engineering, telecommunications, electronics, and other specialty firms appear on a list entitled “U.S. Firms that have Applied for ‘Registration’ with the Kansai International Airport Corporations”, in Background Briefing Book for the Presidential Trade Delegation Regarding the New Kansai International Airport, 7–9 October 1986, n.p. Representatives of many of the companies attended the KIA Kansai International Airport Corporation seminar to which the presidential trade delegation was sent. On the component industries' rating, see Table 1 in U.S. Congress, Office of Technology Assessment, Technology, Innovation, and Regional Economic Development, p. 19Google Scholar.

23 “The Shrinking World of U.S. Engineering Contractors”, Business Week, September 24, 1984, pp. 84–85, cited in Coles, , “The Public Works Access Dispute” pp. 34–35Google Scholar.

24 At the time of the dispute Japanese firms were estimated to have had only about a 1 to 3 percent share of the U.S. market, but the value of Japanese contracts had risen from about $100 million in 1982 to approximately $4 billion by 1988. See Coles, , “The Public Works Access Dispute”, p. 54Google Scholar. American construction firms were alarmed at the prospect that, in the words of the spokesperson for the International Engineering and Construction Council, this might be the beginning of a threat “just like with TVs, cars, and semiconductors”. See Chalpin, Mark as quoted in “Japan Carves Niche in U.S. Construction”, The Asian Wall Street Journal, 19 01 1988, p. 1Google Scholar; see also Krauss, , Under Construction, p. 11Google Scholar.

25 Goldfield, H. P., quoted in Auerbach, Stuart, “Japan Accused of Unfair Tactics”, The Washington Post, 6 06 1986, p. B8Google Scholar.

26 On the details of those perceived impediments, see Krauss and Coles, “Built-in Impediments”, and Cutts, “What the Construction Wrangle is Really About”.

27 For example, see the arguments of the IECIC at a congressional hearing only a few months into the negotiations in The Washington Post, 6 June 1986, pp. B8 and B10.

28 Interview with Keith R. Bovetti of the Foreign Commercial Service Office in Osaka, Tokyo, May 1988. Bovetti is generally credited with “discovering” the KIA issue and helping to mobilize the interest of both the U.S. Department of Commerce and of industrial firms.

29 On the summit meeting, see Nihon Keizai Shinbun, 2–3 May, 1987, p. 1; and The Washington Post, 5 May 1987, p. C1.

30 See The New York Times, 5 December 1987, p. 37; The Mainichi Daily News, 20 December 1987; and The Washington Post, 23 December 1987, p. F1.

31 Congress's retaliation against Japanese construction firms in the United States via the Brooks–Murkowski amendment raised the likelihood that any executive sanctions against Japan would go beyond the construction industry, very possibly involving machinery or even nonconstruction items. This elicited the concern of Japan's Ministry of International Trade and Industry (MITI), which weighed in with pressure to resolve the dispute. This interpretation of events was confirmed by a high-ranking MITI official in an interview on 30 May 1991 in Tokyo.

32 See The New York Times, 17 March 1988, p. 27; The Yomiuri Daily News, 18 March 1988; and Japan Economic Institute, JEI Report, no. 12B, 25 03 1988, pp. 6–7Google Scholar.

33 Commerce Secretary William Verity is being paraphrased in the former statement, deputy U.S. trade representative Michael Smith in the latter. See The Yomiuri Daily News, 27 March 1988.

34 See The Washington Post, 30 March 1988, p. F6; The New York Times, 30 March 1988, p. 1; and Japan Economic Institute, JEI Report, no. 13B, 1 04 1988, pp. 10–11Google Scholar.

35 One of the more detailed descriptions and analyses of the dispute, and a useful chronology, can be found in Noble, Gregory W., “Japan, America and the FSX Jet Fighter Plane: Structural Asymmetries in Bilateral Negotiations”, paper presented at the annual meeting of the Association for Asian Studies, Chicago, Illinois, 5–8 04 1990Google Scholar.

36 See Japan Economic Institute, “Administration Defends FSX Project”, JEI Report no. 19B, 12 05 1989, p. 10Google Scholar; and Sanger, David E., “Japan to Let Contract on Disputed Jet Project”, The New York Times, 30 03 1989, pp. 21–22Google Scholar.

37 Japan Economic Institute, JEI Report, no. 18B, 5 05 1989, pp. 11–12Google Scholar.

38 Pear, Robert, “Preliminary Supercomputer Pact Gives U.S. More Access to Japan”, The New York Times, 24 03 1990, p. 19Google Scholar.

39 Japan Economic Institute, “Super 301: Now That Japan Has Been Named”, JEI Report, no. 23B, 16 06 1991, pp. 7–8Google Scholar.

40 On the role of the Bush–Kaifu summit meeting in producing results and the nature of the agreement, see Pear, , “Preliminary Supercomputer Pact Gives U.S. More Access to Japan”, pp. 1 and 19Google Scholar.

41 Japan Economic Institute, JEI Report, no. 16B, 20 04 1990, p. 12Google Scholar.

42 Ibid..

43 Japan Economic Institute, JEI Report, no. 20B, 18 05 1990, p. 5Google Scholar.

44 Nobaru Fujii, “The Road to the U.S.–Japan Auto Crash”, in The Program on U.S.–Japan Relations, U.S.-Japan Relations: New Attitudes for a New Era, Annual Review 1983–1984, Center for International Affairs, Harvard University, Cambridge, Mass., 1984Google Scholar.

45 Volkswagen did make some inroads into the U.S. market, but its market share peaked at 5 percent in the 1960s. See The New York Times, 26 May 1963; and Nelson, W. H., Small Wonder: The Amazing Story of Volkswagen (Boston, Mass.: Little, Brown, 1965)Google Scholar. For details about the development of foreign firms in the United States, see Reich, Simon, The Fruits of Fascism: Postwar Prosperity in Historical Perspective (Ithaca, N.Y.: Cornell University Press 1990)Google Scholar; Wilkins, Mira and Hill, Frank, American Business Abroad: Ford on Six Continents (Detroit, Mich.: Wayne State University Press, 1964)Google Scholar; and Roos, Daniel and Altshuler, Alan, The Future of the Automobile (Cambridge, Mass.: MIT Press, 1984)Google Scholar.

46 Kanna, N. P., Rebibo, Kathy, and Ellis, Donna, Downsizing Detroit: The Future of the U.S. Automobile Industry (New York: Praeger, 1982), p. 23Google Scholar.

47 Roos, and Altshuler, , The Future of the Automobile, p. 172Google Scholar.

48 This view was reflected in the comments and the activities of U.S. government officials, despite the growth of import sales, both before and after the institution of the VER. Perception differed from reality as reflected in the figures for the growth of import sales, which doubled between 1966 and 1970 (growing from 913,207 to 2,013,420) and then increased by another 50 percent by 1980 (to 3,248,266). All figures are from Motor Vehicles Manufacturing Association (MVMA), World Motor Vehicle Data (Detroit, Mich.: MVMA, 1982)Google Scholar.

49 Hart, Jeffrey, “Rival Capitalists: International Competitiveness in the United States, Japan, and Western Europe”, unpublished manuscript, p. 59Google Scholar. For a fascinating discussion of this subject, see Halberstam, David, The Reckoning (New York: Avon, 1986)Google Scholar.

50 See Winham, Gilbert, The Automobile Trade Crisis of 1980 (Halifax, Nova Scotia: Center for Foreign Policy Studies, Dalhousie, 1981)Google Scholar. For details of the Chrysler case, see U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, The Chrysler Corporation Financial Situation: Hearings Before the Committee on Banking, Housing, and Urban Affairs, 96th Congress, 1st sess., 10 1979Google Scholar; U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, The Chrysler Corporation Loan Guarantee Act of 1979: Hearings Before the Committee on Banking, Housing and Urban Affairs, 96th Congress, 1st sess., 11 1979Google Scholar; and U.S. Congress, Senate Committee on Banking, Finance, and Urban Affairs, Finding of the Chrysler Corporation Loan Guarantee Board, 96th Congress, 2d sess., 1980Google Scholar, Committee Print 62–579 O. For figures, see “The American Car Industry's Own Goals”, The Economist, 6 February 1988, p. 96.

51 U.S. Congress, Senate Committee on Banking, Finance, and Urban Affairs, Finding of the Chrysler Corporation Loan Guarantee Board, pp. 155–157Google Scholar.

52 MVMA, Motor Vehicle Facts and Figures (Detroit, Mich.: MVMA, 1982), p. 336Google Scholar.

53 See The New York Times, 15 May and 12 November 1980.

54 See The New York Times, 8 March 1981. For a discussion of the terms and implications of major legislative environmental policy toward the United States, the Energy Policy and Conservation Act of 1975, see Dyer, Davis, Slater, Malcolm, and Webber, Alan, Changing Alliances (Boston: Harvard Business School Press, 1987) p. 220Google Scholar.

55 The New York Times, 16 March 1981.

56 Note that despite the eventual implementation of the VER, Philip Caldwell, then chief executive officer at Ford, still expressed dissatisfaction with U.S. government policy. By 1984 he called upon the government to engineer an adjustment in the rate of exchange between the yen and the dollar in order to place American producers at a competitive advantage. Caldwell made his speech in September 1984. An historic decline in the value of the dollar took place between March 1985 and February 1988. Yet, despite this decline in value from a level of 270 yen to the dollar to 125 yen to the dollar, Japanese cars remained in high demand. See Caldwell's, Philip speech to a conference entitled “Future of the Automobile”, Cambridge, Mass., 18 09 1984Google Scholar.

57 U.S. Congress, House Committee on Ways and Means, Fair Practices in Automotive Products Act of 1983: Hearings Before the Subcommittee on Trade, 98th Congress, 1st sess., 1983Google Scholar. H.R. 1234, section 2. This bill was later resubmitted as the Fair Practices in Automotive Products Act of 1983, H.R. 5133.

58 See U.S. Congress, House Committee on Ways and Means, Subcommittee on Trade, Domestic Content Legislation and the U.S. Auto Industry: Analyses of H.R. 5133, 97th Congress, 2d session, 1982, pp. 10 and 30Google Scholar. Note that Japanese firms had long resisted pressure from their own government to build U.S. production plants. See Fujii, , “The Road to the U.S.–Japan Auto Crash”, p. 41Google Scholar. For a comprehensive analysis of the issue, see Summerville, Paul, “The Politics of Self-Restraint: The Japanese State, and the Voluntary Export Restraint of Japanese Passenger Car Exports to the United States in 1981”, Ph.D. diss., University of Tokyo, 1988Google Scholar.

59 The most vocal proponent of free trade was GM. See The New York Times, 18 March 1981.

60 The New York Times, 20 and 23 March 1981.

61 U.S. Congress, Senate Committee on Commerce, Science, and Transportation, Fair Practices in the Automotive Products Act: Hearings Before the Committee on Commerce, Science, and Transportation, 97th Congress, 2d sess., 1982, pp. 56, 60, and 61Google Scholar.

62 See U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, The Effect of Expanding Japanese Automobile Imports on the Domestic Economy: Hearings Before the Subcommittee on Economic Stabilization, 96th Congress, 2d sess., 1980Google Scholar; and U.S. Congress, Joint Economic Committee, U.S.–Japanese Economic Relations: Hearings Before the Subcommittee on International Trade, Finance, and Security Economics, 97th Congress, 1st sess., 1981Google Scholar.

63 Fujii, , “The Road to the U.S.–Japan Auto Crash”, p. 41Google Scholar.

64 The New York Times, 1 May 1981.

65 See Summerville, , “The Politics of Self-Restraint”, p. 356Google Scholar; and Fujii, , “The Road to the U.S.–Japan Auto Crash”, pp. 38–39Google Scholar.

66 Brock, William, cited in The New York Times, 3 05 1981Google Scholar.

67 See the testimonies of Robert Dederich, undersecretary of the Department of Commerce; Michael Driggs, deputy assistant at the Department of Commerce, and William Krist, assistant in the office of the U.S. Trade Representative, in U.S. Congress, House Committee on Energy and Commerce, U.S. Auto Trade Problems: Hearings Before the Subcommittee on Commerce, Transporation, and Tourism, 98th Congress, 1st sess., 1983, p. 67Google Scholar.

68 Hart, , “Rival Capitalists”, p. 513Google Scholar.

69 See The Wall Street Journal, 19 December 1983.

70 President Bush's more recent efforts to open the Japanese market to U.S. auto producers is significant for our argument. During his ill-fated visit to Japan, Bush repeatedly stressed the competitive capacities of American firms and the importance of sales for the U.S. balance of payments. Our argument suggests that the capital investment in high-technology production by American auto firms over the last decade had paid off in competitive terms for them, shifting them from being non-high tech to being high-tech producers. In other words, Bush's behavior in seeking a market-opening strategy suggested that he considered U.S. auto producers to have shifted from cell B to cell A in our classification, that is, he considered them to be competitive, high-tech producers. Certainly, consistent with our expectations, the impetus for the visit's agenda and the decision to invite along auto company executives came from Mosbacher, who was part of the trade bureaucracy as secretary of commerce. This episode also suggests that the classification of sectors is not static but, on the contrary, is dynamic, with executive behavior changing depending on whether the sector concerned is perceived as high tech or competitive. For a variety of views concerning the competitiveness of U.S. firms in Japan's market see Chipello, Christopher, “U.S., Japan Say Differences Remain over Sales of Autos”, Wall Street Journal, 9 01 1992Google Scholar; Graham, George, “Call to Save U.S. Motor Industry”, The Financial Times, 7 01 1992Google Scholar; Ingrassia, Paul, “Detroit's Big Three Are Trying to Conquer a New Market: Japan”, The Wall Street Journal, 19 11 1991Google Scholar; Sterngold, James, “Japan Announces a Host of Steps to Aid U.S. Trade”, The New York Times, 9 01 1992Google Scholar; Wagstyl, Stefan, “On the Campaign Trail—In Japan”, The Financial Times, 1 01 1992Google Scholar; Weisman, Steven, “Japan Irked as Bush Visit Turns Into a Trade Quest”, The New York Times, 22 12 1991Google Scholar; and Wines, Michael, “Bush Reaches Pact with Japan but Auto Makers Denounce It”, The New York Times, 10 01 1992Google Scholar.

71 Holland, Max, When the Machine Stopped: A Cautionary Tale From Industrial America (Boston: Harvard Business School Press, 1989), p. 252Google Scholar. For details of the agreement, see Hooley, Richard, Protection for the Machine Tool Industry: Domestic and International Negotiations for Voluntary Restraint Agreements, Pew Foundation Case Studies in International Negotiation, no. 120Google Scholar, Graduate School of Public and International Affairs, University of Pittsburgh, Pittsburgh, Penn., 1987, appendix 2Google Scholar. Note that in this case the agreement extended to Taiwanese imports.

72 The quotation and figures on the structure of the industry are to be found in Hooley, , Protection for the Machine Tool Industry, p. 3Google Scholar.

73 Ibid., p. 1.

74 The formal complaint focused on Japanese tax credits as a form of subsidization in contravention of Section 103, the Unfair Trade Practices Clause, of the Revenue Act of 1971. The formation, evolution, and dismemberment of Houdaille is discussed in fascinating detail in Holland, Wlien the Machine Stopped. On Houdaille's competitiveness, see Hooley, , Protection for the Machine Tool Industry, p. 7Google Scholar. One observer, Mark Reutter, described the petition as “from first to last a political petition, premeditated to spark a fire-storm of abuse against Japan. Copaken [Houdaille's legal representative] alleged in documents that a cartel masterminded by the Japanese Ministry of International Trade and Industry had decided to destroy Houdaille through unscrupulous subsidies and dumping. The lawyer constructed his ‘yellow-peril” case with utmost media savvy, putting together a video tape for special showings to reporters and congressmen”. For a highly critical assessment of the behavior of Houdaille's owners and management (including this quotation), see Reutter, Mark, “When They Forgot the Nuts and Bolts, Everybody Got Screwed”, The Washington Monthly, 04 1989, especially p. 53Google Scholar.

75 Holland, , When the Machine Stopped, p. 15Google Scholar.

76 Ibid., p. 13.

77 Ibid., p. 17.

78 The following analysis relies extensively on confidential interviews conducted in Washington, D.C., in May 1989 and in Tokyo in May 1991.

79 Walters, Robert S., U.S. Negotiation of Voluntary Restraint Agreements in Steel, 1984: Domestic Sources of International Economic Diplomacy, Pew Foundation Case Studies in International Negotiation, no. 107, Graduate School of Public and International Affairs, University of Pittsburgh, Pittsburgh, Penn., 1988, p. 7Google Scholar.

80 For an analysis of the growth of minimills, see Barnett, Donald and Crandall, Robert, Up from the Ashes: The Rise of the Steel Minimill in the United States (Washington, D.C.: Brookings Institution, 1986)Google Scholar.

81 Walters, , U.S. Negotiation of Voluntary Restraint Agreements in Steel, 1984, p. 5Google Scholar.

82 Ibid., p. 8. A similar process is now taking place among Japan's steel producers, who largely have conceded market share to the NICs and have started to diversify into unrelated areas (such as entertainment). Interview with Osamu Suruga, senior manager, corporate planning division, Nippon Steel, Tokyo, 14 May 1991.

83 Borrus, Michael, “The Politics of Competitive Erosion in the U.S. Steel Industry”, in Zysman, John and Tyson, Laura, eds., American Industry in International Competition (Ithaca, N.Y.: Cornell University Press, 1983), p. 84Google Scholar.

84 Walters, , U.S. Negotiation of Voluntary Restraint Agreements in Steel, 1984, p. 8Google Scholar.

85 For a detailed account of the events leading up to the TPM program, see Borrus, , “The Politics of Competitive Erosion in the U.S. Steel Industry”, pp. 83–96Google Scholar.

86 Walters, , U.S. Negotiation of Voluntary Restraint Agreements in Steel, 1984, p. 10Google Scholar.

87 Figures are from the American Iron and Steel Institute (AISI), Annual Statistical Report, 1985 (Washington, D.C.: AISI, 1986), pp. 8–9Google Scholar. For a detailed discussion of the events leading up to the pact and the terms of the agreement itself, see Myers, Charles T., “The 1982 and 1984 Steel Trade Accords: The Impact of Process on the Resolution of Trade Disputes”, master's thesis, Graduate School of Public and International Affairs, University of Pittsburgh, Pittsburgh, Penn., 1990Google Scholar.

88 Walters, , U.S. Negotiation of Voluntary Restraint Agreements in Steel, 1984, pp. 4, 12, and 14Google Scholar.

89 Wolff, , “International Competitiveness of American Industry”, p. 314Google Scholar.

90 For the terms of the recommendation, see Woolcock, Stephen and Hart, Jeffrey, Interdependence in the Post-multilateral Era (Lanham, Md.: University Press of America, 1986), pp. 52–53Google Scholar.

91 Walters, , U.S. Negotiation of Voluntary Restraint Agreements in Steel, 1984, pp. 14 and 16Google Scholar.

92 Ibid., pp. 17–18.

93 Ibid., p. 18.

94 The most comprehensive analysis of the textile issue and its background can be found in Destler, I.M., Fukui, Haruhiro, and Sato, Hideo, The Textile Wrangle: Conflict in Japanese–American Relations, 1969–71 (Ithaca, N.Y.: Cornell University Press, 1979)Google Scholar. A shorter summary of the case is found in Destler, I.M. et al. , Managing an Alliance: The Politics of U.S.–Japanese Relations (Washington, D.C.: The Brookings Institution, 1976), pp. 35–45 and passimGoogle Scholar.

95 Destler, , Fukui, , and Sato, , The Textile Wrangle, p. 58Google Scholar.

96 Destler, et al. , Managing an Alliance, pp. 36–37Google Scholar. On the 1957 agreement under Eisenhower, see also Friman, H. Richard, “Rocks, Hard Places, and the New Protectionism: Textile Trade Policy Choices in the United States and Japan”, International Organization 42 (Autumn 1988), pp. 701–8CrossRefGoogle Scholar.

97 Destler, et al. , Managing an Alliance, p. 37Google Scholar.

98 Fukui, Destler, and Sato, , The Textile Wrangle, p. 34Google Scholar.

99 Ibid., p. 68.

100 Cited in ibid., pp. 71–72.

101 Nixon's tactics included linking the textile issue to the return of Okinawa and at one point even threatening to impose quotas under the “Trading with the Enemy” Act of 1917. The strong threats in the later stages of the negotiation were part of a secret deal between Nixon's representative David Kennedy and MITI minister Tanaka to help the latter gain domestic concessions on the Japanese side. See Destler, et al. , Managing an Alliance, pp. 38–45Google Scholar; and Destler, , Fukui, , and Sato, , The Textile Wrangle, p. 298 and passimGoogle Scholar.

102 On HDTV, its technology, development, and implications, see Kumabe, Norio, “Couch Potato Heaven”, Look Japan, 01 1988, pp. 20–21Google Scholar; Nobuo, Shiga, “Haibijiyon fukyû yosoku no Muzukashisa” (“The Difficulty of Forecasting the Diffusion of Hi-vision”), Hôsô Hihyô, 12 1988Google Scholar; “The Television of the Future”, Newsweek, 4 April 1988, pp. 62–63; and “Super Television: The High Promise—and High Risks—of High Definition TV”, Business Week, 30 January 1989, pp. 56–66.

103 See American Electronics Industry, Electronics Industries Association's Advanced Television Committee, “Consumer Electronics, HDTV, and the Competitiveness of the U.S. Economy”, mimeograph, submitted to Congressman Edward Markey (D-MA), chairman of the Subcommittee on Telecommunications and Finance, U.S. House of Representatives, 1 February 1989.

104 Markoff, John, “Making Industrial Policy at the Pentagon”, The New York Times, 19 11 1989, section 4, p. 4Google Scholar.

105 Richards, Evelyn, “Pentagon Aims to Revive U.S. TV Industry”, The Washington Post, 19 12 1988, p. A1Google Scholar.

106 On Pentagon concern for HDTV and its aim of regenerating U.S. technology in electronics, see ibid; and the remarks of Craig I. Fields, in U.S. Congress, House Committee on Energy and Commerce, Hearings Before the Subcommittee on Telecommunications and Finance, 03 8 and 9, 1989, serial no. 101–34, pp. 152–63Google Scholar. On DARPA funding on display panels, see Japan Economic Institute, “U.S. HDTV Picture Still Fuzzy”, JEI Report, no. 44B, 17 11 1989, p. 8Google Scholar.

107 In November 1988 Verity appointed an advisory committee on advanced television to advise the department on HDTV's impact on American industry. See Japan Economic Institute, “Developing Advanced Television: Industrial Policy Revisited”, JEI Report, no. 2A, 13 01 1989, p. 8Google Scholar.

108 Personal communication from staff members of Markey subcommittee, dated 5 January 1990.

109 Opposition came primarily from Michael Boskin, chairman of the Council of Economic Advisors, Richard Darman, the budget director, and Roger Porter, domestic policy advisor. For this characterization of their position see Farnsworth, Clyde H., “The Bush Team Has Competing Ideas on Competing with Japan”, The New York Times, 25 06 1989, section E, p. 4Google Scholar; see also Japan Economic Institute, “Interference Clouds HDTV Picture”, JEI Report, no. 31B, 11 08 1989, pp. 12–13Google Scholar; and “U.S. HDTV Program”, JEI Report, no. 36B, 22 09 1989, pp. 14–15Google Scholar.

110 “I don't know if it's dead, but it's not moving”, said one administration official. See Wessel, David and Lachica, Eduardo, “Mosbacher's Initiative on HDTV is Getting Scuttled, Sources Say”, The Wall Street Journal, 2 08 1989, p. B4Google Scholar. For details on the more generalized approach see Pollack, Andrew, “The Setback for Advanced TV”, The New York Times, 30 09 1989, pp. 17 and 21Google Scholar.

111 Markoff, John, “Report of U.S. Research Cut Stirs Critics”, The New York Times, 8 11 1989, p. 30Google Scholar.

112 Choy, Jon, “U.S. HDTV Picture Still Fuzzy”, Japan Economic Institute, JEI Report, no. 44B, 17 11 1989, p. 7Google Scholar.

113 Fiddner, Dighton, “The State's Role in Science and Technology Research and Development: A Comparative Assessment”, typescript, University of Pittsburgh, Pittsburgh, Penn., 1991Google Scholar.

114 U.S. Department of Commerce, International Trade Administration, Office of Telecommunications, A Competitive Assessment of the U.S. Fiber Optics Industry (Washington, D.C.: GPO, 09 1984), executive summary and pp. 52–54Google Scholar. For a broader discussion of the role of governmental agencies in the development of the fiber optics industry, see the draft copy of a paper entitled “Maintaining the Defense Technology Base”, from a workshop on the relationship between military and civilian fiber optics, organized by the U.S. Office of Technology Assessment, personal communication.

115 This problem may become more salient as the United States confronts more and more industries in which the Japanese and others have pioneered new technologies.

116 Krasner emphasizes the liberal trade orientation of the U.S. “central decision makers”. Goldstein has argued that “in particular, the Office of the President has been active in protecting America's liberal position. Although the congressional position on trade has varied, the position of the executive has been unambiguous. When confronted by a choice between giving aid or not, the executive gave no aid”. See Krasner, Stephen D., “United States Commercial and Monetary Policy: Unravelling the Paradox of External Strength and Internal Weakness”, in Katzenstein, Peter, ed., Between Power and Plenty: The Foreign Economic Policies of Advanced Industrial States (Madison: University of Wisconsin Press, 1978), pp. 55–56Google Scholar; and Goldstein, , “Ideas, Institutions, and American Trade Policy”, pp. 215–216Google Scholar.

117 General studies of the semiconductor dispute include the following works: Yoffie, David B. and Coleman, John J., The Semiconductor Industry Association and the Trade Dispute with Japan, nos. A and B, rev. eds., Harvard Business School Case Studies, Harvard University, Boston, Mass., 1987 and 1988, respectivelyGoogle Scholar; Clyde V. Prestowitz, Jr., Trading Places; Krauss, Ellis S., “U.S.–Japan Negotiations on Construction and Semiconductors (1985–1988): Building Friction and Relationchips”, in Evans, Peter, Jacobson, Harold K., and Putnam, Robert D., eds., International Bargaining and Domestic Politics: An Interactive Approach (Berkeley: University of California Press, forthcoming)Google Scholar.

118 The Council on Competitiveness classified the United States as “strong” in microprocessors, and “competitive” in logic chips but “losing badly or lost” in memory chips. See Council on Competitiveness, Gaining New Ground: Technology Priorities for America's Future (Washington, D.C.: Council on Competitiveness, 1991)Google Scholar. Differences among types of semiconductor firms in the sector, as well as background to the dispute, can be found in Yoffie, and Coleman, , The Semiconductor Industry Association and the Trade Dispute with Japan, no. A., pp. 3–4Google Scholar; Salter, Malcolm and Sanabria, Susan, Semiconductors: U.S. Response to Japanese Ascendency, Harvard Business School Case Studies, Harvard University, Boston, Mass., 1987, pp. 1–21Google Scholar; Howell, Thomas R., MacLaughlin, Janet H., and Wolff, Alan Wm., The Microelectronics Race: The Impact of Government Policy on International Competition (Boulder, Colo.: Westview Press, 1988), chaps. 1–3Google Scholar; Wolff, Alan Wm., “International Competitiveness of American Industry”, pp. 317–19Google Scholar; Borrus, Michael, Millstein, James, and Zysman, John, U.S.–Japanese Competition in the Semiconductor Industry: A study in International Trade and Technological Development, Policy Papers in International Affairs, no. 17, Institute of International Studies, University of California, Berkeley, 1982Google Scholar; and Okimoto, Daniel I., Sugano, Takuo, and Weinstein, Franklin B., eds., Competitive Edge: The Semiconductor Industry in the U.S. and Japan (Stanford, Calif.: Stanford University Press, 1984)Google Scholar.