Semiconductor Trade Agreement

Semiconductor Trade Agreement

The trade deal was a media disaster. This indicates that the only way to compete with U.S. companies is to get tough government protection. In fact, this is not true. For complex chips, which represent the highest level of high technology, American products are the world leaders. Even in Japan, American companies like Texas Instruments Inc. and Intel Corp. are the market leaders. But Silicon Valley`s willingness to rely on Uncle Sam obviously gives the impression that he can`t be alone. When U.S. demand for DRAMs increased in the 1980s, Japanese companies filled this gap, not because of unfair trade practices, but because of earlier investment decisions. U.S.

companies have lost much of their competitive advantage by delaying investments in periods of slow market growth. Today, many of these U.S. companies want the federal government to cover the losses they might have suffered if they didn`t invest in DRAMs. It is ironic that if some of these companies had invested in the production of DRAM, they would have sacrificed the larger profits from the production of the largest chips. CHARLES WESSNER: In this session, we`ll discuss another case study: the semiconductor trade. For our first presentation, I am particularly pleased to introduce Michael Borrus, Co-Director of the Berkeley Round Table on International Economy. It is to bend to the pressure. In the 1980s, the U.S. semiconductor industry complained of facing unfair competition from Japanese companies and needing temporary relief from Japanese imports to transform U.S. production sites. The U.S.

government responded by threatening to reward trade if Tokyo did not raise the price of Japan`s low-end DRAM chips in the U.S. and overseas markets. Tokyo bowed to this pressure in August 1986. Japan has also agreed to try to guarantee the United States a certain share of the Japanese market in these products. The extension of the semiconductor chip deal is a recipe for weakening another U.S. industry by making it less competitive through reliance on trade protection, thereby undermining America`s competitive position in the international economy. Therefore, George Bush should not renew the agreement on semiconductor chips. The presumed goal of this exercise was to give more U.S. memory companies a chance to compete.

It was a total flop. The same three national companies that sold ram chips in 1986 sell them today. There was not a single new national entrant. The share of U.S. companies in the Japanese market has increased by only a fraction. The deal appears to have been more fruitful for U.S. manufacturers in the field of programmable ROM chips. DR. KIM: The government is not involved in defining the sites where we can do production.

They are not involved at all, and it is up to us to decide where we go. Why do we produce in the United States? There is obviously a trade problem in our heads….

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