U.S. Trade Battle Must Begin at Home

President-elect George Bush hasn’t laid out his agenda as yet. But associates say that, despite his lack of emphasis on the subject in campaign speeches, he feels strongly about the need to strengthen the competitive position of America.

We should all hope that this is the case.

America is still a rich country. But we are like a family living in the biggest house in town--the foundations of which are being eaten away.

In 1981 America led the world in technology and in financial and military power. We may still be supreme in military muscle, but not in the other two categories.

Color television and the VCR were first developed in this country. So were transistors, integrated circuits, microprocessors, optical fibers, robots and a host of other technologies.

Yet by 1984 Tokyo’s Long Term Credit Bank could boast that Japan had taken the lead in virtually all of these areas, as well as in semi-conductor lasers, carbon fibers, office copiers and facsimile equipment.Our own National Academy of Engineering concluded last year that, of 34 critical technologies, the Japanese were superior in 25 of them.

And the trend continues. While U.S. researchers are holding their own in the critical new field of super-conductors, American industry is well behind that of the Japanese in the development of superconductor applications.

The United States is out in front with super-computers and biotechnology, but the Japanese are driving for supremacy in those areas, too.

Meanwhile, U.S. industry is already being left behind by the Europeans and the Japanese in the important new field of high-definition television.

The pattern has been for pioneering discoveries to be made in American universities and laboratories, only to have the Japanese (and sometimes others) emerge supreme in product development and market share. Now even the U.S. lead in research is being undermined.

The United States still leads in total research and development, but too much of the American effort is concentrated in the defense sector, where applications are often irrelevant to commercial product development.

The U.S. trade balance has improved this year, but the deficit is still huge--and threatens to remain so. We are balancing the books by borrowing from abroad and selling off our assets.

Angry rhetoric and protectionism are not the answer. After all, the governments of competing nations are only doing what they believe is best for their people. It makes much more sense to demand that American government, business, education and other institutions work with the same intelligence and dedication in our behalf.

The emergence of Japan to economic supremacy didn’t just happen. In his excellent book, “Trading Places,” Clyde V. Prestowitz outlines how history has given the Japanese a deeply rooted instinct to maximize exports and minimize imports, to resist a significant foreign economic presence in Japan, to dominate whatever markets they enter and to exploit everybody else’s technology while restricting access to their own.

The Japanese government has officially embraced a policy of encouraging more imports while depending less on exports to drive the economy. But there is no sign of a real change in the national mind-set.

Part of that mind-set is close cooperation between business and government. Companies work closely with the powerful Japanese economic ministries in deciding which new product areas and technologies should be developed. Then they go to work to excel in the targeted areas with full government support.

That support has frequently taken the form of arrangements for low borrowing costs, help in organizing consortiums for joint action and protectionist measures to hold foreign competitors at bay while the Japanese effort proceeds.

Prudent use of the new U.S. trade law to try to enforce reciprocal treatment can help. But a lot of experts believe that the larger need is for structural changes in America’s own economic and trading environment.

It’s ludicrous, for example, that the tax laws actually encourage corporate borrowing for debilitating takeovers that reduce the capital available for research and development.

It is irrational to have antitrust laws that discourage the pooling of resources among American companies but fail to deal with the cartel-like practices of their overseas competitors.

It makes no sense that Japanese scientists have access to the universities and institutes where American discoveries are made but that our people lack comparable access to Japanese laboratories.

Strong presidential leadership is needed not just to make the needed changes in government policies but also to do some evangelical work with American business people.

Japanese companies, for example, like to make a profit--but within the framework of what is good for Japanese society as a whole. To a lot of today’s American corporate leaders, that sort of thinking is laughably old-fashioned. But it’s one that the American people deserve to have taken seriously.