Big U.S. Firms Agree on Way to Change Chip Trade Pact

Ending a longstanding split over U.S. electronics trade policy, the major American semiconductor and computer companies on Wednesday announced a joint position on renewal of the controversial 1986 U.S.-Japan semiconductor trade agreement, which expires next July.

The compromise proposal calls for elimination of key provisions in the trade pact that effectively fix the price of widely used memory chips. The computer industry has opposed those provisions, which establish so-called fair market values for all imported memory chips, because they have dramatically increased the prices companies must pay for such chips.

The new proposal instead simply calls for the Commerce Department to implement a fast-track investigation if evidence emerges that Japanese companies are illegally dumping memory chips on the U.S. market. Chip industry demands that foreign firms gain a 20% share of the Japanese semiconductor market, which are part of a “side letter” to the current trade agreement, have been retained.

The trade pact was signed in 1986 after years of complaints by U.S. chip manufacturers that Japanese companies were dumping--selling products below cost--to drive American producers out of the memory chip business. But the agreement did not achieve the goal of enticing major American suppliers to re-enter the market for the most widely used memory chips, called DRAMs. And American companies still hold only an 11% share of the Japanese semiconductor market.

Although the united front of computer and chip companies should improve the chances of the compromise proposal being adopted as a negotiating position by the Commerce Department, it still faces tough political sledding. Many Administration officials are known to oppose any extension of the trade pact.