Gentler Trade Winds : Commercial Rancor Among Nations Is Likely to Decrease During the 1990s

Isn’t it ironic that America’s nasty little trade wars today are being fought over wine and steel rather than semiconductors and biotechnology?

Is anyone surprised that French agricultural subsidies rather than U.S. intellectual-property policies are what have threatened to topple the General Agreement on Tariffs and Trade?

Old-fashioned industries--not newfangled high technologies--seem to be causing most of today’s international trade feuds.

On one level, that’s completely logical: Industries such as agriculture and steel have long, lavish histories of government intervention and subsidy. Nudging them away from the public trough is more an exercise in Realpolitik than economics.

But the political economists and competitiveness gurus arguing that high technology would become the central battleground in tomorrow’s global trade wars will be proved wrong. In fact, it’s entirely possible that the 1990s will see--with but a few exceptions--”kinder, gentler” high-tech trade relationships between industrialized nations.

That’s not to say that there won’t be intense trade battles over such key industries as automobiles and airplanes: Undoubtedly, there will. But the conventional notion that brutal competition over cutting-edge technologies such as advanced materials, software, biotech and personal computing will rip the fabric of global trade relationships is flawed. Like generals in an economic war, trade negotiators seem destined to fight yesterday’s trade wars, not tomorrow’s.

Why? Consider the new trade realities. America’s high-tech companies have become more competitive. Japan’s speculative bubble has burst, so Japanese companies no longer enjoy a de facto financial subsidy. The country is in recession. Top-tier technology companies such as Nippon Electric, Hitachi, Matsushita and Sony have endured painful losses in key markets. These companies have cut back their capital investments and deliberately slowed their rate of new product introductions.

Indeed, Sony Chairman Akio Morita has publicly asserted--in an article that generated fierce debate--that Japanese companies should devote more attention to boosting profit, not just capturing or maintaining market share. That’s hardly a recipe for a trade war.

What’s more, Japanese technology companies such as Toshiba and Fujitsu have been so intent on forging “strategic alliances” with overseas firms that a critical level of interdependence now exists: High-tech trade wars would likely yield only Pyrrhic victories.

Even in Europe, the dynamics have been redefined. European high-tech companies have undergone even more traumatic restructurings than in the United States and Japan. Many of these new technological opportunities are too expensive for ambitious companies to pursue on their own.

So the intensity of the high-tech trade dialogue is changing, “if, for no other reason, than everyone’s now in bed with everyone else,” says Dan Burton, executive vice president of the Washington-based Council for Competitiveness, which has been analyzing high-tech trade policies.

“There’s no question that the conclusion of alliances tends to dampen many high-technology trade issues,” agrees Clyde Prestowitz, the former U.S. trade negotiator who now runs the Economic Strategies Institute. “Once companies have a deal, it makes it more difficult for them to pound the table and jump up and down.”

Adds Hiroshi Tsukamoto, president of the Japan External Trade Organization: “The key words in Japanese high-tech industry today are strategic alliance. They basically think that their future depends on the alliances they create. Most of these alliances focus on the joint creation of innovation. . . . There is no longer much room for trade disputes in this area.”

Indeed, Tsukamoto maintains that Japan’s Ministry of International Trade and Industry is not girding itself for a renewed round of trade confrontations. Though trade tensions will continue to exist, he does not see high technologies as the triggers for a 1990s trade war.

Burton, of the Council on Competitiveness, says the debate over major high-technology issues “may be shifting to another level. Maybe trade tensions will go down, but issues like foreign investment--both ways--will remain a concern.”

In other words, the trade debate for the 1990s seems to be shifting from deficits related to the flow of tangible goods to disagreements over the flow of intellectual and financial capital. While important, these issues seem unlikely to ignite a trade war.