Industrial Policy and Trade Distortion: A Policy Perspective

Abstract

US industry these days feels under siege from foreign competitors, and points to rising shares of imports in their home market and falling shares of US exports in world markets. Attention has been drawn to a host of foreign practices that apparently help to explain the increased competition from foreigners, ranging from specific export promotional tactics and specific import prohibitions to broadly-drawn industrial policies and industrial targets that allegedly provide impetus to foreign exports and simultaneously discourage imports from the USA and elsewhere. These practices in one variant or another have been discovered to be widespread, being used not only by other industrial countries, but by less developed countries (LDCs) as well, particularly the newly industrialised countries (NICs) such as Korea and Brazil. But Japan is held up as the main culprit, not so much because its practices are more extensive than those in other countries, but because they are somewhat mysterious and lost behind Japanese reticence and lingusitic ambiguity, and above all because Japan has emerged as the most successful competitor in a number of industries in which Americans have hitherto considered themselves unrivalled. It is foreign success rather than the practices themselves — which in many cases have existed for many years and in some cases have actually diminished in importance — which has given rise to such widespread concern, and has led to calls for US action ranging from retaliation to emulation.