Klodt, Henning

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Research Papers in Economics

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Klodt, Henning
Book Review
[Book Review of] Tyson, Laura D'Andrea : Who's bashing whom? :
Trade conflict in high-technology industries, Washington, DC, Inst.
for Internat. Economics, 1992
Weltwirtschaftliches Archiv
Provided in cooperation with:
Institut für Weltwirtschaft (IfW)
Suggested citation: Klodt, Henning (1993) : [Book Review of] Tyson, Laura D'Andrea : Who's
bashing whom? : Trade conflict in high-technology industries, Washington, DC, Inst. for Internat.
Economics, 1992, Weltwirtschaftliches Archiv, ISSN 0043-2636, Vol. 129, Iss. 3, pp. 639-640,
http://hdl.handle.net/10419/2190Rezensionen - Book Reviews 639
und sollten - entgegen der derzeitigen Praxis - bei internationalen Bemühungen zur
Liberalisierung des Handels nicht ausgeklammert werden.
Jörg-Volker Sehrader
Tyson,LauraD'Andrea, Who's Bashing Whom? Trade Conflict in High-
Teehn 0 logy Industries. Institute for International Economics. Washington,
D.C., 1992. XVIII, 324 pp.
Who's bashing whom? Japan and Europe are bashing at the United States, but the
United States should bash at them in return. This is the central message of Laura
Tyson's book. It is primarily addressed to policy makers rather than scientists, and it
provides a comprehensive non-technical overview of recent theoretical and empirical
work on international trade relations in high-tech industries.
The book starts from the assertion that competitive advantage in high-tech indus-
tries is created, not endowed by nature, and that government action plays a dominant
role in establishing those advantages. It mainly rests upon the theory ofstrategie trade
policy and the policy conclusions put forward by various of its proponents. Tyson
suggests that a strong high-tech sector is beneficial for the whole economy, because
technology-intensive industries allow to earn oligopolistic rents, exhibit positive spill-
overs to the technological development ofother industries and create high-wage em-
ployment opportunities for qualified workers. She further argues that Japan and to
some extent also Western Europe massively support their research-intensive industries
by subsidies and external protection, which in turn reduces the share ofUS high-tech
industries in world markets. From the perspective ofa "cautious activist" she recom-
mends the US government to press for an opening offoreign high-tech markets and -
ifthis does not help - to impose retaliatory restrietions on imports to the US markets.
In addition, a limited number ofstrategie industries should be supported directly, and
joint R&D cartels ofdomestic firms should be encouraged.
The remaining chapters are concerned with detailed case studies of specific high-
tech areas: supercomputers, semiconductors, commercial aircraft, and consumer elec-
tronics. These chapters provide rich information on main producers, technologies,
market structures, trade relations, and, last not least, trade frictions. In most cases, she
argues, the attempts ofthe US government to solve trade conflicts and to improve the
export opportunities ofUS firms by establishing fair trade rules failed, because foreign
firms often circumvented these rules. It would have been preferable to her if the US
government had strived for selective reciprocity thatlinks access offoreign firms to US
markets to comparable access of US firms to foreign markets. For this purpose, she
suggests toconcentrate on"voluntaryimportexpansionagreements (VIEs)" thatestab-
lish minimum market shares ofUS firms in specific foreign markets. In her view, this
would not result in pure managed trade, but in a compromise between negotiated rules
andnegotiated outcomes ofinternationaltrade. She repeatedly mentions thatherwhole
policy agenda involves the danger ofrunning into international trade wars, but appar-
ently she does not take those dangers too seriously after alle
Politically, the book is an influential one. Not only because Laura Tyson has been
appointed the head ofthe Council ofEconomicAdvisors by President Clinton, butalso
because she formulates an interventionistic policy design that fits weIl into widespread
concerns about the future of the US economy among policy makers and the public.
From this point ofview, it would have been preferable ifthe "cautious activist" were
a little bit more cautious, because many ofher arguments are based on rather shaky
grounds. Throughout the book, she heavily rests upon that part ofthe literature that
seems to be supportive to her views, whereas she takes only limited account of the640 Weltwirtschaftliches Archiv
caveats and restrietions that raise doubts about the prospects ofa successful strategie
trade policy. Above all, she tends to ignore the wamings of numerous authors that
governments may be unable to identify strategie industries and that foreign govem-
ments may retaliate. It has repeatedly been demonstraded that an ill-designed strategie
trade policy approach may do more harm than good.
Tyson is probably right in arguing that the competitiveness ofthe US economy in
high-tech industries is deteriorating and that this development tends to threaten the
relative income position ofthe United States in the world. When addressing the basic
determinants ofthisunfavourable development, however, she seems to be less precisely
on the mark. In our view, the decline ofUS technologicalleadership mainly reflects the
weakness ofhuman capital formation over the past decades rather than unfair trading
practices offoreign countries. Ifpolicy makers are shortofpopulararguments advocat-
ing govemment support to strategie industries, Tyson's bookwill prove to be a rich and
highly valuable arsenal. If they want to better understand the reasons why the US
economy is falling back, the should better look at the relative qualification levels ofthe
labour force in different countries and the systems ofeducation and vocationaltraining
in Japan, Europe and the United States. In an increasingly global and integrated world
economy, it is not trade barriers that count, but investment in human capital.
Henning Klodt

[Book Review of] Tyson, Laura D'Andrea : Who's bashing whom? : Trade conflict in high-technology industries, Washington, DC, Inst. for Internat. Economics, 1992.

http://www.econstor.eu/bitstream/10419/2190/3/262255332.pdf

[Book Review of] Tyson, Laura D'Andrea : Who's bashing whom? : Trade conflict in high-technology industries, Washington, DC, Inst. for Internat. Economics, 1992.

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