| Abstract: | This paper assesses the changing U.S. competitive position in high-technology products, and examines reasons for changes. It then inquires into the potential value of restrictive trade policies for promoting the U.S. interest in this sector, including mutual restrictions between the U.S., the EC, and Japan. The paper shows that the U.S. market share in most high-technology products, while still high, is declining. While industrial policy in other countries may have been a facilitating factor in this adverse development, the main explanation appears to lie in changing factor endowments, particularly the marked increase in the human capital/labor endowment ratios of Japan and Germany relative to that of the United States. When considering all the criteria relevant to trade policy, the differences between the high-technology industries bring into question the validity of lumping them into one sector for the purpose of strategic trade policy. Each industry needs to be treated separately. Their main common characteristic is intensity in human capital input. When they are viewed as one sector, a move to redress the declining U.S. lead calls for a domestic rather than a trade policy: massive U.S. investment in human capital and in research and development of the post-sputnik variety. |
