US Still Declining

Charles Jannuzi jannuzi at edu00.f-edu.fukui-u.ac.jp
Tue Sep 25 03:54:29 PDT 2001


Chris Beggy wrote:


> I agree MS and Intel became profitable monopolists. I'm not
> clear from your post about the mechanism though. Who decided
> that the Japanese would stay out of processor chips and computer
> OSes? Who enforced this?

I think this all goes back to the Plaza Accord. I'm not a professional researcher of this, but if you read the news from the Japanese side of things, all trade deals with the US are significant, so you remember them.

This goes back to the 1980s when the US trade policy was to unilaterally force Japan to balance its trade deficits with the US. These policies continued and developed from Reagan through Bush the elder right up through at least Clinton 1.

There were different phases, with different sets of trade reps and delegations. The most famous one when Bush led a group of Detroit auto execs over and at dinner threw up in the Prime Minister's lap. Perhaps the most offensive group was the one who took over during Clinton 1 under the guidance of Mickey Kantor. They actually came over and got the Japanese government to agree to increasing CONSTRUCTION over here. The Ministry of Construction has never looked back since. It might not be official yet, but I do believe every square inch of Japanese has been paved or concretized at least twice now.

One early phase was an emphasis on currency exchange rates, though Clinton came back to this too. Another early phase was US quotas on Japanese automobiles--which is why my Subaru Justy cost an arm and a leg in 1987. A somewhat later phase was automobile parts--Japanese automobile makers had to show real progress in the amounts purchased and imported from the US--but only after they shared enough manufacturing technology to get the US auto parts makers up to Japanese standards!

These more or less unilateral trade decisions have had major effects on the world. Automobile quotas did keep many Japanese automobiles out of the US (and profits up only for the Japanese makers able to export profitable models to the US to fill the quotas). This is why Mitsubishi does not own Chrysler, but now both Mitsubishi and Chrysler are controlled by Daimler Benz. This is why Nissan is now owned by Renault (I still ask myself about that one, since I would never drive a Renault). This is one reason why Ford controls Mazda, since Mazda was locked into the Japanese market and couldn't grow (and Ford has done a very lousy job of it I might add).

At one phase way way back when the US had decided to let the dollar slide, one term used a lot on the US side was 'structural impediment', meaning informal, cultural and other impediments to balancing trade. This actually became the name for some talks. In one set of talks, Japan's idea of establishing a fund to develop processor chips and OSes was termed one such impediment and the Japanese government was told that the US would not tolerate it.

Meanwhile, the US government put money into a consortium that did at least two things: (1) it kept US RAM producers alive, (2) it helped Intel develop a more advanced processor. The biggest government subsidy, though, without a doubt, was the US government buying all those pcs and software.

There was a follow up to this, too. I remember way back when--the early Bush administration?-- reading in all the papers that one of the victorious deals the US got was that the US would develop processor chips while Japan would have to stay in RAM (and they were then surpassed by S.Korea as the world's number 1 RAM producer, but by that time RAM chips were basically a commodity).

As for enforcement, well my research shows that in fact the major Japanese companies have made an effort to stick with the trade deals forced on them by US-Japan agreements. Perhaps one of the most pathetic ones was watching Toyota and Nissan building new show rooms to showcase Detroit cars that never had a chance in hell of surpassing single figure sales nationwide.

In the case of computer chips, perhaps they thought they were smart to stay in RAM anyway, since at one time that was an extremely profitable niche. Processor chips are pretty risky to develop, and so far only Intel has been very successful at staying profitable.

The other thing to remember is that the US has repeatedly invoked unilateral moves to shut out Japanese goods and damage Japanese companies. The WTO has actually been something of a savior for Japanese companies, since the US now repeatedly loses all those actions over quotas and 'dumping', etc. But back in the 1980s, Japan and its big manufacturers had to do what the US government wanted or they would have had ALL their US market for RAM taken away from them (that was the quid pro quo, now that I recall, the US would allow the fairly free flow of RAM, though I also believe this was followed by a few phases of quotas and tariffs on RAM, etc.--just as with Japanest automobiles).

One interesting footnote is that a group of software developers went ahead with the OS ( unsubsidized) , that the US trade reps earlier had called ' a trade impediment'--Tron. I have B-Tron running on one PC desktop. If you like Linux on a high power pc you'll LOVE Tron. Other forms of Tron are embedded in a wide variety of Japanese electronics. One form is widely used in factory automation. This is an open standards OS that is more versatile than Linux even. Had it been allowed to get some subsidy, who knows what could have been--it's not all the US's fault, though, if companies like NEC had jumped on it, it also might have been different.

I still think Tron has the potential to help revolutionize personal computing--if Microsoft and Intel were actually broken up and their monopolies busted.

Charles Jannuzi



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