American Industry in International Competition: Government Policies and Corporate Strategies

by Laura Tyson, John Zysman


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Abstract

The article focuses on government policies and corporate strategies. The authors identify several possible economic and political rationales for an industrial policy, as it is one of the instruments with which the government can respond to the competitive difficulties of individual sectors in international trade. They conclude that, in the absence of such a policy, the government will continue to respond to such difficulties with protectionist measures that thwart necessary economic adjustment and reduce our national economic well-being. The preeminence of the U.S. in international industrial competition and the insulation of American markets from foreign competition have ended. In industrial sectors as diverse as autos, steel, consumer electronics, textiles, and apparel, American firms now face intense foreign competition. These sectors, which account for a substantial share of industrial production and employment, have become vulnerable to developments abroad. According to recent estimates, although the share of foreign trade in gross national product remains lower in the U.S. than in any other advanced country. The competitive difficulties of individual sectors reflect a broad change in the international economic position of the U.S.

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