Abstract

The U.S. continues to lead in the research and production phases of industry. However, research and development alone are not sufficient to guarantee U.S. economic and technical leadership in future industries. It is in the production phase that foreign competition, particularly from the Japanese, blocks capital formation and threatens the sources of capital necessary for future industries. It may be surprising to suggest that very few high-tech companies undertake much research, but this is in fact true. Most basic research in the U.S. is done in government or university laboratories such as those at the University of California or MIT, or in a very few large industrial laboratories such as Bell Labs. There are two components to a solution to the problem of concerted Japanese disruption of the U.S. high-tech capital formation cycle. One part focuses on trade policy, the other on domestic U.S. capital formation and technology-licensing policies. U.S. trade negotiators must understand how closure assists the Japanese ability to disrupt capital formation in the U.S., and they should use access to American markets in targeted high-tech sectors.