Clyde V. Prestowitz: Lie of the Tiger
[Clyde V. Prestowitz is author of The Betrayal of American Prosperity: Free Market Delusions, America’s Decline, and How We Must Compete in the Post-Dollar Era.]
When I arrived in Washington in the fall of 1981 to serve as counselor to President Ronald Reagan's commerce secretary, the United States was more afraid of Japan than it had been since Pearl Harbor. The Japanese auto industry was preparing to have Detroit for lunch. Imports of gas-sipping Hondas and Toyotas were forcing America's Big Three automakers to close plants and lay off hundreds of thousands of workers. The American semiconductor industry, pioneered by Silicon Valley start-ups, was on the ropes: Japanese producers, supported by their government, took over half the market for the newest generation of computer chips. And all this was happening amid a crippling U.S. recession....
Like 1980s Japan, China today is pursuing an export-led growth strategy, suppressing domestic consumption, pushing savings, and guiding investment into strategic industries. It has a multitude of trade barriers, weak labor unions, and an undervalued currency. The U.S. trade deficit with China is now about $250 billion -- four times that with Japan. Despite its early welcome to foreign investors, Beijing is focused intensely on developing its own technology. More importantly, U.S. high-tech industries -- solar energy, computer chips, and fiber optics -- are increasingly being offshored to China. And Chinese commitments to strongly protect intellectual property are often honored more in their breach than in their execution. As one Chinese friend explained to me last year, "Now we have all the foreign dogs in the kennel, and we're going to beat the stuffing out of them."...
But even smarter tactics might not be enough to regain lost ground. For though Reagan's aggressive policies were enough to stop the bleeding, they weren't enough to make the U.S. economy genuinely competitive again. Most U.S. producers never recovered what they lost in the 1980s. In fact, the question of just who beat whom in the last great trade war has no easy answer. Consider this: Japanese GDP growth from 1990 to 2000 -- Japan's so-called lost decade -- was just 0.2 percent less than America's when you account for increases in the U.S. population. And Japan comes out ahead on a per capita basis. Even with the battering it took, Japan's productivity growth outpaced that of U.S. workers in the 1990s....
The numbers aren't lying: It's time to realize that the United States never really beat Japan -- and it's unlikely to win against China without a new strategy. Chanting tired ideological mantras didn't save us in the 1980s. And it won't save us now.
Read entire article at Foreign Policy
When I arrived in Washington in the fall of 1981 to serve as counselor to President Ronald Reagan's commerce secretary, the United States was more afraid of Japan than it had been since Pearl Harbor. The Japanese auto industry was preparing to have Detroit for lunch. Imports of gas-sipping Hondas and Toyotas were forcing America's Big Three automakers to close plants and lay off hundreds of thousands of workers. The American semiconductor industry, pioneered by Silicon Valley start-ups, was on the ropes: Japanese producers, supported by their government, took over half the market for the newest generation of computer chips. And all this was happening amid a crippling U.S. recession....
Like 1980s Japan, China today is pursuing an export-led growth strategy, suppressing domestic consumption, pushing savings, and guiding investment into strategic industries. It has a multitude of trade barriers, weak labor unions, and an undervalued currency. The U.S. trade deficit with China is now about $250 billion -- four times that with Japan. Despite its early welcome to foreign investors, Beijing is focused intensely on developing its own technology. More importantly, U.S. high-tech industries -- solar energy, computer chips, and fiber optics -- are increasingly being offshored to China. And Chinese commitments to strongly protect intellectual property are often honored more in their breach than in their execution. As one Chinese friend explained to me last year, "Now we have all the foreign dogs in the kennel, and we're going to beat the stuffing out of them."...
But even smarter tactics might not be enough to regain lost ground. For though Reagan's aggressive policies were enough to stop the bleeding, they weren't enough to make the U.S. economy genuinely competitive again. Most U.S. producers never recovered what they lost in the 1980s. In fact, the question of just who beat whom in the last great trade war has no easy answer. Consider this: Japanese GDP growth from 1990 to 2000 -- Japan's so-called lost decade -- was just 0.2 percent less than America's when you account for increases in the U.S. population. And Japan comes out ahead on a per capita basis. Even with the battering it took, Japan's productivity growth outpaced that of U.S. workers in the 1990s....
The numbers aren't lying: It's time to realize that the United States never really beat Japan -- and it's unlikely to win against China without a new strategy. Chanting tired ideological mantras didn't save us in the 1980s. And it won't save us now.