Trade Politics and the Semiconductor Industry

Douglas A. Irwin

NBER Working Paper No. 4745
Issued in May 1994
NBER Program(s):International Trade and Investment

A coalition of well-organized semiconductor producers along with compliant government agencies (USTR and the Commerce Department) brought about a 1986 trade agreement in which the United States forced Japan to end the 'dumping' of semiconductors in all world markets and to help secure 20 percent of the Japanese semiconductor market for foreign firms within five years. The antidumping provisions of the 1986 agreement, which later proved to be partly GATT-illegal, resulted in such steep price rises for certain semiconductors that downstream user industries (primarily computer systems manufacturers) forced the U.S. government to remove those provisions in the 1991 renegotiation of the agreement. The equally controversial 20 percent market share provision - based on circumstantial evidence that the Japanese market was closed -provided 'affirmative action' for the industry in its efforts to sell more in Japan, but has been criticized as constituting 'export protectionism.' This paper examines how the U.S. semiconductor industry became the beneficiary of this unique and unprecedented sectoral trade agreement by analyzing the political and economic forces leading up to the 1986 accord and shaping subsequent events.

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Document Object Identifier (DOI): 10.3386/w4745

Published:

• The Political Economy of American Trade Policy, Anne O. Krueger, ed.,pp. 11-66, (University of Chicago Press, 1996).
• Trade Policies and the Semiconductor Industry, Douglas A. Irwin. in The Political Economy of American Trade Policy, Krueger. 1996

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