From: boba@miki.pictel.com (Bob Alexander)
Subject: Re: Why memory costs doubled
Organization: PictureTel Corporation
Date: Tue, 29 Dec 1992 14:06:34 GMT

>In 1857, when the competition between Japan and the United States began,
>the shogun's adviser, Masayoshi Hotta, observed:
>
>	                                     ... and so gradually subject
>	the foreigners to our influence until in the end all the
>	countries of the world know the blessings of perfect tranquility
>	and our hegemony is acknowledged throughout the world.

I suppose that, since 1857, no advisor to the U.S. president has ever said
anything that would sound sinister to foreigners?  Let's not blame the
Japanese for protecting their own interests when we do the same.

>When the occupation ended in the early 1950s, and MITI was formed, the
>strategy was to use trade to establish the hegemony.  They have almost
>succeeded where the Imperial Army and Navy failed.

MITI is treated as a demi-god, but it has failed as often as it has
succeeded.  Japan has failed in its attempts to improve its
aeronautics and agriculture industries despite decades of trying.
MITI has given very bad advice to Honda and Sony.  Even in the areas
where Japanese companies have succeeded, MITI had little if any
involvement.

The story of Japan's memory dumping is not quite what the popular
media makes of it.  I followed events very closely as they were
happening.  U.S.  companies were unable to match the prices of
Japanese competitors, so they charged the Japanese with dumping.  The
U.S. gov't demanded that Japanese companies fork over usually
confidential financial information.  The companies that refused got
slapped with extremely high import duties until they complied (can you
say "extortion?")

Japanese companies amortize costs over a longer period than U.S.
companies, which allows them to recoup their costs more slowly and
thus appear to be "dumping."  (Is it dumping, or is it long term
planning of the type that U.S. industry lacks?)  When the U.S. gov't
got the information, they applied U.S. accounting rules to the raw
data and ruled that the Japanese were breaking the law.  The U.S.
imposed "voluntary" (under the threat of penalties) price controls on
DRAM.  This was a windfall for Japanese companies.  The prices were
initially very high, but they were to be revised quarterly.  (Note that
these were price controls, not tariffs, so the money went to the Japanese
companies.)

The next two quarters, the fixed price dropped precipitously,
suggesting that the original fixed prices were out of line.  After
that, the U.S.  gov't stopped announcing publicly the fixed price.  My
guess is that they were too embarrassed to admit how wrong they were.

The U.S. gov't is not an impartial judge of trade disputes.  Just because
it accuses (and convicts) a foreign country of dumping, doesn't mean it's
true.  Nor is it an impartial sentencer.  Just because it imposes duties
and protects a politically powerful interest group, doesn't mean it's
good for the country.  We've seen this over and over again with steel,
automobiles, textiles, oil, LCDs, food, etc.  Protectionism always hurts
the consumer, rarely helps the protected industry, and has negative
secondary effects on other industries (e.g. tariffs on steel hurt the
automotive industry, tariffs on RAM and LCDs hurt the computer industry.)

     Bob Alexander                                     boba@pictel.com
       The more the government does, the better libertarianism looks
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