Strategic Trade Agreement

All this points to the need to better inform public opinion about the relatively small number of jobs directly affected by imports from low-wage developing countries; higher export wages; the domestic nature of many of the problems that cause public anxiety; and what the national government is doing to address these issues. Frost reports that there is strong evidence that people change their minds about trade when they have access to a full range of information about the long- and short-term benefits and costs of integrating the U.S. economy into the global market. At the same time, it warns of the importance of putting too much emphasis on the employment gains from trade liberalization, which can be quite wrong and, in any case, slightly frustrated by changes in macroeconomic circumstances. To clarify the model, let`s look at an example: two airlines from two different countries are competing for the global commercial aircraft market. The company, which dominates the global commercial aircraft market, realizes overvalued returns – profits higher than those that could be made for equally risky investments in other sectors of the economy and enjoys a higher “national” income. And because commercial aircraft is an oligopolistic industry where only a limited number of companies can operate, only a small number of countries can take advantage of the available over-returns. As a result, companies would be competing for these industries. Strategic trade theory suggests that, in some sectors, global economic interaction leads to zero-sum competition for excess yields available in oligopolistic industries.

[6] The creation of the World Trade Organization and the establishment of biennial meetings of trade ministers have changed the dynamics of the negotiations and paved the way for priority issues as soon as they arise. The successful negotiation of agreements at the 1996 Singapore Meeting of Trade Ministers on the removal of barriers to trade in information technology products and the competition of basic telecommunications services (the Information Technology Agreement and the Basic Telecommunications Agreement) set a welcome new precedent for the negotiation of important agreements outside of massive rounds. This book provides an overview of these issues, which are at the heart of the current debate on US trade policy, and proposes how the US could respond to the challenges ahead. Each of the authors presented personal ideas that offer policymakers a number of possible options in the face of future business challenges. Horstmann and Markusen (1986) focus on technical production assumptions. They suggest that subsidies and tariffs can encourage the entry of less efficient firms and increase the average cost of the sector. Dixit and Kyle (1985) argue that it is important to examine the question of who behaves strategically in relation to whom. Possible reactions, such as state retaliation and changes in market structure, are ignored in strategic trade theory. Perhaps the most promising approach to the medium-term opening up of the Japanese economy is to insist resolutely, in bilateral, regional and multilateral negotiations, on the establishment of a stronger competition policy and on the reform of national rules, which will make it less pervasive, less discreet and more closely linked to objective performance criteria directly linked to transparent regulatory objectives. and more isolated from the internal political process, bound by personal relationships and reciprocal favors.

The Japanese government and many opinion leaders agree that such reforms are desirable and that the United States should help it overcome the internal forces of inertia that are now hindering the adoption of the necessary reforms. . . .