The US-Japan Semiconductor Agreement

Richard Baldwin

No 387, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The semiconductor arrangement was intended to enhance free trade based on market principles. This paper argues that the arrangement had exactly the opposite effect. The arrangement has two parts: a price floor to prevent predatory pricing, and provisions to double U.S. market share in Japan to counter market closure. Given semiconductor production technology, the price floor forced a capacity reduction, a rise in world prices and a cartelization of the market. Since the observed dumping was probably not predatory pricing, the price floor restricted competition and free trade. The market closure probably exists and significantly harms non-Japanese producers. It is therefore an anti-competitive practice.

Keywords: Commercial Policy; Semiconductor Industry; Trade Agreements; Trade Restrictions (search for similar items in EconPapers)
Date: 1990-03
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