Computer need chips - criticism of economic sanctions against Japan

IN THE SPRING OF 1987, the United States decided to "get tough" when Japan, imposing "sanctions" (tariffs) to persuade the Japanese to cut their production of semiconductors in order to raise the price. The first ripples should have warned of what was to come. On March 31, 1987, the New York Times reported that a "chain reaction in financial markets (was) touched off by President Reagan's trade sanctions against Japan ... Reaction to the dollar's decline was violent in the stock and bond markets, where prices plunged in near-panic selling." Now, a year later, Newsweek reports that the "semiconductor agreement is one reason why American computer manufacturers are ... facing one of the worst shortages of memory chips ever." Many U.S. companies are unable to sell expensive computers because they don't have enough cheap chips. The proposed sanctions against Toshiba in the omnibus trade bill would cause even more trouble, since Toshiba is virtually the only source of the one-megabit chips that are at the heart of the most powerful U.S. computers.

Since the chip shortage already means U.S. manufacturers have had to restrict their production of complex computers, it also reduces the sales of costly and complex U.S. microprocessors. If this is "getting tough" with trading partners, perhaps we should also cut the supply of some trivial imported component of U.S. metals, autos, or chemicals, and this shut down those industries too.