THIS ARTICLE ARGUES THAT INDUSTRIES IN DECLINING ECONOMIC POWERS HAVE UNDERGONE PROTRACTED PERIODS OF DECLINE, WHILE THOSE OF NEWLY EMERGING POWERS ENJOY A SIMILAR PERIOD OF PERSISTENCT GROWTH. THUS TRADE FRICTIONS ARE A NATURAL CONSEQUENCE. IT EXAMINES INDUSTRIAL POLICIES AND THE GLOBAL DIMENSION OF FREE TRADE AND ARGUES THAT THE TAKEOFF OF THE EAST ASIAN ECONOMIES NEEDS TO BE ENSURED THROUGH ECONOMIC COOPERATION AMONG APEC COUNTRIES.
THE AUTHOR QUESTIONS WHETHER JAPAN'S ECONOMIC SUCCESS WILL LAST OR WILL BE SHORT-LIVED. HE ANALYZES THE REASONS FOR THE RELATIVE ECONOMIC DECLINE OF THE UNITED STATES FROM SUCH PERSPECTIVES AS CHANGES IN THE COMPETITIVENESS OF MAJOR INDUSTRIES IN THE USA AND JAPAN, THE MISMANAGEMENT OF U.S. MACROECONOMIC POLICY UNDER THE REAGAN ADMINISTRATION, AND THE OVERVALUATION OF THE DOLLAR IN THE 1980'S. THEREIN LIE A NUMBER OF LESSONS FOR JAPAN IN CHARTING ITS FUTURE COURSE OF ACTION. JAPAN'S CURRENT-ACCOUNT SURPLUS HAS BEGUN TO DECLINE, AND IT IS NO LONGER FEASIBLE TO CONCENTRATE ONLY ON AUGMENTING DOMESTIC DEMAND. FIRST, JAPAN MUST BE CONCERNED WITH THE BALANCE BETWEEN DOMESTIC DEMAND AND CURRENT-ACCOUNT SURPLUS, SO AS TO FULFILL ITS INTERNATIONAL RESPONSIBILITIES THROUGH OVERSEAS ECONOMIC COOPERATION. SECONDLY, THE CONSIDERABLE SIZE OF JAPAN'S CURRENT-ACCOUNT SURPLUS NECESSITATES SOME KIND OF RULES OR PHILOSOPHY, ACCEPTABLE INTERNATIONALLY, TO SERVE AS A GUIDE IN REALLOCATING SOME OF THE SURPLUS BY REGION AND PURPOSE.
