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App. B—Commissioned Background Papers

15

and foreign trade during their first 5-10 years of development, some of them

may become powerful sectors of our economy support for such embryonic industries must

in be

the future. supplemented

But encouragement and by intensified efforts

to re-establish the competitiveness of older major industries through advancing beyond their current technological frontiers,if the national welfare is to be

(6) safeguarded in the short-run and intermediate-run as well.

A related view whose vulnerability is inadequately recognized holds that the international competitiveness of our basic manufacturing industries is bound to decline relative to less developed countries because of our higher wage rates. Of course, substantial wage rate differentials do exist and these are likely to encourage continuing shifts in the location of some light manufacturing industries.

But such wage rate disadvantages are largely offset in higher output per man-hour and higher product quality. for wage rates to rise more rapidly in industrializing

many basic industries by

In addition,

the tendency

countries tends to further

reduce resulting differences in unit wage costs.

It

that wages tend to account for less whole, thus limiting the effects of

than 20 per cent lower wage rates

is in in

also U.S. wide

worth recalling here manufacturing as a sectors of industry.

Most important of all for the longer run is the fact that labor inputs are being

replaced increasingly in determining the productive efficiency of most manu- facturing industries by capital inputs, which embody the technological contri-

butions of advances in controls and robotics.

processing, mechanization, computerization, programmable Hence, advanced industrial nations are likely to retain

their competitive advantages in many basic manufacturing industries for many

years

to

come.

Such

advantages

will

be

reinforced

by

the

greater

availability

of

investment funds and the skilled labor needed to

greater availability maintain, supervise

of the advanced engineers and and improve such sophisticated

highly operations

  • --

    especially those producing higher quality and more complex products.

At any rate, more sharply focussed diagnoses are obviously essential to the development of effective remedial efforts, not only for the industries which have already been hard hit by foreign competitors, but also to help the additional array

of domestic industries likely to face such increasing pressures during the next

five years.

emerging

from

In

a

this connection, it may be worth noting some of the findings study of the factors affecting the international competitiveness

(6)

For further discussion, see B. Basic Misconceptions,” in H.H.

Gold, “U.S. Technological Policy Needs: Miller (cd.), Technology , International

Some Economics

and Public of Science

,

Policy 1981)

.

(Washington, D. C. :

American Association for the Advancement

90-240

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