CABINET COUNCIL ON COMMERCE AND TRADE MEETING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R001700060001-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 8
• Document Creation Date: December 20, 2016
• Document Release Date: April 3, 2007
• Sequence Number: 1
• Publication Date: December 14, 1981
• Content Type: MEMO

UI- -ICE OF THE -PI RECTOR
Approved For Release M07/04/03 : CIA-
TO: Mr. Casey
FROM: Debbie
SUBJECT: Cabinet Council on Commerce and
Trade Meeting
The Cabinet Council on Commerce and Trad
is meeting on Wednesday, 16 December,
at 0845--you are invited, per Dennis
Kass' office. Two items of interest
to CIA are Landsat and High Technology.
Meeting will be held in Roo?sevelt Room
of White House.
Will attend
Will not attend
Not referred to DIOIC. VVa ver
Ipli .
 Approved For Release 2007/04/03: CIA-RDP84B00049R00170006000
To: The Honorable
William Casey
!l~rsily 1?~gi~R}
5?e i1
Attached is an advance copy of what
will be briefed to the CCCT by me next
week. You may find it useful to put in
an appearance in order to comment on
the way in which this study compliments
your own efforts.
Attachment
Not referred to DIOIC. VVa ver
a jarjli.
Approved For Release 2007/04/03: CIA-RDP84B00049R0017000
U.S. DEPARTMENT OF COMMERCE
Under Secretary for International Trade
 Approved For Release 2007/04/03: CIA-ROP'4Bb00
December 14, 1981
9R001700060001-2
THE :3 :CRF' t1RY Of C?;NgrvMF_RCE
MviAN,)U'1 Fort: MEMBERS OF THE CABINET COUNCIL ON COMMERCE
AND TRADE (CCCT)
FROM Malcolm Baldrige, Chairman, Pro Tem
Cabinet Council on Commerce and Trade
SUBJECT STUDY OF THE COMPETITIVE POSITION OF U.S. HIGH
TECHNOLOGY INDUSTRIES
ACTION FORCING
EVENT Threat of Foreign Competition to the Viability
of Key U.S. migh Technology Industries and Poten:.:al
Impacts on the U.S. Economy and Nation,_! Security.
U_S. nign technology industries contribute significantly in;1 disprc )rtio n.itelJ
to h.S. export performance and to growth in productivity and c put. The
decline in ;..5. technological and industrial leadership is threateninc the
CT key U.S. technology-intensive industres. Loss of U.J. leadership
in Lneso odustries has significant political and nation sec:..city
conse,uences. High technology industries, of themselves., are :r. important
source of employment. Tne application of recent advano=.: in the
microelectronics sector to information processing and industrial automation,
is. crucial to improving U.S. productivity growth. U.S. t_chnological
pre-eminence in key sectors is crucial to the development at adv__?-)ced
weaponry. Moreover, domestic production capacity in a number of high
technology sectors is necessary if the U.S. is to exercise cr-3oe-r_~1ate;
foreign policy leverage, ensure defense related surge capability, _-,id minimize
supply disruption risks.
Increased competition from foreign producers nas already led to ciercapacity
and severe unemployment in the automotive and steel sectors and to the virtual
elimination of U.S. consumer electronics production. Foreign competition, by
reducing the o rofit margins and business expectations of U.S. producers, is
constr:jining research and development spending and capacity expansion in
industries judged crucial to future J.S. industrial and militaiy strength.
Inc se:nicon?uctor industry may be t,): most seriously affected, out U.S.
leadership in the computer anu te1ecoinrnunications industries is also being
challenged.
fnis trend i_, manifest in the declinin, snare :If the U.S. in tie trace of
technology-intensive manufactured products.
Not referred to DIOIC. VVa ver
applies.
 Approved For Release 2007/04/03: CIA-RDP84B00049R001700060001-2
Trade Balances in Technology-Intensive Manufactured Products
Excluding Automotive Products, 1971-75 and 1976-80, Cumulative in $ Billions
United States
West Germany
Japan
1971-75 (cum.)
+114.7
+102.5
+71.5
1976-30 (cum.)
+196.0
+188.5
+18J.2
Trade Balances in Technology-Intensive Manufactured Products
Including Automotive Products, 1971-75 and 1976-80, Cumulative in $ aillions
United States
West Germany
Japan
1971-75 (cum.)
+ 77.5
+134.2
+ 37.7
1976-80 (cum.)
+154.0
+259.9
+275.1
STATE~ TENT OF ISSUES
Given existing U.S. Government policies, can U.S. high technology
industries maintain a leading position in the face of increasingly
strong foreign competition?
Are there serious economic and national security consequences from a
loss of technological leadership, and ultimately, industrial
viaDility in technology intensive sectors?
ri,iat would be appropriate U.S. Government responses if one or more
U.S. hign technology industries face a significant threat to its
technological leadership or economic viability?
Tne study will assess the ability of key U.S. high technology industries to
maintain competitive viability in the currrent and projected international
economic environ,nent. It will focus on an examination of the underlying
economic and political factors judged crucial to the development, innovation,
and production of nigh technology products. This section will be preceded by
a review of conditions facing key high technology industries and followed by
an examination of the economic, national security, and foreign policy
implications of a further loss in U.S. technological leadership. A final
section will evaluate U.S. policy implications if it is judged that one or
more of our high technology sectors are facing significant threats to their
future economic viability.
Tne snort deadline precludes an indepth industry by industry analysis.
Rather, the study will review the degree to which foreign competitors
challenge key U.S. industries, and the ability of these industries to maintain
or restore competitive eminence. . This review will compare the trends in
 Approved For Release 2007/04/03: CIA-RDP84B00049R001700060001-2
technological developments in both U.S. and foreign technology-intensive
industries, as well as the relative ability of U.S. and foreign firms to
translate these developments into competitive products. It will also assess
the importance of high technology industries for overall U.S. economic
performance. The industries surveyed will be chosen on the basis of their
significance to the economy, the advanced state of the technology involved,
and their importance to national security. These industries will include
semiconductors, aerospace, computers, telecommmunications, industrial control
systems, machine tools, automobiles and steel.
The study will examine the likely consequences of trends in
technology-intensive industries for economic growth, productivity, and foreign
trade. In addition, it will address the implications of these same trends for
U.S. national security and foreign policy. The study will assess the extent
to which U.S. military procurement may become dependent upon foreign sources
for critical. and technology, and consequences for surge potential of U.S.
industry.
The main thrust of the analysis will be to examine those factors, as
demonstrated by the industry by industry review, which influence the ability
of U.S. high technology firms to operate in an increasingly competitive
international environment. In addressing research and development efforts,
the study will examine factors pertinent to academic research, industrial
research and development, government research and development and. the
interaction between these three sources. To assesss the comparaive ability
U.a. ano foreign industries to bring the technologies to market, the study
will review the relative costs and availability of capital, their influence on
capital formation, and international differences in business behavior
;including technology transfer policies). The study will compare U.S. and
foreign labor costs, labor-management relations in high technology industries,
availability of specially skilled employees, comparative productivity, and
management techniques.
Tne study will identify key foreign governmental policies designed to foster
and protect their own high technology industries. The study will identify,
where feasible, practices of foreign governments which interfere with the
operation of normal market forces, for example, preferential tax policies or
interventions in capital markets.
The study will review the government/nigh technology sector relationship in
Japan, Germany, the United States and other key countries. Pertinent factors
include government financial support, including R &O funding, the effect of
regulation and tax policies on performance, the influence of antitrust
policies, and the government role in regulating market access. The study will
also compare formal and informal trade oarriers, implementation of the MTV
codes, the effect of foreign subsidization on third market penetration, and
U.S. export disincentives.
 Approved For Release 2007/04/03: CIA-R DP84B00049R001700060001-2
The last and final section of the study will examine the implications for U.S.
policy of perceived problems in the international industrial environment that
affect the growth of high technology industries. If the study determines that
one or more segments of our high technology sector faces a significant tnreat,
possible U.S. policy responses, both domestic ano int-ernational, will be
identified.
Tne study will be organized to ensure quality results and speed of
completion. These criteria can best be met by assembling a small W'orkina
Group (aoout 5 persons) of the highest caliber experts on high technology
industries and the economy chosen from among the various agencies within the
U.S. Government. The staff of the working group will be detailed from their
agencies to work full time on the project.
The working group will take its mandate from the CCCT and report directly to
it. Central staff direction will be provided by a single person designated by
the CCCT, with proven expertise in the area and the ability to devote almost
full time to the project.
Agencies with interest and responsibility in the areas covered by the study
will oe asked to participate by making available to the Working Group, as
needed, their data, resources, analyses of issue and full cooperation. 'these
alencies will be requested to appoint a contact ersr ~! .. o
p wh c~a?n coord,natc
assistance-- from the agency to the working Group. The Working Group may
convene meetings with interagency representatives, to provide guidance on
policy issues affecting the study.
The eiorking Group may also draw on industry and academic experts as necessary
to review the economic and technological analyses for the draft report. The
draft report will be circulated for interagency comment prior to its formal
presentation to the CCCT. The draft report will be completed within 120 days
of CCCT initiation.
 Approved For Release 2007/04/03: CIA-R DP84B00049R001700060001-2
OUTLINr_
STUDY OF THE COMPETITIVE POSITION OF U.S. HIGH TECHNOLOGY INDUSTRIES
I.
INDUSTRIAL SECTOR REVIEW
A. HIGH TECHNOLOGY INDUSTRIES
1.
Information Processing Systems and Services
a.
b.
c.
d.
e.
Semiconductors
Computers
Telecommunications
Software
Data Base Development
2.
Civil
and Military Aircraft
3.
Civil and Military Space Systems and Services
4.
Scientific and Instruments Control Systems
5.
Industrial Automation
B. HIGH TECHNOLOGY APPLICATIONS IN MATURE INDUSTRIES
1. Automotive Products
2. Specialty Steels and Other Strategic Metals
3. Shipbuilding
4. Machine Tools
C. EMERGING INDUSTRIES
3iotechnology
Mz Lno Resources
Advanced Energy Technology
11. ECONOMIC, NAiiUNAL SECURITY AND FOREIGN POLICY CONSEQUENCES OF
U.S. COMPETITIVE POSITION
A. ECONOMIC CONSEQUENCES
B. NATIONAL SECURITY CONSIDERATIONS
C.' FOREIGN POLICY CONSIDERATIONS
III. KEY VARIABLES AFFECTING COMPETITIVENESS
A. COST AND AVAILABILITY OF FINANCIAL CAPITAL
0. HUMAN CAPITAL
C. ROLE OF NATIONAL GOVERNMENTS
D. TECHNOLOGY TRANSFER POLICIES
E. INDUSTRIAL ORGANIZATION
 Approved For Release 2007/04103: CIA-RDP84B00049R001700060001-2
IV. U.S. POLICY IMPLICATIONS
A. BACKGROUND
B. U.S. GOVERNMENT DOMESTIC POLICY IMPLICATIONS
1. Macroeconomic policies
2. R&D policies
3. Trade policies
4. Investment policies
5. Science and technology policies
C. U.S. GOVERNMENT INTERNATIONAL POLICY IMPLICATIONS
1. Defense rationalization policies
2. Trade policies
3. Investment policies
4. Technology transfer policies
5. International science policies