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U.S. Competitiveness and New TVs

February 05, 1989|LAURA D'ANDREA TYSON | With this column, Laura D'Andrea Tyson joins the Times Board of Economists. A professor of economics at the University of California at Berkeley, she is also research director at the Berkeley Roundtable on the International Economy. She received her doctorate in economics from the Massachusetts Institute of Technology and has been on the faculty at UC Berkeley since 1977. A member of the Cuomo Commission on Trade and Competitiveness and the Leadership Council of Rebuild America, she is the author of "Politics and Productivity: The Real Story of How Japan Works" with Chalmers Johnson and John Zysman. and

High-definition television has become a high-definition issue in U.S. policy circles. Congressional and business leaders have seized upon HDTV as an opportunity to rebuild American competitiveness. But before we rush headlong into developing a national policy for HDTV, it might be useful to address two important questions.

First, what are the links between American participation in HDTV and American competitiveness?

Second, how are we to define American participation? For the nation to benefit from the economic opportunities HDTV offers, must we use technology exclusively developed, produced and licensed by U.S.-owned companies? Or will production by foreign firms operating in the United States have comparable beneficial effects?

To answer these questions, we must begin with the fact that the U.S. television industry is no longer solely or even predominantly domestic. Of the firms producing television sets in the United States today, six are Japanese, two are European and four are South Korean. The sole remaining domestic producer is Zenith, with only 12% of domestic sales, and even this "domestic" company produces at least half of its television output abroad.

Moreover, foreign firms not only account for the lion's share of the U.S. market--they are also the undisputed leaders in color television technology and they have a substantial head start in HDTV development.

To many, the loss of the American television industry to foreign competitors and America's lagging position in HDTV are symbols of the nation's eroding competitiveness. Therefore, policies to guarantee a share of HDTV markets to U.S. producers seem tantamount to policies to guarantee the nation's economic survival.

Such symbolism is misleading. A case can be made for a national policy for HDTV, but the restoration of national competitiveness doesn't qualify. America's competitive position has not weakened because of problems specific to the television industry or to any other single industry. Rather, the American position in HDTV and other high-technology areas is weak owing to complex factors, including low rates of saving and investment, the high cost of capital, the pervasive shortsightedness of American business, the deficiencies in our educational system and insufficient public and private support for commercial research and development.

This environment has invited a competitive assault on many American industries. Unless we are prepared to address the fundamental problems, specific policiesto promote the American television industry--or any other industry--are doomed to failure.

This is not to deny that HDTV presents genuine economic opportunities. It is certain to become big business over the next two decades. If the United States fails to participate in HDTV production, as it failed to participate in the production of videocassette recorders, major output and employment opportunities will be lost, and the trade balance in consumer electronics will plummet even further.

Failure to participate in HDTV will also have negative spillover effects throughout the electronics industry. HDTV will provide a growing market for more sophisticated semiconductors as well as larger, more advanced video displays. Solutions to the problems of image and digital signal processing for HDTV will also apply to fast displays of color images on advanced computer workstations. Consequently, producers of high-resolution displays for HDTV are likely to gain a competitive edge in the computer industry. Finally, HDTV may speed the development of a national broad-band telecommunications network based on optical fibers.

Such spillover effects offer economic opportunities and potential economic jeopardy: If the United States misses out on HDTV production, it may suffer further losses in its already embattled semiconductor industry and may find its computer and telecommunications industries under siege.

But what does U.S. participation in HDTV mean? Does this country need a domestically owned industry to reap the direct and indirect economic benefits of HDTV production? There are no compelling reasons to think so.

Foreign companies have invested significantly in production and research in the United States, while domestically owned companies have moved offshore, scaled back and sold their domestic operations to their foreign competitors. Foreign companies in the United States have demonstrable advantages in HDTV technologies. And there is no evidence that U.S.-owned HDTV companies would rely more on domestic producers of semiconductors, displays and other electronic inputs than would foreign producers operating in the United States.

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