Newspaper article THE JOURNAL RECORD

Harvard Group Supplies Theoretical Framework to Contest Free Trade / Two Points: 'Comparative Advantage' Theory Damaged; Japan's Prowess Must Be Matched

Newspaper article THE JOURNAL RECORD

Harvard Group Supplies Theoretical Framework to Contest Free Trade / Two Points: 'Comparative Advantage' Theory Damaged; Japan's Prowess Must Be Matched

Article excerpt

Free trade has been a venerated economic principle in the United States going back 200 years. But there have been challengers.

The first was Alexander Hamilton, who in 1791 argued for government policies that would encourage native manufacturing while protecting it from British exports.

Britain was the world's great trading power then - a role that eventually passed to the United States, without much attention having been paid to Hamilton's theories. But now that Japan wears the crown, some professors at the Harvard Business School are trying to supply the theoretical framework for another challenge to free trade.

The professors' views are not brand new. But the audience seems to be growing. Last week, for example, representatives of the auto, machine tool, chemical and semiconductor industries traveled to Harvard, in shifts, for workshops that lasted six days. A principal concern was the onslaught of low-cost, high-quality Japanese goods, and the professors, in effect, justified a tougher strategy to deal with the competition.

``We are looking for an intellectual structure that reflects the real world, and this one does,'' said Andrew A. Procassini, president of the Semiconductor Industry Association, representing an industry that is losing badly to the Japanese.

The Harvard theory comes in two layers, one involving trade strategy and the other Japan's manufacturing prowess.

The latter has to be matched, the professors said. American factory costs have to come down, partly through joint research projects, such as Sematech, the semiconductor industry's embryonic effort. The technology that emerges from this research should be shared by competitors within an industry.

This sort of factory technology sharing is rare in the United States. But the goal is to do away with competition at the factory level. Instead, each company in an industry would have expertise to build a state-of-the-art ``generic'' factory. Competition would be elevated to product design and to marketing.

In addition, manufacturing efficiency would be enhanced through greater loyalty between customers and suppliers. Such loyalty comes easily to the Japanese, but is resisted by Americans.

These manufacturing ideas are shared by the five principal members of the Harvard professorial group: Joseph L. Bower, Bruce R. Scott, Robert H. Hayes, Kim B. Clark and Richard Walton. The ideas also are being pushed by the Berkeley Roundtable on International Economics at the University of California. …

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