1989 Reports

Declining industries, mechanisms of structural adjustment, and trade policy in Pacific Basin economies

Patrick, Hugh T.

The process of industrialization, and its spread to the developing economies, generates in its wake severe problems of structural adjustment for "declining" or "troubled" industries. These problems are of major policy significance for the Pacific Basin economies, though in somewhat different ways depending on the level of development (the advanced industrial countries, the newly industrialized economies, and currently industrializing nations). How inefficiencies are dealt with and resources reallocated is an important domestic economic and political problem. Moreover, it has even more important implications for the relationships of these economies with each other and with the world, not simply in terms of trade flows but of the rules and nature of the international trading system itself. The Pacific Basin Studies Program at Columbia University in 1987 initiated a project to investigate these issues in a comparative Pacific Basin context under the direction of Professor Hugh Patrick. The purpose has been to describe and evaluate the mechanisms of adjustment in each country, to determine their effectiveness and constraints on various policy choices, and to examine the implications for the country's trade policy. The focus of the project has been on manufacturing industries; agriculture enters only peripherally. In this paper, Professor Patrick gives his results and recommendations to correct the inefficiencies of industrialized nations in the Pacific Rim.