ABSTRACT
The sudden collapse of the United States (US) high technology trade position that has occurred almost entirely on the import side of the ledger derives mainly from two sources of imports— Japan and the newly industrializing countries of East Asia—and is heavily concentrated in communications equipment and electronic components. The US economy is emerging from a decade or longer of slow or negative economic and productivity growth; high unemployment, inflation, and interest rates; repeated trade deficits of unprecedented proportions; and wrenching dislocations in basic industries. US deterrence strategy relies on deployment of qualitatively superior weapon systems to offset the numerical advantage of opposing strategic and conventional forces, and the viability of current approaches to arms control hinges on sophisticated methods of verifying weapons limitations. The effects of overvaluation are so pervasive that it is almost immaterial whether US high technology trade is slightly more or less disadvantaged because of greater or lesser price elasticities and location of production.
