INTERNATIONAL TRADE, INTERNATIONAL INVESTMENT, AND INDUSTRIAL POLICIES: TOWARD A POLITICAL ECONOMY OF WORLD COMMERCE (AUTOMOBILES)

This dissertation addresses the general issue of the role of government policy and actions in affecting the international allocation of resources and the exchange of goods and services between countries. The purpose is to lay the basis for a political economy of world commerce that explicitly integrates trade, investment, and government industrial policy into dynamic analytical framework. The problem is to identify the importance of industrial policy measures in world commerce. This is accomplished through a survey and analysis of industrial policy objectives in major U.S. trading partners and through a case study of the world automobile industry from 1950 to 1981. The specific hypothesis examined for the automobile industry is whether world automotive production and trade has been determined as much by government industrial policy as by trends in comparative advantage. The method of inquiry is to analyze explicitly the extent to which patterns of world automobile production and trade are explained by industrial policies as compared to comparative costs and to hold constant all other factors affecting international competitiveness.;The empirical evidence presented indicates that much greater attention should be given to the role of government industrial policy in explaining patterns of world production and trade in manufactured products. However, more case studies of particular industries are required before the results from the analysis of the automobile industry can be generalized.;The survey results indicate a widespread use of industrial policy measures among both developed and developing countries, with a particular focus on industries considered to offer significant growth potential in terms of output, employment, and exports. The automobile case study indicates that government industrial policies can explain a significant amount of the patterns of production and trade that occurred from 1950 to 1981. Indices of comparative costs are also important in explaining some of the observed patterns of production and trade, but the explanatory results are significantly enhanced when indices of comparative costs are augmented with data on industrial policies. The general pattern observed throughout the period from 1950 to 1981 was that locations of production were more closely correlated with locations of demand than with locations of low cost.