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Under the banner of “1992,” the European Communities aim to remove all barriers to the movement of persons, capital, and goods among the member countries. The 1992 movement comprises a set of bargains among European elites. Structural change (relative U.S. decline and Japanese ascent) provoked a rethinking of European roles and interests. The 1992 project emerged as a response because of: (1) the policy leadership exercised by the Commission of the European Communities, with support from a transnational business coalition; and (2) a changed domestic political context in several key countries—specifically, the failure of previous national economic strategies and the transformation of the left. The changes under way will alter regional business competition and politics and will affect the world economic system.

John Zysman outlines the increasing economic and technological autonomy of Western Europe and Japan and draws out the implications for the balance of power among the Western allies. He argues that the changed global economic structure will result in a changed security structure, and that America's relative loss of position in trade and technology will undermine its ability to influence world politics in the future. He explores the reasons for the American decline, and traces the growing importance of commercial rather than military technological development.

European industrial policy for high technology must be reformulated. First, past support of producers over users has undermined producers by not creating a sophisticated market, the single most powerful industrial policy tool. Second, global trade and investment are regionalizing. Policies aimed at rejuvenating sectors such as electronics must consider that regionalization will make access to technology and markets increasingly asymmetrical. The concepts of supply base and architecture of supply clarify this understanding. Europe must not just refocus domestic support but also secure access to the supply bases of the other two regions, America and Asia.

An erosion of manufacturing capacities has contributed substantially to America's trade problems. The difficulty lies not in U.S. machines and technology, but in U.S. strategies for automation and the goals American firms seek to achieve through production innovation. Mass production and administrative hierarchies created the basis for American industrial preeminence in the years after World War II. There is substantial evidence that American firms have been unable to adopt or adapt to the production innovations emerging abroad. A sustained weakness in manufacturing capabilities could endanger the technology base of the country.

The French state bureaucracy, able partially to shelter itself from Parliament and to influence the industrial sector directly, has been able to protect national interests in an economically interdependent world. It struck a regional bargain that committed agriculture to the European Community and in effect provided a German subsidy to French farmers. It mediated between the national and international market to promote industrial modernization and force a restructuring of critical industrial sectors. It has grown increasingly sophisticated in its dealings with multinational companies. Early efforts to insist on purely French operations have been abandoned, permitting the state to negotiate more effectively with the multinationals and obtain substantive rather than symbolic goods. These policies have cushioned agriculture's transition into an industrial world and helped pressure a previously protected industry to modernize. Finally, the state has played trader, trying directly to market French goods and assure payment for imports in package trade deals. The French have not been able to impose their own rules on monetary and energy matters. Yet their efforts suggest that a nation-state can use administrative or domestic economic resources to reduce its vulnerability to international developments, though it cannot of course escape from the system.

Countertrade, offsets, barter, and buybacks have existed since before money was invented but over the last few centuries have been treated as marginal phenomena. However, current estimates of the volume of these activites range from 8 to 30 percent of world trade and could reach 50% by the year 2000. What is surprising is not just the imprecision of the data but the fact that we have no control over this enormous volume of international transactions. This article examines these forms of trade, their causes and policy implications, and their future impact on our open trade system

A shortened version of the introductory and concluding chapters of a volume of case studies of American industry in international competition, this article examines the contemporary debate on industrial policy, building on lessons drawn from the case studies. The authors identify several possible economic and political rationales for an industrial policy, as it is one of the instruments with which the government can respond to the competitive difficulties of individual sectors in international trade. They conclude that, in the absence of such a policy, the government will continue to respond to stich difficulties with protectionist measures that thwart necessary economic adjustment and reduce our national economic well-being.