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Learning by Doing and Dumping in the Semiconductor Industry

IN 1986, the U.S. Department of Commerce and International Trade Commission concluded that Japanese firms were selling several varieties of semiconductors at prices below their fair market value in the United States market, thereby violating the antidumping laws.1 While dumping penalties were ultimately levied against only one variety of semiconductor imports, the trade dispute was a major impetus behind the United States-Japan Semiconductor Agreement that continues to regulate effectively the price and quantity of computer memory chips exported from Japan.2 The purpose of this article is to argue that, contrary to the decisions in those antidumping investigations, there is little economic evidence that Japanese semiconductor firms sold memory chips at a loss in the U.S. market or engaged in predatory behavior. Under existing U.S. trade law, however, there is little doubt that Japanese producers were formally guilty of dumping during the period under investigation-that is, selling at a price below their current unit costs of production. Reconciliation of these seemingly contradictory conclusions lies in the recognition that Japanese (and American) semiconductor firms make their