Can government create comparative advantage?
As we saw, another claim of the activists is that the Japanese government has been able to incubate world class competitors by insulating them from foreign (and domestic) competition in their home market. At one time protection from foreign competition was accomplished by overt import restrictions; today it is more likely to be implemented by discriminatory regulation and procurement. The textbook case of such an infant industry strategy is Japan’s domestic telecommunications market: “[T]he absence of sustained foreign competition there . . . has given Japanese companies a critical advantage in international competition,” Borrus and Zysman have argued.62 According to Tyson, “By blocking Motorola’s access to Japan’s rapidly growing market, Motorola’s Japanese competitors have been able to keep their prices up, earn high profits and develop competing products. Based on their sanctuary at home, they have been able to launch competitive strikes against Motorola in the U.S. and third-countr
