Trade Conflicts: The Role of Regulation

For more than fifteen years, the telecommunications equipment sector has played a prominent role in straining trade relations between the United States and Japan. The industry’s most recent trade dispute was precipitated by Mo-torola’s charge that technical standards effectively barred its entry into Japan’s cellular telephone market. Cellular systems face the technical challenge of transferring calls as customers roam from one company’s cells to another. In both the United States and Japan, this challenge was solved by establishing regulatory standards to ensure compatibility among local service providers. However, compatibility did not extend internationally between the United States operating standard (developed jointly by Motorola and AT&T) and the Japanese standard (developed by Nippon Telephone and Telegraph [NTT]). While Japanese cellular companies surmounted the U S. standards barrier by modifying their equipment for export, Motorola’s entry strategy into Japan re-lied instead on lobbying for market access guarantees under U.S. trade law. After contentious and prolonged negotiations between the office of the U S