International Restraints to Competitiveness of the U.S. Heavy Electrical Equipment Industry

NSIAD-83-51: Published: Sep 14, 1983. Publicly Released: Sep 19, 1983.

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The heavy electrical equipment industry consists of a few large multinational manufacturers that dominate their home markets and compete for the remaining world markets. Pursuant to a congressional request, GAO reviewed the worldwide competitiveness of U.S. manufacturers of heavy electrical equipment, focusing on: (1) buy-national practices of the United States and selected foreign governments to restrain access to domestic markets; (2) noncompetitive practices, such as the use of subsidies, to promote exports; and (3) concerns of U.S. firms about other barriers attributable to U.S. statutes and regulations.

GAO found that, in many countries, the major purchasers of heavy electrical equipment are government-owned utilities whose buy-national policies generally restrict procurement of this equipment to domestic sources. The U.S. market is open to foreign competition and the major users of heavy electrical equipment are private utilities. A recent survey indicated that almost half of these utilities give preference to domestic goods and that only a small percentage of foreign equipment has been purchased in the past 5 years. Federal purchases of heavy electrical equipment follow policies pursuant to the Buy American Act. The number of purchases in recent years has been small but includes a sizable percentage of imports. The United States and most major supplier countries offer government-sponsored export programs, including subsidized export financing credit. In recent years, more restrictive international guidelines were negotiated. However, these guidelines only set controls on interest rates and maturity. U.S. manufacturers note that foreign countries are finding ways to provide subsidized financing that are not regulated by these guidelines. Although some U.S. Government policies may have adversely affected U.S. manufacturers' competition in the export markets, GAO feels that Government officials were probably aware of some of these consequences when legislation was enacted. U.S. manufacturers believe that antitrust, antiboycott, and foreign corrupt practices legislation are a small factor compared to other nations' buy-national practices and export subsidies.

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