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To: Frodo Baxter who wrote (607)	9/7/1998 10:41:00 PM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 3536

no protected voodoo, just econometrics....on second thought I guess it is voodoo. Various think thank types do this sought of analysis. No there is not one equilibrium. I thought it was pretty obvious that I was pointing out that the non protected sectors had become more competitive at stronger yen rates. The protected sectors have in effect atrophied and are very uncompetitive. Because of this fragmented nature of the impact of international competition the equilibrium is dependant on what the trade restrictions are. Under the current regime the equilibrium rate id probably lower than the current exchange rate. If trade rules are liberalized the equilibrium rate would be much higher, also we would be driving more Toyotas and the Japanese would be eating more American agricultural products. But even in a completely open economy there is not one equilibrium rate. Canadian lumber exporters are not competitive at the same exchange rates as Canadian auot parts manufacturers. You always get trade offs. Henry