Riskiness Afoot
President Reagan has done the right thing in rejecting quotas on shoe imports, but he has adopted a risky strategy in trying to fend off congressional counterattacks on his free-trade policy.
Foreign imports have overwhelmed the American shoe market, making up 76% of current sales. Not all American makers have suffered, however. Some have stayed on top of the market and the technology, and are successful exporters as well. To have protected the others with trade barriers would have imposed a $2.9-billion burden on consumers over the next five years, according to the President’s calculation. That is too high a price to pay, $50,000 to $70,000 a job, to save American jobs.
The decision is sure to stir the forces of protectionism that have been gathering strength in Congress as the trade deficit has grown to record proportions. It may help those behind the most destructive of about 300 pending bills--a proposal to make drastic cuts in textile and apparel imports, again at an unacceptable cost to consumers.
Perhaps to head off some of those dangerous and costly proposals on Capitol Hill, Reagan included in his announcement rejecting shoe protection an initiative to use the powers of his office to go in hot pursuit of unfair trading practices by other nations. He will invoke Section 301 of the 1974 Trade Act to bring on behalf of the U.S. government complaints against the trade restrictions or other practices deemed unfair by trading partners of the United States.
Until now, the section of the law has been the province for industries to bring grievances against other nations. That is as it should be. The government of the United States then adjudicates the controversy. The proposal now being made by the President would convert the executive into both prosecutor and judge.
There is room for aggressive trade advocacy on the part of the U.S. government. Such a posture would reassure congressmen trying to respond sympathetically to constituents heavily battered by imports and struggling to break into tight export markets. But the better route for that advocacy is the General Agreement on Tariffs and Trade--however glacial its response, however slothful the role of allies. To circumvent GATT would be to court the same overall negative results that are inevitable when walls of protection are erected. The problems cannot be solved in isolation from multilateral negotiations.
The President has not wavered in his stand against protectionism--even in the heat of the last election, when the Democratic Party abandoned its traditional position and advocated moves that sounded suspiciously like Smoot Hawley revival. Some Democrats in Congress are in the vanguard of similar moves this year. The President has made concessions, in steel for example, that have encouraged bad practices at home and discouraged innovation abroad at the expense of American consumers. But his firm advocacy of free trade is a singular contribution at a time when many in Congress are courting the reckless alternative of protectionism.
Reagan found that quotas on shoe imports would be “detrimental to the national economic interest.” No doubt about it.
