U.S. Should Be Looking Ahead on Trade Issues

There is an old adage that generals always fight the last war, meaning they prepare a Maginot Line against foot-slogging troops and miss the fact that warfare has moved on to fast-moving tanks. In the trade bill that it passed last week, the House of Representatives is behaving like the proverbial generals: reacting to yesterday’s trade issues--the formerly strong dollar, massive imports--but not helping the United States adapt to the world economy today.

The bill is being criticized as political, but its faults are economic. Politically, the bill is understandable. Anytime a third of one party’s congressional delegation votes for an opposition party’s measure, as the Republicans did on this Democratic trade bill, you’re hearing the voice of the people. The American voters are disturbed because the gale-force winds of a changed world economy seem to be threatening their livelihoods, and they get the impression that their government doesn’t much care. They are in a mood for reaction, and that is what the House bill offers.

Focus on Retaliation

The bill is negative when it should be positive. It focuses on retaliation against West Germany, Taiwan and Japan when it should be seeking ways to help our customers. Before high U.S. interest rates, the strong dollar and their own economic problems put the kibosh on them in the last five years, the countries of Central and South America were buying about $40 billion worth of U.S. exports. Lately those purchases have fallen to about $26 billion a year, and the Latin American economies are stagnating.


We need to find an imaginative way, through some form of investment, to help our customers get their economies growing again. But the trade bill offers little help in that regard.

We live in a world in which automating industry is using less energy, less labor and fewer raw materials to turn out the goods--as management expert Peter Drucker explains in a noteworthy article in the spring issue of Foreign Affairs magazine.

The difficulty for the copper workers of Arizona and Montana, for example, is that industry is using less copper in the age of the microchip. That is why copper prices remain permanently low. So we need to find an imaginative way to help the copper industry through a transition and, most of all, to help retrain the copper workers (and the oil and leather and textile workers who are affected by declines in their raw materials prices).

Island Mentality

Retrain for what? For computer-integrated manufacturing, for speeded-up methods of distribution, for new industries based on microchips. Surely we can figure out a way to do that; surely it is a better use of taxpayers’ money than paying extended variations of unemployment insurance.

The new trade bill, however, does not address such priorities but speaks instead of keeping imports out, giving Arizona copper workers little but a way to vent their frustrations at Mexican smelters.

The thinking behind the trade bill seems to view the United States as an island, on which we can feel good if the other fellow feels bad. It fails to recognize today’s global interdependence, to acknowledge that the money the foreigners--especially the Japanese--have made selling us products has been reinvested in U.S. Treasury bills, financing our government deficit.

That particular convenience won’t last. Susumu Nikaido, the No. 2 man in Japan’s ruling party, explained on a recent visit to Los Angeles that over the next 10 years, the Japanese government is going to be using its money at home. It will be giving financial aid to Japan’s small to medium-size companies to help them convert from export dependency to developing domestic markets.

These are not Japan’s well-known giant companies; they are the suppliers to the giants, who account for 70% of the jobs in the Japanese economy.

“The government has to use financial resources to help them change their operations,” Nikaido says. If the past is any guide, we Americans will soon be giving each other seminars on how the Japanese solved the problem of retraining workers.

Japan will adapt; should we do less? The changed world economy, after all, is something to celebrate, not to fear. The fact that we can produce more food and manufactured goods with less energy, raw materials and labor represents progress for all mankind.

The challenge now is to find ways to continue the growth of world trade that, since the end of World War II, has brought our society and others to unprecedented levels of prosperity.

Turning our face to the wall is no way to meet that challenge. Why not look forward instead? Doing so has always worked before.