Trade: Coming Unglued
The issue of trade will sorely test both President Reagan and Congress when the new session opens in January. There is an increasing risk that both the White House and Congress will yield to pressures for protectionist concessions just to seem to be doing something about unemployment in traditional industries, the record trade deficit and the continuing farm crisis. Nevertheless, Congress does have one promising alternative.
Protectionism comes in carefully disguised packages these days because voters have come to understand the perils of building the kind of tariff walls that worsened the depression in the 1930s. But the new forms are no less dangerous to the world economy and to the U.S. economy.
Among the treacherous ideas pending in Congress are proposals for automatic retaliation against nations perceived as being unfair in trade or simply having large trade surpluses of their own. In the name of fairness, legislation has been proposed to punish particular imports, with the result that some American producers might enjoy short-term relief from competition but at a price of ungluing the whole structure of international trade negotiations.
Much of the alarmism has been constructed on the current account deficit that includes investments, services and other transfer payments in addition to trade in goods. That deficit almost certainly will reach $140 billion, yet another record, by the end of the year. There is also concern about the rising foreign debt, now more than $190 billion, larger than that of any other nation, with little prospect of reduction in the short term. But the strongest pressure for protection is based on employment rather than economic statistics, and reflects the social agony of unemployed textile and steel workers and debt-ridden farmers who are finding it impossible to compete in world markets without immense government subsidies.
Reagan has been firm on most major trade issues in the first six years of his presidency. Where he has made overly generous concessions, as in restricting steel imports, the protection has had only limited effect on already troubled U.S. firms --many of them badly managed and overwhelmed by their failure to keep up with new technology. The cases have at least served to remind the nation that protection works primarily to protect the inefficient and to postpone the adjustments, however painful, that are required to compete.
Against the gloom, however, there is a single remarkable legislative opportunity through which Congress could accelerate trade negotiations and the creation of a global climate that would open extraordinary new opportunities for American entrepreneurs. That opportunity is to renew the negotiating authority expiring at the end of 1987 that allows the Administration to bring newly negotiated trade agreements to Congress on the so-called fast track, on which amendments are prohibited and Congress must vote yes or no. It has proved the only effective way to protect global trade arrangements from being nibbled to death by small and separate special interests.
The extension of that authority early in the new session of Congress would, the experts tell us, greatly facilitate the new Uruguay Round of talks under the General Agreement on Tariffs and Trade. This negotiation could easily stall without the strong indication implicit in the extension of negotiating authority by the United States. The importance of the new round for the United States cannot be exaggerated, for on the agenda are such elements as agriculture, services, patents and investments critical to the growth of trade for the United States.
The third-quarter trade-deficit figures were a disappointment. But there are encouraging signs that in themselves support strong resistance to protectionism--notably the surge in exports in October. The United States can compete in the world market, and compete it must if it wants a strong economy. That is why extending existing trade-negotiating authority, with its fast track for congressional action, is essential and urgent.
