‘Open Markets’ Drag Us Down the Wage, Skill Ladders

The Reagan Administration has learned nothing from the failure of its foreign-trade policies. The President’s proposals for improving our so-called “competitiveness” would not solve the problem, but would worsen it. If the nation is to be saved from its trade crisis, it is Congress that will have to provide the desperately needed solution.

The country has witnessed the failure of a succession of Reagan trade policies. Automatic changes in exchange rates brought about by the so-called “free market” failed to solve the problem, as did the manipulation of exchange rates by governments. Cajoling or forcing other nations to “open their markets to us,” as the Administration euphemistically phrases it, sounds to foreign governments more like a demand to abandon their own trade policies.

Despite claim after claim that we “now have turned the corner,” the trade deficit is at an all-time high. In a recent proposal the Administration has gone from the unrealistic to the absurd: The giant U.S. trade deficit is to be cured by a reduction in the West German discount rate.

And now the new cure and the new slogan: “Enhance our competitiveness.” This is to be done, President Reagan told the nation during his State of the Union address, by government spending on “science and technology centers,” “strong new funding for basic research” and “new federal commitments keyed to retraining and job mobility.”

Will such policies cure the enormous excess of imports over exports that has been shifting U.S. industries and jobs to low-wage nations? Or will the flood of imports be allowed to continue to cause widespread failure and weakening of U.S. firms, forcing workers into lower-paying, less-skilled jobs and deindustrializing the nation as it pushes it into second-class economic status?

Have the nations that have been “outcompeting” us done so by expensive programs of basic research and job training? No, precisely the opposite. They won the foreign-trade battle by copying our goods and production methods, and using lower labor costs to undersell American products in the United States and abroad.

Our competitors have proved that when products are quickly copied through “reverse engineering,” spending for basic research will merely add to our costs and worsen the trade deficit.

For the government to increase its spending for retraining and job mobility, in an effort to--according to Reagan--”adapt to the rapidly changing nature of the workplace,” also would push up costs and make the deficit worse. And the irony is that the reason the “nature” of the American workplace is changing is because we continue to lose desirable jobs to low-wage nations.

Those workers are improving their standard of living as a result of the jobs that they have taken from us. The Administration’s trade proposals will not save or create good jobs here at home; they will only help to put more Americans out of work--while adding to our costs and further damaging our competitiveness.

The key to saving the U.S. economy from destructive foreign trade does not lie in buzzwords like competition or competitiveness. It requires a trade policy that will replace destructive foreign competition with balanced trade arrangements that benefit the nations involved. Seeking to “compete” with low-income nations like South Korea, India and China by reducing U.S. wages and living standards is not the answer.

Did Americans vote for that kind of a future? Were they aware that these are the implications of “free trade?” What is the nation’s future?

To save the economy of this country, as well as to bring about constructive foreign trade, requires the swift adoption of a policy that would halt international wage-cutting competition and allow each nation to produce the goods for which it is particularly suited. Such constructive trade arrangements would require the United States to adopt policies that would limit its imports sufficiently to keep them in balance with its exports.

This would create the real two-way trade that the nation needs rather thanthe current one-sided flow of goods that shifts our desirable high-wage and skilled industries and jobs to other countries. A true two-way system could be achieved by import quotas that are adjusted to keep U.S. imports at the trade-balancing level, or by export-import matching mechanisms, or by balanced trade packages negotiated by the nations involved.

To meet this challenge, the United States must stop being misled by slogans like “free trade,” “protectionism” and “competitiveness,” and must deal competently with the realities of foreign trade in today’s world.