Beating Back Trade Barriers
Congress and the Reagan Administration still have a long way to go before they agree on a new trade bill, but they have drawn a lot closer to producing a responsible measure to try to reduce the nation’s massive trade deficit. The harshly protectionist approach taken by the House last year has been set aside in legislation introduced by Dan Rostenkowski (D-Ill.), the chairman of the Ways and Means Committee. That measure, which has its counterpart in the Senate, would still require retaliation against countries that unfairly close their markets to U.S. products. This time around, though, the President would be given greater discretion in applying penalties, as well as the authority to waive retaliation if it is “not in the U.S. national economic interest.”
This represents considerable change, particularly from a central provision in the earlier House bill that would have required seven countries now enjoying “excessive” trade imbalances with the United States to reduce their surpluses by 10% a year or face 25% import fees. Such automatic retaliation would violate existing international trade agreements and inevitably set off a trade war from which no winners would emerge. The new bill calls for investigating the trading practices of these major partners. If unfairness was found, it would require six months of negotiations to try to resolve the problem. Only if those talks failed would the way be open to possible retaliatory action.
A lot of people aren’t happy with this more moderate approach. They blame the loss of U.S. jobs and markets almost wholly on unfair protectionist practices abroad. Such practices certainly exist--a clear and current case being Japan’s effort to deny American contractors involvement in the $8.5-billion Osaka airport construction project. But every serious study of the causes of the trade deficit, which last year reached a record $170 billion, has found that there are a complex of reasons--a great many of them home-grown--to account for it. Efforts to simplify the problem through measures that would raise prices to consumers and deny them freedom of choice while exposing U.S. exporters to retaliation abroad represent the most economically regressive way to deal with trade issues. The political consensus that is emerging on that point is highly encouraging.
