VIEWPOINTS : Economics Forms Bridge Between U.S., Third World
At an ever-increasing pace, the world is shrinking. Transportation and communication advances have produced near-instantaneous links throughout the globe. Financially and economically, an interdependence has developed that binds the industrialized democracies and Third World countries, rich and poor alike.
This has been a boon to U.S. exports for the last 40 years. Those same forces also have brought this country some of its toughest competition, especially from the Japanese and a number of our European allies.
And that’s the rub for a lot of U.S. industries. Foreign competitors have prevailed in a host of markets, prompting demands for Washington to give a helping hand. The call for protectionism--as embodied in trade legislation recently vetoed by President Reagan--is certain to persist for some time.
Despite the loss of U.S. jobs and declines in many types of exports, this nation is better off keeping its markets open and not closing its doors to the competition. The high standard of living in the United States, which we all seek to protect, has been supported by well-developed markets overseas for American products. A good way to continue that successful trade record is to enlarge the size of the U.S. overseas market.
Where is the potential for expansion? In the future, much of our growth in trade will have to be with countries in the Third World. Population growth will occur almost exclusively there. Many natural resources are found in abundance only in developing countries. The Third World will have the greatest per-capita income growth and the greatest need for goods and services.
The increased dependence on Third World nations already is apparent. In the 1970s, U.S. merchandise exports to the industrialized countries increased more than fourfold. But during the same period, there was a sevenfold increase in U.S. exports to the developing countries.
Poverty at Root
Ninety-six countries commonly are referred to as developing, almost all in Africa, Asia and Latin America. They account for 76% of the world’s population. Between now and the end of the century, 94% of the growth in the world’s population is expected to take place there.
Unfortunately, population growth and market growth are not synonymous. A large percentage of people born in these countries will continue to be poor. Many are hungry. This is not because of insufficient food supplies; it is due to poverty.
The Third World’s economic development has been held back by debt more than anything else. Collectively, developing countries owe more than $750 billion to lenders. In 1986, debt service represented 35% of the gross national product for all developing countries.
Before the so-called debt crisis in the early 1980s, 45% of U.S. exports went to the 15 countries now classified as the most heavily indebted. But U.S. exports to those countries have fallen by fully one-third since 1981. Clearly, the current Third World debt problem--first brought on by the 1973 oil embargo and aggravated by the 1979 OPEC price hikes--has weakened the less developed countries and undermined their ability to buy exports from the United States or anywhere else.
Protectionist policies, popular with many U.S. political and business leaders, would make things even worse. Trade sanctions, quotas and tariffs, along with curbs on multilateral lending, could deepen debt problems.
Debt Issue Key
Although trade measures under consideration seem to be directed toward Japan, the most hurt would be Western Europe, Canada and the Third World. Without buyers for their exports, Third World borrowers would find it even more difficult to repay their debts or purchase our products. And when economic growth in the industrial world slows, as it did last year, developing countries suffer even more.
If the Third World is truly the promising future market for the United States, then the debt issue will have to be firmly resolved. In addition, foreign economic assistance to the Third World will greatly influence how quickly and strongly these economies bounce back, enabling poor people to participate in the marketplace.
The United States, in the second half of the 1980s, is a paradox. It has the world’s largest economy, whose ups and downs affect the economic health of nations around the globe. Yet it is deeply concerned about its ability to compete in world trade.
It would be farfetched to suggest that we might find in the developing countries the solution to our competitiveness problem. But it is clear that America is not going to find its own solution without them.
