A Key Congressman Talks About Competitiveness : AMERICA’S TRADE CRISIS <i> by Don L. Bonker (Houghton Mifflin: $18.95; 305 pp.) </i>

For an astronaut who might have been sent on a mission to Mars in the early 1970s and is just returning to Earth, or even a freshman college student beginning his study of global economics, “America’s Trade Crisis” would be a comprehensive introduction to the decline and problems of U.S. competitiveness during the last 20 years. But for a readership that has some acquaintance with industry and trade, the book offers a generally pedestrian recounting of what have become all-too-familiar plaints. Since the author, southwestern Washington Congressman Don L. Bonker, has been chairman of the House Foreign Affairs subcommittee on international economic policy and trade and is in a position of major influence, the lack of new perspectives and ideas is disappointing.

In fact, since the book was completed some time in 1987 and was published only last summer, a number of key elements have become outdated. Thus unintentionally, by spotlighting the glacial, outdated pace and practices of the publishing industry, which is protected from the spur of foreign competition, the book’s production itself presented a graphic example of how, by our failure to exploit new technology and our too-late awakening to the realization that business-as-usual is no longer good enough, we are falling behind.

In this context, of course, the author himself has been victimized. Yet it demonstrates the inefficiencies of protectionism and other artificial barriers in a world where the nature of problems can change swiftly and dramatically. For example, the agricultural surpluses that Bonker addresses have vanished with the drought, the U.S. manufacturing industry that Bonker sees imperiled has made a robust recovery, and the depressed steel industry of a year or two ago is unable to fulfill all its orders. To Bonker, the problem is that the shortages of the 1970s turned into the glut of the 1980s. But one could make a case that the problem of the 1990s may be a return to the shortages of the 1970s.

It is futile to belabor the wage differentials that see Mexican maquiladora industries pay one-tenth of U.S. wages directly across the border. Until recently, the American labor force has always been the world’s highest paid; but superior education and technology enabled us to more than offset these in the cost of final products. In fact, for the first time in 150 years, the cost of labor in other advanced industrial nations has caught up to those in the United States.

The difference is that technology has become so flexible and easy to acquire, and transportation of energy, commodities and manufactured goods so inexpensive that any nation with the ability and willingness to invest in capital goods and the education of its citizenry can become a player in the global market place. In the context of human improvement and world stability, that is all to the good. The problem is that, starting with the space and missile races and the Vietnam War, we have been diverting too many of our resources away from productive competitiveness, and this trend was greatly accelerated by the Reagan Administration--at the worst possible time. Bonker joins a host of other voices, and is quite right, when he criticizes Reagan’s obsession with military might--and, for that matter, military redundancy--at the expense of investment in education and the undermining of national solvency.

But there are two sides to many coins, and some of his other premises are dubious. He goes out on a very thin limb when he ascribes part of the trade crisis to the 1986 Tax Reform Act because of the $28-billion-a-year (on average) tax increase for corporations. The fact is that the act simply restored much lost equity to the tax system and recaptured some of the infinite tax breaks, which had become a scandal, for corporations. During the 10 years before 1985, the corporate percentage of income and profits taxes dropped from 24% to 15.5%, yet it was in that very period that U.S. competitiveness declined precipitously. The U.S. corporate tax burden (combined profit and social security employer taxes) has been below the rates of Japan, West Germany, Canada and France. So scratch that as an element of the trade crisis.

It is, however, true that virtually all industrial nations, with the exception of the United States, levy hefty sales, value-added and excise taxes that dampen consumption, and so in effect act as a subsidy to exports. But it is also true that all of the Western European nations use these revenues for comprehensive social welfare systems far beyond anything in the United States. So what is taken with one hand is given back with the other.

Similarly, Bonker joins in the chorus chiding the U.S. population for its low savings rate. But social security, unemployment insurance and company pension plans have largely replaced individual savings. Americans have an infinitely greater investment in housing than anyone else in the world, and this is appreciating continuously, so enhancing assets. The Japanese have had no national social security system, they have had far less access to home ownership, and they have not had the availability of credit the U.S. has had; so naturally they have saved more.

While it is true that there has been some attrition in the U.S. standard of living, the cost of living in the United States is still substantially lower than in Japan and most other industrial nations--largely because of imports. If the Japanese were not so disciplined and insular, they might be asking some hard questions about why their dedicated work has not paid more dividends to the general population.

Are higher-paying jobs being replaced by lower in the United States, as Bonker notes--again not with great novelty? Partially yes, partially no. First of all, anyone who has ever worked in a steel mill or a Detroit assembly line would scarcely have considered these desirable jobs, except for the pay. While we have lost jobs in manufacturing, we have also eliminated many at the lower end of the spectrum, in agriculture and household work, through mechanization and the “electric home.” Those that are left are being filled largely by illegal immigrants.

It is unquestionable that a nation cannot chronically run an unfavorable balance of trade without suffering consequences; and Bonker is correct that we should not gladly suffer such Japanese practices as importing raw American products, such as logs, but effectively barring finished ones such as lumber. Yet even here, the picture is to some extent distorted. When an American corporation sells a high-rise office building in Los Angeles or New York to the Japanese, that office building will continue to generate U.S. jobs and U.S. taxes. While the profits may be going to Japanese capitalists instead of U.S. capitalists, that is a matter of relative indifference, since in either case, they will be reinvested where they offer the greatest return--be it in Japan, the United States or the Seychelle Islands. One can scarcely speak about capital or financial markets anymore in nationalistic terms.

Given his position in Congress, Bonker is not just another author. During the next few years, we shall be facing heightened challenges on a variety of fronts, from the newly industrialized nations to a completely integrated European Community. But one cannot solve problems by simply throwing statistics at them, anymore than by throwing money at them. We have the data from innumerable sources. What we need now from Bonker and persons like him in leadership positions is more incisive analyses, innovative thinking, and creative approaches to respond to those challenges.