VIEWPOINTS : SUPER 301: A JUSTIFIED COURSE : Proposed Trade Law Sanctions Are Credible Warning, Not Protectionist Ploy

Ever since the Bush Administration named Japan, Brazil and India as unfair traders 10 days ago, the action has been roundly denounced as first step in a pell-mell rush by the White House to the disastrous days of Smoot-Hawley protectionism. Dire predictions of retaliation, a world trade war and worse have filled our business news pages.

But a dash of perspective might be useful at the moment. First, even a casual look around reveals that the world and America’s place in it bears no resemblance to that faced by Sen. Reed Smoot when he devised his system of tariffs in 1930. Not only is the world not reeling from a global financial collapse, the clear objective of the Bush trade offensive is to open foreign markets to American products, not to close off the United States to the very people overseas who manufacture so much of our own prosperity.

Critics have charged that the trade sanctions threatened by the White House represent a brutal and selfish break with America’s tradition of free trade and a cowardly capitulation to the narrower interests of some of the President’s big business friends. Such a notion is history of the daffiest kind, to begin with. It also ignores a week of headlines that have followed the formal complaints leveled against the three nations.

What has gone on as Bush, Treasury Secretary James A. Baker III and U.S. Trade Representative Carla A. Hills have shuttled from Brussels to other capitals is that America’s NATO allies have been confronted with a set of U.S. policies that are all of one piece. That is to say, the White House is willing to discuss and negotiate anything and everything, and it has linked our defense posture and our foreign policies firmly with our trade policies--just as Europeans have for centuries and just as we did in the days of the Marshall Plan.

Integrating Policies

In short, there is something more serious going on here than a President caving in to protectionist special interests. Are there dangers ahead for the American economy with the Bush strategy? Yes, indeed, for much of that strategy depends on a delicate negotiation and trade technique at which we Americans are not very skilled.

But the point is this: For the first time since the end of the Vietnam War, a U.S. President is trying to make trade policy part of this country’s foreign strategic policy. Instead of treating trade as a glad-handed backwater of our foreign aid largess, the Administration is trying to use hard bargaining, shrewd diplomacy and, yes indeed, the threat of reprisals to persuade our trading partners around the world that the same rules of open markets should apply to everyone. And, equally important, if all trade markets cannot be fully free and open, the areas off limits should be fully negotiated and above-board.

Not long ago, the United States could view trade with other nations as a painless form of foreign aid. Well into the 1970s our total volume of merchandise exchanged with other countries only amounted to about 12 cents of every dollar of annual gross national product.

But now our trade volume is roughly 25 cents of every dollar of our economic growth. And we have been losing, in terms of the trade deficit, an embarrassing 1.7 cents on every dollar’s worth of trade transaction and building a trade deficit that annually pumps roughly $150 billion in surplus dollars into the hands of our trade customers--one-third of those dollars into the hands of our Japanese friends alone.

Serves as a Warning

While the return of those dollars in the form of foreign investments in new plants, real estate, corporate shares and U.S. Treasury securities has been welcome, America clearly cannot continue to have its foreign trade losses and government spending profligacies subsidized by people outside our country. One answer to the trade problem is to get our foreign partners to open up previously closed portions of their economy so that American goods and services can compete.

It is in this light that Bush’s so-called Super 301 unfair trade list must be viewed. It is not a declaration of war, but rather a credible warning that this time the White House intends to use all of the power levers at its disposal to win expanded markets for American exporters. While that means that some painfully protected sectors of Japanese, Brazilian and Indian economic life must give way, the reward is something of even greater value to them--continued access to the American market itself.

Understandably, the three countries cited for blocking U.S. access to markets and the 22 others placed on a “watch list” are not all pleased by the prospect of an 18-month time limit in which to negotiate trade opening agreements that will forestall the Bush Administration from imposing up to 100% penalty duties on their products sold here.

But in fairness, the three nations cited have had it coming to them for a long time. Japan has run a classic mercantilist, beggar-thy-neighbor trade policy since time began. While South Korea, Taiwan, Hong Kong and Singapore have all opened up (albeit reluctantly) to American trade, Tokyo’s negotiators have remained resolute.

Brazil has been hiding for years behind the protection of being a Third World nation when really it should have graduated to second-world (growing industrial economy) status earlier in this decade. Brazil’s import-licensing system and its protection of industries deemed important for development must be liberalized. And India’s refusals to honor world patent protections, the closing off of its insurance industry and other barriers to trade in services and investment also are indefensible for a nation demanding to be treated as a full dues-paying adult in all other matters.

Important Signal

The trade complaints have less to do with individual disputes such as Japan’s refusal to buy California rice or Detroit auto parts. The issue is whether these governments routinely tolerate a system of anti-trade practices in their private sectors.

The fact that the European Community was left off the list was an important signal from President Bush of just how prepared he is to negotiate and horse-trade guns for butter and vice versa. The U.S. trade team is openly worried that the EC will set up “European content” laws on everything from computer chips to television programs that will work against the kind of joint-venture manufacturing partnerships that we are trying to foster around the world. Even so, Bush has decided to avoid provoking a trade policy crisis in exchange for loyal support on nuclear arms talks with the Soviets in the months to come.

Is that fair to the Japanese and the others cited or put on the watch lists? No, but it is sensible diplomacy. And it is a good start for a new American Administration. What remains, of course, is the question of whether Bush and his senior advisers can carry off this risky plan to break the trade stalemate that has dogged us for years.