Viewpoints : RESHAPING TRADE POLICY : Adding more federal bureaucrats won’t help us compete with the Japanese.

Frustrated by continuing U.S. trade deficits, some members of Congress are arguing that the time has come for a shake-up of the government’s trade bureaucracy and the creation of an all-powerful department of industry and trade.

Supporters of a new Cabinet agency assert that foreign unfair trade practices are the real cause of declining U.S. competitiveness. They allege that U.S. trade negotiators are unable or unwilling to get tough with foreign officials because interagency conflicts over the role of trade versus other foreign policy concerns have paralyzed our government.

But the idea of creating a trade department is neither new nor a realistic solution to our economic problems. It came up as early as 1962, when President Kennedy decided that the U.S. should embark upon a massive effort to liberalize world trade through global negotiations. The political resistance that quickly surfaced illustrates some of the concerns raised by these plans.

In the case of the Kennedy proposal, House and Senate committees reminded the President that under the U.S. Constitution, Congress regulates foreign commerce. Lawmakers refused to let the State Department lead the program on the grounds that it always sells out to its foreign clientele.

Kennedy came back with a plan to make the Commerce Department responsible for trade negotiations. However, agricultural and labor interests objected vehemently to subordination of their interests in a department that they felt was dedicated solely to looking after manufacturers.

Congress then decided to create a new Presidential post, over Kennedy’s objection, to carry out Congressionally mandated trade talks. A special representative for trade negotiations was appointed with a supporting staff in the President’s own executive office. Since that time, every President except for George Bush has tried, and failed, to abolish this office as an unnecessary anomaly and shift trade to Commerce or another agency.

Every trade policy reorganization plan has come up against the same problem: Given the widely differing interests of insurers, bankers, farmers, workers, manufacturers, importers and exporters, it was impossible to put trade policy in any existing department without having every issue appealed to the top. If a new department were to be established, the other agencies would inevitably end up appealing their points of view. To deal with this continuing challenge, any President would have to create an overseer for trade policy in the White House--a function that, in theory, is already performed by the U.S. trade representative.

The only other alternative seemed to be to give the coordination role to the National Security Council staff--as House Majority Leader Gephardt proposes--but that would subordinate trade interests to foreign policy considerations, which is exactly what Congress has said it wants to avoid.

In practice, all recent presidents since Nixon have placed trade disputes in a wider context of general economic policy, under the leadership of the Treasury secretary. Trade issues have been decided by balancing domestic interests against one another, and against other national economic objectives.

For example, in the 1980s, trade disputes with Japan often have been muted by the President and the Treasury to ensure continued financial policy cooperation with the Japanese government and central bank. Without this cooperation, U.S. interest rates would have been higher, the dollar would have stayed too high, and developing country debt problems would have grown unmanageable.

It could be said that the priorities were wrong--that the Administration should really have fixed the federal budget deficit and reduced U.S. dependence on foreign capital. But the United States was in a financial predicament that dwarfed individual trade complaints, and a trade department wouldn’t have changed that fact.

In the 1980s, a number of domestic industries such as steel, semiconductors and automotive manufacturing have complained about unfair foreign competition. Their complaints were rewarded with new forms of import restriction. The result was to encourage many foreign producers to jump the fences and transplant their factories to the United States, bringing those domestic industries even tougher competition.

Would a new trade and industry department have stopped all this protectionism? No. On the contrary, such a department would have favored domestic industry interests, and probably been even more protectionist--and even more foreign businesses would have moved here.

Now it is fashionable to argue that our government has to get tougher. Boiled down, the trade department promoters seem obsessed by Japan. The latest Washington fad is to blame Japan’s continuing trade success on the cunning maneuvers of an elite group of bureaucrats, politicians and businessmen acting in a mutually supporting conspiracy. To deal with this different society, it is argued, the United States needs a full-scale army of specialists in a department of trade to bash away at the Japanese global conspiracy. What we need, it is said, is “managed trade” with Japan, specifying what can be sold to the United States and when, and stipulating what shall be bought and from whom.

However, it is unlikely that multiplying the number of bureaucrats dealing with Japan will change much. Throwing civil servants at business problems has rarely, if ever, worked out well. It goes against the fundamental American experience, which is that business works best when the government does not overmanage it. In fact, more management of trade by the U.S. government almost guarantees an acceleration of foreign production transplants to the United States, in the long run damaging the most those very companies that are complaining the loudest.

So who really wants a trade and industry department? The main supporters are manufacturers that have fallen behind in world competition, and that now seek government help. Is it wise to let the losers make policy for the whole nation?