Open Trade Is a Boon; U.S. Mustn’t Become Isolationist

One of the weirder aspects of the election year so far is the turning away from foreign affairs, from any idea that the world can be America’s oyster. Isolationism and trade protectionism, last seen as political forces in the 1920s and ‘30s, are coming back like Gershwin tunes.

And, like music in stereo, they’re coming from ideologues on both sides of the political spectrum--from conservative candidate Patrick Buchanan and liberal activist Ralph Nader, who want the United States to quit the 103-nation General Agreement on Tariffs and Trade and to scuttle plans for a free-trade agreement with Mexico and Canada.

There was evidence last week that their arguments may be getting through. Canada protested tariff actions by the U.S. Commerce Department, and the Geneva-based GATT--which has been making rules on international trade for 45 years--accused the United States of using legal subterfuge to hamper trade.

Meanwhile, former President Richard Nixon decried the lack of foreign policy discussion in the campaign and U.S. failure to help the struggling republics of the old Soviet Union.

Why is this happening? A commendable concern with the home front is one reason. The American people have patiently paid the taxes and shouldered the burden of the West’s defense for five decades. Now, they want attention paid to the needs and problems of this country.

And no denying there are problems aplenty. But their solution lies in looking outward not inward, forward not backward.

For there are opportunities in the world today--in U.S. trade and in the changing economies of Europe, Japan and Russia--that are not being understood. And there are problems that can be avoided if the United States regains a proper knowledge of its own strength.

We should recognize reality, beginning with how much the United States benefits from open international trade. In manufactured goods, trade accounts for 40% of total U.S. output. That’s right, 40%, or $422 billion worth of merchandise exports out of just over $1 trillion in total manufactured goods.

The percentage is lower for services, but sizable in those services involved in international trade, such as finance, air travel and entertainment. Measurements are not precise, but directly and indirectly international trade may account for one in four U.S. jobs.

That’s because we’re doing well, not poorly. U.S. exports of manufactured goods almost doubled in the last five years, an unprecedented performance. With U.S. industry highly competitive, trade represents opportunity and good jobs for American young people.

But there’s a cloud. Growth in world trade has been slowing for years, markedly in the last decade, as the economies of Western Europe, Japan and the United States have reached something of a saturation point and are taking in each other’s washing. New markets have to be developed in the poorer regions of Latin America, Asia, Russia and Eastern Europe, the Middle East and Africa.

That’s why the countries belonging to GATT have been trying since 1986 to negotiate a new agreement, more favorable to developing countries and broadened in coverage to include agriculture, services and intellectual property, such as films and computer software.

Such an agreement would favor U.S. interests. Yet it is just at this time that opposition to GATT has arisen in America. “The opposition reflects a perception that the U.S. has lost leverage and risks being dictated to by foreigners,” says Harald Malmgren, a Washington-based business and trade consultant. It is a misperception that sees the evident prosperity of Europe and Japan as diminishing the strength of the United States.

Reality is different and better. European nations have been opening trade among themselves, frankly, to emulate the interstate commerce of the United States. In the process, Europe has become a good customer, giving the United States a growing trade surplus.

Japan is seen as powerful but, in fact, its economic imbalances are creating problems. As Japan has deflated the speculative bubble that drove up its stock and real estate prices in the 1980s, its domestic economy has been stagnant. But Japan’s big companies, benefiting from investment in better times, are now pumping exports into the world market. The result is Japanese trade surpluses that may total $80 billion a year in 1992 and ’93. “Those ‘export dollars’ will need to be recycled as were ‘petrodollars’ in the 1970s,” says Richard Drobnick, an expert in Asia’s economies at USC.

That recycling can be a boon. “Japan’s surpluses will be invested in Siberia and the old Soviet republics with guarantees from the Bank of Japan to overcome political uncertainty,” says a U.S. entrepreneur who hopes that the U.S. government gives similar encouragement to American business.

The stakes are high and offer a lesson for those who believe that U.S. influence is declining. If the United States isn’t active in Russia and the republics--and in the world at large--new markets may lie fallow, Japan’s investments may be seen as sinister, and growth in world trade and development may slow further.

But if U.S. policy is outward-looking and confident, it can help ensure a better future for its own people and others. Confidence, when you think about it, will be the truly determining factor in this election year.