Taking a Stand on TRADE

The question of whether the United States should adopt protectionist measures to deal with foreign competition emerged as a major issue in the Illinois and Michigan primary campaigns and is expected to continue influencing the presidential debate. Here is a look at the trade issue and where each presidential candidate stands:

THE PROBLEM: The U.S. trade deficit began to balloon in the early 1980s. But while some industries clamor for protection from imports, others--such as agriculture, technology and financial services--worry that a trade war could kill exports and cost tens of thousands of American jobs. As of 1990, the U.S. trade deficit stood at $101 million.

THE ARGUMENTS: Free-trade advocates argue that expanded trade means more jobs for Americans through expanded exports. Free traders generally say that private enterprises will boom if trade barriers are kept down. And some contend that to improve the U.S. position in world markets, a greater government effort at converting promising research ideas into commercial products is needed.

Protectionists say the United States must set up barriers because America’s main trading partners do not play fairly. Some focus on Japan. Others, particularly labor unions, focus on competition from low-wage, developing countries, such as Mexico.

PROPOSED LEGISLATION: The Trade Enhancement Act of 1992, sponsored by House Majority Leader Richard A. Gephardt (D-Mo.), would require Japan to narrow its trade surplus with the United States by 20% a year for five years. Imports of Japanese cars would be frozen at their current level of 3.8 million units for 1992, and reduced by 250,000 cars each year Japan failed to meet the 20% trade surplus reduction goal. The limit would be raised according to the number of additional American-made cars and light trucks Japan imported every year.

Several proposals in both the House and the Senate would renew and strengthen the now-defunct Section 301 of the 1974 Trade Act, which requires the Administration to identify unfair trading partners and warn them that retaliatory measures will be taken unless they open their markets.

Also, the Senate will be asked to approve a free trade agreement with Mexico once negotiations end, probably next year. Most labor unions oppose it, fearing that American jobs would be lost to low-wage Mexican competition. Many environmental groups also oppose the idea. They fear that American companies would shift production to Mexico to evade U.S. anti-pollution laws. Supporters argue that Mexicans will become wealthier under the treaty, and thus buy more U.S. products--leading to more American jobs--and will have more resources to use for environmental protection.

THE CANDIDATES’ POSITIONS:

* President Bush, in his State of the Union speech, said he would “work to break down the walls that stop world trade.” More recently, he has talked more of negotiating “fair trade” rules with Japan, but he is opposed to the Gephardt bill. The proposed free-trade agreement with Mexico is part of his plan to establish a North American Free Trade Area that would also include Canada.

* Patrick J. Buchanan has taken “America first” as his slogan, but his protectionism has more rhetoric than substance. He has supported some free-trade specifics, such as Bush’s proposed treaty with Mexico.

* Arkansas Gov. Bill Clinton says that the federal government should insist on fairness among trading partners, but he generally supports the free trade position. On the Michigan campaign trail, he defended the proposed free-trade agreement with Mexico because of its potential benefits for both countries.

* Former Massachusetts Sen. Paul E. Tsongas likes to say “the Cold War is over, and Japan and Germany won,” but he argues against trade protectionism as a response. Instead, he stresses the need for U.S. businesses to improve their competitiveness in worldwide markets.

* Former California Gov. Edmund G. (Jerry) Brown Jr. has favored free trade in the past, but he recently has emphasized his opposition to the “fast-track” negotiation process on a free-trade agreement with Mexico. Brown has expressed concern that many communities, especially in the Rust Belt, cannot afford to lose more jobs to foreign countries.

Global Give and Take

Although the overall U.S. trade deficit narrowed by a third between 1987 and 1990, the deficit with Japan has remained stubbornly high, largely because of imports of automobiles and advanced electronics. In other areas the picture has improved substantially. U.S. trade is near a balance, for example, with the 12-nation European Community and with Mexico.

‘90

W. Europe: +4.5 Mexico: -1.8 Japan: -41.1 Source: Commerce Department