Trend of the economy; Reagan's dilemma: balancing third-world aid with jobs at home

A good case can be made that Americans serve their own best interests when they help poor nations of the world modernize their economies as quickly as they can.

It is equally tru that the faster this happens, the more Americans are likely to lose their jobs.

Trying to resolve this dilemma lies at the heart of US policy -- whether under President Reagan, Carter, Ford, or a future president -- toward the great mass of humanity living in what has come to be called the third world.

No part of the world buys more American goods, or has a more rapidly growing appetite for them, than less-developed countries (LDCs). Twenty-five percent of all US manufactured exports go to non-oil-producing LDCs. Add the 13 members of the OPEC oil cartel and the share rises to 38 percent.

The United States, in turn, depends upon LDCs to supply a variety of strategic minerals and commodities vital to the functioning of US industry.

Putting this all together, it seems clear that the US and LDCs have a good deal to gain from mutual cooperation. But there is a catch.

To create jobs for their growing urban populations, developing lands steadily broaden the range of products that they make and sell to rich nations of the North (the US, Canada, Western Europe, and Japan).

These goods, produced with cheap labor, compete directly with old-line traditional industries of the US and other industrial powers. Shoes and textiles are familiar examples, but there are many others.

"In the future," concludes a study for the Joint Economic Committee of Congress, "the United States will confront increasingly intense foreign competition [from LDCs] across the full range of manufactured products."

Robert S. McNamara put it bluntly before he retired as president of the World Bank: Between 1965 and 1975, he said, LDC-manufactured exports grew from $10 billion yearly to $33 billion -- at an estimated cost of 1 million jobs in the industrialized world.

Mr. McNamara's call for a tripling of exports by LDCs by 1985 could, by this calculation, displace 3 million industrial workers in the rich countries of the West.

This challenge will be sharpest from advanced developing countries, nations like Brazil, Mexico, Taiwan, South Korea, India, and Singapore.

"Because [these nations] entered the [export] market later," says Assitant Secretary of State Robert D. Hormats, "their equipment tends to be more modern and, because much of it was bought after the rise in energy prices, more energy-efficient."

Behind these advanced LDCs stand serried ranks of poorer nations, still backward, but striving toward that day of export competitiveness.

What can, or should, the US do in this situation?

Protectionism -- that is, blocking LDC exports from entering the US -- is rejected by President Reagan, as it was by Jimmy Carter before him.

Specialization is a preferred route and, in fact, is essential, if the US is to keep up with industrial powers like Japan and West Germany. Specialization calls for moving gradually out of the middle range of manufactures and into realms of higher technology, where LDCs cannot yet compete.

For the US this means emphasis on such things as aircraft, computers, advanced electronics, communications equipment, and the like. It means also continued growth of American farm exports.

Beyond this, the US government must work powerfully within the world trading community to reduce montariff barriers to trade, both in agriculture and manufactures.

"It is crucial," says Mr. Hormats, "that countries agree upon the rules to be followed when domestic industries are injured by foreign competition."

This calls for bringing LDCs increasingly into the trade negotiation arena, dominated up to now by debates among rich nations on rules primarily for themselves.

Meanwhile, the Reagan administration hopes to avoid the kind of global discussion of North-South issues that might drown specific trade issues in hostile rhetoric between rich and poor.

It took some years of the so-called North-south dialogue to dilute that hostility to the point that specific problems of trade, foreign aid, and transfer of technology and capital could be profitably addressed.

All this unfolds against the background of three facts:

* a billion people in the third world go to bed hungry at night.

* Their leaders -- whose political survival is at stake -- will do everything they can to create jobs at home, with scant regard for the effects in richer lands.

* Mounting unemployment in industrial countries, especially among young people, limits the patience of Western l eaders to swallow growing competition from LDCs.

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