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Economic slump, not foreign competition seen as cause of job loss

By Harry B. EllisSenior economics correspondent of The Christian Science Monitor / December 13, 1982



Washington

''All the evidence,'' says Brookings Institution economist Robert Z. Lawrence , ''shows clearly that foreign trade has had a generally positive effect on US employment.''

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More American jobs are created by export of US goods, in other words, than are lost by competition from foreign imports.

''Yet,'' Mr. Lawrence says, ''the perception of job loss is quite different, '' as noted in the almost frantic efforts of the auto and steel industries - both management and labor - to curb the inflow of imports.

Part of the misperception, says the Brookings expert, stems from the ''resonance'' throughout the land of powerful trade unions and industries, many thousands of whose workers have been laid off.

The automobile industry and the United Automobile Workers (UAW), for example, are currently trying to push a ''domestic content'' bill through Congress. It would require foreign carmakers with major sales in the United States to use American parts and labor on a sliding scale, ranging from 10 to 90 percent, depending on the number of cars sold.

Hundreds of thousands of US auto and steel workers indeed have no jobs. Still, according to a forthcoming study by Lawrence, the bulk of job loss in these industries has come from domestic factors, not from foreign competition.

High fuel cost, soaring interest rates, and two US recessions almost back to back would have thrown a great many UAW members out of work even if Japanese cars had not flooded in.

In the troubled US steel industry, the Lawrence study finds that American exports actually added jobs to steelworker ranks - despite heavy inroads made by foreign producers.

Certain declining American industries - autos, steel, textiles, rubber, and footwear, for example - are victims of a profound restructuring process within US manufacturing, with old-line basic industries giving way to high technology.

''Comparative advantage for the US increasingly lies in high technology,'' notably computers and related electronic fields, Lawrence says. ''Loss of competitive advantage for the United States is strongest in areas not requiring intensive R&D (research and development).''

Measured over a broad range of industries, according to the Brookings scholar , the US continues to show up very well against Japan, West Germany, and other industrial powers. Forty out of 52 industries studied by Lawrence benefit from foreign trade.

''In total perspective,'' says Lawrence, ''the US was able to create 23 million new jobs in the period from 1973 to 1980'' - a far better record than most other industrial powers achieved.

Demography now favors the United States, because the wave of post-World War II babies has substantially entered the labor force, along with a great number of married women. In coming years fewer teen-agers and women are expected to be looking for jobs.

In Europe, by contrast - where the postwar baby boom came later - labor markets are swamped by a flood of young people seeking work for the first time.

This is more than European economies can handle, for the same old-line industries that are troubled in America - autos, steel, and textiles - are faltering in Western Europe.

During much of the period on which the Lawrence study focuses - 1973-80 - the dollar was undervalued in relation to other major currencies. This made US goods relatively cheaper for overseas buyers and greatly boosted American export sales.

Now the situation is exactly opposite. The dollar is overvalued in relation to other currencies.

High interest rates in the United States have drawn investments out of marks, francs, pounds, and yen into dollars. Although US interest rates have fallen somewhat, the dollar remains stubbornly strong - partly, experts say, because many investors regard the US as the most stable place in an uncertain world.

The strength of the dollar has depressed US exports, which now have become more expensive for foreigners to buy. A West German importer, for example, has to convert more marks into dollars to pay for American goods than he did a few years ago.

He tends to buy less from the United States. So do merchants in many other countries where currencies have weakened against the dollar. The result is a worsening US trade deficit.

''From 1980 to 1982,'' says Lawrence, ''the volume of US exports has dropped by 14 percent, while the volume of imports into the United States has climed by 9 percent - mostly due to the strengthening of the dollar.''