There is only one sensible way out of the Latin American and African debt crisis. The debtors' economies have to grow out of it. But there's the rub. To grow, they need capital to invest to increase productivity to expand exports to earn dollars to pay debt and provide capital to grow, etc, etc. And it was borrowing capital for all those purposes that created the debt crisis in the first place.
The debtor nations need to sell more shoes, steel, clothes, sugar, tools, and furniture to America, Europe, and elsewhere in order to earn the dollars to pay back American and European banks - and to modernize their shoe and tool plants.
Given this reality, the June 12 vote of the International Trade Commission (ITC) in Washington to recommend some form of trade protection for five types of American steel products is exactly the wrong trend to set.
The ITC is handing President Reagan a political Bessemer furnace. He will have to accept, reject, or modify its recommendations by Sept. 26. His choice, just six weeks before the election: stick to free-trade principles, or bow to industry and steelworker pressures from the nine big-steel states - states with 83 percent of the electoral vote needed to win. If he erects trade barriers against steel, other lagging American industries will increase demands for similar help. And America's allies in Europe and Asia will be tempted - and justified - to retaliate.
American consumers would pay more for many basic goods. Consumers in Mexico, Argentina, and several dozen less-affluent lands would suffer doubly.
They have already been asked to tighten belts and work harder under loan plans from the International Monetary Fund (IMF). Fair enough. Austerity and a renewed work ethic are a prelude to growth.
But is it fair to ask those nations' citizens to (1) pay more for imports; (2 ) pay higher taxes; and (3) work harder to export more - and then tell them, ''sorry, no added exports welcome here''?
Questions involving trade and tariffs often sound logical in the abstract, but are heart-wrenching when put in terms of jobs for the workers on all sides.
In this case, the AFL-CIO's Lane Kirkland is arguing that charity begins at home. He is telling American voters they ought to think first of the jobs of steelworkers in Pennsylvania and other states. And beyond them, the textile, shoe, and other workers.
Sympathy is natural. But, taken to its logical end, this argument is a Scrooge argument. Instead of expanding the world economy, it calls for pinching off growth - first in poorer countries, then in all countries. It calls for preserving inefficient management, less-productive-per-dollar workers, and outmoded factories and processes in the United States, to America's eventual disadvantage - and to the risk of more upheaval in the debtor nations.
It's not always wise to reduce complex international problems to homely parallels. But it's useful in this case to imagine yourself as the holder of mortgages on your neighbors' houses. Neighbor A can't sell his chickens for as high a price as when he signed the mortgage. Neighbor B can't afford his higher heating-oil bill. Interest rates on the variable-rate mortgages you hold have been raised to match world lending rates. Your tenants threaten default unless terms are stretched.
As a landlord you have basically two choices: (1) help your tenants by stretching payments while they find better ways to earn money for mortgage and oil bills, or (2) foreclose and sell to someone else.
There the parable breaks down. You can't foreclose and sell Argentina to Japan. You can only make life miserable for Argentina's government and inhabitants if they default - by garnishing property, boycotting trade, cutting off future capital flow.
That course, while it might satisfy Scrooge, does no one any good. That's why the only palatable exit is helping the debtors grow out of the debt abyss.
Several steps would help accomplish this end:
* Protectionists - both in steel and other industries waiting in line - ought to be held off by the White House. Modernized US specialty-steel mills are doing all right anyway. More outdated mills should be helped to adopt such technological advances as the rapid-solidification casting process, which permits remarkably faster production and a chance to get ahead of overseas competitors. Other lagging industries should be aided in undertaking joint research and development to move ahead of their cheap-labor competitors overseas.
* The US should use its influence in the IMF to see that debtors helped by the fund are required to improve investment incentives as well as adopt austerity plans.
Since debtor countries are by definition investment risks, IMF officials should be pressing finance-ministry and central-bank officials to reduce penalties and design legislation favorable to outside venture capital. Given a friendly investment climate, some of the debtors might even woo back some of their native capital that has fled to Switzerland, Singapore, or New York.
* American and Japanese aid, trade, and investment have helped make growth tigers out of Korea, Taiwan, Hong Kong, Malaysia, Singapore, and even North Borneo. A similar approach could help create growth jaguars, or at least ocelots , out of some of Washington's Latin American neighbors. To begin, political and business leaders on both sides of the Rio Grande would need to find agreement on trade and investment ideas and sell them to publics skeptical about gringo imperialism.
Some economist is sure to answer that the Koreans, Chinese, Malays, and Thais have a puritan work ethic, while Latin populations are bogged down in a manana society complicated by corruption and class warfare.
That argument should not be hooted out of court as racist. It deserves rational consideration. But those who make it should remember similar doubts expressed about the Asian work ethic as recently as two decades ago. The answer to manana-ism and class strife is support for those business and political leaders who see the same potential the Asians leaders saw.
Not to try these trade and investment solutions is to invite a far more costly result - in terms of economic setbacks, migrants streaming into the US, and possibly open-ended military expenses.
The month of June has seen three major economic meetings: the Western summit in London, the International Trade Commission voting session in Washington, and the Latin debtors parley in Cartagena, Columbia. The six leaders in London gave a better answer than the five commissioners in Washington to the anguish of the 11 Latin American finance ministers. That answer was to plan future hard bargaining for fair and open trade, instead of allowing the moat-builders to gain ground.
IMF lenders can extend that approach if they use their leverage to win not only austerity but also a favorable investment climate in nations that are up against the wall. That's the sequence that created the economic miracles of the German, Japanese, and Asian tigers.