Deficit taming

By

THERE was irony in the coverage offered up by our Labor Day newspapers. On the one hand there was Jackie Presser, president of the Teamsters' Union, declaiming in full-page advertisements that ``industrial America is dying.'' We are witnessing the export of America's industrial might, said the ad. ``Silicon Valley is on its way to Taiwan and Hong Kong. Delaware's chemical base is bound for Asia.'' Other industries, argued the ad, are departing for South Korea.

As if to bolster the thesis, there was the news story from Shreveport, La., of the layoff of l,877 telephone company workers. The company is opening a new factory in Singapore instead.

All this is the result of cheaper manufacturing costs outside America, coupled with a strong dollar, which has sent a flood of goods into the United States, made American goods harder to sell overseas, and created a mammoth trade deficit.

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This is troubling, and one can have nothing but compassion for the workers who have been thrown into the ranks of the unemployed as a result.

But wait just a minute. The papers are also full of stories about the record number of Americans who have traveled abroad this summer, buying out stores from London to Hong Kong. And at home there are waiting lists for some Japanese cars, so much so that some Honda dealers, for instance, are charging several hundred dollars more than the sticker prices.

All this, too, is the result of cheaper manufacturing costs outside the US and the strong dollar, and it contributes to the big trade deficit.

In other words, while some Americans have lost their jobs as their employers gird to tackle the trade imbalance, other Americans have benefited greatly from cheaper prices and are fueling the deficit.

A further irony: All the talk about job losses as a result of foreign competition is not as clear-cut as might first appear. Certainly there are specific instances of factories closing down or cutting back. But as economist Herbert Stein pointed out recently, when the US had a trade surplus of $9 billion in l980, total employment was l00.9 million. Today, with a trade deficit of $100 billion, employment is 108.1 million. Far from losing jobs overall, there has been an increase of 7 million jobs during t hat period.

Congressmen returning to Washington after the summer recess have been hearing a lot of complaint from those of their constituents who have lost jobs to foreign competition. They have not been hearing much complaint from those constituents who have been buying up foreign imports at good prices.

So as Congress wrestles with the trade deficit, politics is stimulating a slew of protectionist legislation.

That is absolutely the wrong way to go.

President Reagan last week declined to give protection to the domestic shoe industry, earlier he declined to ban foreign steel, and he has vowed to veto any new protectionist legislation. The President is right, however painful for him the immediate political fallout.

He is taking the longer view, arguing that protectionism would stimulate foreign retaliation and lead to a ruinous trade war. That way, the consumers lose and end up paying higher prices.

None of this means we should not press countries like Japan to open their markets to American goods. We should. But we should also get our own house in order. Our budget deficit must be reduced. To help pay for it, foreign capital flows in, boosting the dollar. That makes US exports costly and difficult to sell. It makes foreign goods more attractive to American buyers.

There is also evidence that American industry is not as up-to-date as we think. It needs to modernize and hone its competitive edge.

If we are to enjoy the fruits of an international economy, the road to success lies in even more international cooperation, not via an illusory, quick protectionist fix.

John Hughes is a Pulitzer Prize-winning journalist who was assistant secretary of state from 1982 to 1984.

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