Protectionism and jobs
PRESIDENT Reagan's strong words regarding the importance of world commerce -- and the pitfalls to global economic growth resulting from protectionism -- should be noted. A period of ``free and fair trade'' in the global marketplace, the President said in his televised news conference the other night, ``is the path of cooperation and success that will make our people more productive and that can lead to a decade of growth.'' By contrast, as he observed, a ``mindless stampede toward protectionism'' could be a ``one-way trip'' toward slower global growth, resulting in lost sales abroad and lost jobs at home.Skip to next paragraph
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Mr. Reagan's overall priorities are correct on the trade issue, as he calls upon Congress to exercise ``cool heads and clear vision'' regarding more than 200 bills now before lawmakers that would in one way or another penalize nations having large trade surpluses with the US.
Momentum for a tough trade bill has been growing, as more and more US factory jobs are lost from rising competition abroad. The trade deficit for 1985 is now expected to be in the range of $150 billion. A significant part of that imbalance, however, stems from the high value of the dollar, which makes US goods more expensive and thus less competitive vis-`a-vis overseas products.
While agreeing with Mr. Reagan on the importance of free trade -- and the need for a new round of global trade talks -- we would have to take issue with the White House on several important elements of the overall trade-debt issue:
The White House must share responsibility with Congress in not yet having enacted a comprehensive package aimed at sharply reducing the federal budget deficit. The deficit puts upward pressure on interest rates -- which in turn pushes up the value of the dollar. Washington -- Congress and the White House -- needs to take more forceful action than it has so far to reduce the deficit.
The White House would seem unwise in being overly casual -- as Mr. Reagan seemed to be in his press conference -- about the United States' return to debtor status for the first time in over 70 years. It is true that the US was a debtor nation throughout most of its history. Overseas investment, for example, helped finance US transcontinental railroads.
What Mr. Reagan did not note, however, is the rising level of interest payments on the national debt, now running at some $150 billion annually. And it is going to overseas owners of the US debt. The rising interest payments limit the ability of Washington to use available taxpayer funds for necessary federal programs.
In short, Washington must avoid protectionist measures that invite retaliation against American goods.
At the same time, the White House and Congress must take firmer action to reduce the deficit -- one main factor explaining those lost export sales.