Trade winds

Is the world, unthinkingly and short-sightedly, headed for a trade war? Such is to be avoided at all costs, but the warnings are there, echoing in such statements as that by United States chief trade representative William Brock:

''This is the most crucial year we have faced in international trade policy since the second world war.''

Few could deny the benefits of freer trade to economic growth worldwide. The steady liberalization of trade in the past half century has opened up markets, provided jobs, helped keep prices down, and contributed to a general rise in living standards in both the industrialized and developing countries. But recession and unemployment seem to be causing a tide of panic. Trade frictions are developing, spurring protectionist sentiment and a shift to bilateral deals rather than multilateral agreements.

Disturbed by the huge US trade deficit with Japan, for instance, Congress has under consideration a number of so-called reciprocity bills aimed at withdrawing US trading privileges from countries which do not provide American exporters with reciprocal market access. The lawmakers would like Japan to open wider its door to US manufactured and agricultural goods. Western Europe, too, is up in arms about the flood of Japanese goods into its markets. The Economic Community has warned of protectionist measures to redress its balance of trade with Japan, an issue certain to be aired by French President Francois Mitterrand during his visit to Tokyo this week.

Moments of tension have existed before, of course. But experts now see a greater danger than at any time in the past two decades. The recession, for one thing, is worldwide--with the economies of such industrial heavy-weights as Japan and the United States slipping; with the developing countries unable to refinance their massive debts and therefore unable to keep up imports; and with the East European countries also in financial crisis. In a nutshell, the total economic pie is not growing and, as a result, world trade has stagnated for the third year now.

Complicating the problem are the structural changes taking place in industrial economies. Automation is on its way, promising greater efficiency but also an even bigger displacement of labor. Concerned about already high unemployment, and obsessed by its imbalance of trade with Japan, Europe is sheltering such industries as steel and petrochemicals while it tries to sort things out. The fact that Europe is not positioned as well as the US to compete in the selling of services adds to protectionist pressures against US efforts to extend freer trade rules to services as well as manufactured goods.

Building protectionist walls would mean a retrograde step for the world, however. The United States, for instance, gave up a trade policy based on ''reciprocity'' some 60 years

ago when it adopted legislation liberalizing tariff practice. To act now out of resentment over Japan's success in the American market would be foolhardy. Particularly since the difficulties with Japan stem in part from the fact that the US is pursuing different macro-economic policies, e.g., maintaining high interest rates and a loose fiscal policy. Instead of raising trade barriers, the US government would do better to eliminate the huge budget deficits, helping to bring down interest rates and thereby reduce the value of the dollar against other major currencies. Japan, for its part, ought not to hold down the value of its currency in any way.

If Congress begins to pass reciprocity bills, it could spark similar action by the Europeans in the case of, say, US farm products. Instead, lawmakers need to be guided by an understanding of the growing importance of trade to the US economy and the long-term damage which protectionism would invite. Whereas in 1970 US trade accounted for only 4 to 5 percent of the nation's GNP, today it accounts for 9 percent. In farming and manufacturing (setting services aside), the growing share of trade is even more significant.

We are, in short--all of us--living in a world in which every economy increasingly depends on all the others. The decade ahead is expected to be a difficult one because the global economy is undergoing a restructuring. As this process takes place, the issue is not who is right or wrong in any given situation. It is whether the United States and other nations will avoid making a grab for the economic pie and taking protectionist action which sparks reaction and leads to further tension.

Leaders and lawmakers would do well to heed the voices of those who counsel that this is a time for forbearance and restraint--not impatience and greed.

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