Presidential panel tells how US can help industry meet world competition
Washington — The evidence is all around: Autos from Japan. TV sets from South Korea. Radios from Taiwan. Electric hair curlers from Hong Kong. They all tell us international trade is booming. These things also signal something else: US industry is losing its competitive edge. Fewer and fewer goods are made in America.
Even in high technology -- America's forte -- the United States is losing world market share in seven out of 10 major sectors. America's foreign trade deficit with Japan, for example, is larger in high-tech electronic goods ($15 billion) than in autos.
All this has the Reagan White House looking for answers. Now a presidential commission, headed by John A. Young, president of Hewlett-Packard Company of Palo Alto, Calif., has issued a report on what can be done.
Mr. Young, meeting with reporters here yesterday, explained that there is no single, simple action that can be taken to put America back on top in world trade. It won't be that easy. Even so, he said, a start must be made. The warning signals of America's decline are beginning to multiply. He ticked off just a few of them:
Productivity per worker. Since 1960, US productivity has risen an annual average of only 1.2 percent. That's only one-fifth the rate of Japan (5.9 percent), less than one-fourth the rate in South Korea (5.3 percent), and even well behind the 2.3 percent growth in a poorly-performing economy like Great Britain's.
Efficiency. Because of failure to improve productivity, the US today has fallen behind Japan in efficiency in such key industries as steel, transportation equipment, precision machinery, and electrical goods.
Standard of living. Low levels of investment and lagging productivity per worker have slowed the improvement in American standards of living since 1960. Standards here have risen more slowly in recent years than in Canada, Japan, West Germany, France, and Italy. US living standards were lower in 1983 than in 1979.
``The world trading environment within which we're operating has changed dramatically,'' says Mr. Young. ``Fully 70 percent of the goods manufactured in this country face competition from products made abroad.
``We are facing new competitors in Japan and the other nations of the Pacific Rim. We now do more trade with those nations than with all of Europe combined. We must not congratulate ourselves because our economy is outperforming Europe. Japan and her neighbors have created a new standard by which we should judge our competitiveness.''
If there is one key to improving America's ability to compete, it is probably technology, the commission concluded. It is, said Young, ``our greatest advantage.''
Yet this is an area that the commission felt needed substantial improvement.
Each year, the US spends about $100 billion for research and development. Half of this, however, is spent by the federal government, and two-thirds of that amount goes into defense and space.
In total, the US spends a greater percentage of its gross national product for research than Germany or Japan. But when defense is factored out, the US lags far behind both those countries in research on products that would help the American economy compete.
This led to the commission's first proposals. The commission suggested removing antitrust barriers that now prevent joint research projects among private firms. This would improve efficiency by eliminating some overlap.
Further, the commission would boost tax incentives for R&D; and it would create a federal department of science and technology to improve the spending of the government's $50 billion a year in research.
Another point: Much of the US research effort goes into developing new products. Not enough goes into improving technology to produce those products. This is a key area where the US has fallen behind nations like Japan and Korea.
Other highlights of the report:
Reduce capital costs. At present, US companies must pay twice as much for capital as Japanese companies. Costs can be reduced by lowering federal spending and cutting the deficit.
A better tax system. Present rules penalize some firms, help others. Ironically, some of those hurt most by tax laws are those which are being damaged most by foreign competition.
Improved workers. A number of steps are possible, including better dialogue between workers and managers, employee stock ownership plans, more worker training.
Trade laws. Markets need to be opened abroad, and laws need to be strengthened to deal with unfair practices by other nations. In some cases, antitrust laws might have to be rewritten to recognize the new realities abroad.