Agenda for world trade
PERHAPS it's the holiday season now getting under way in the United States - with shopping malls amply stocked with goods from around the world - that brings the trade issue so prominently to thought. Perhaps it's the recent congressional elections, in which Democrats won control of the Senate. Or the continuing hardships imposed on workers as they see manufacturing jobs slip to factories overseas. The crucial point is that the trade deficit, now climbing well above last year's deficit of some $150 billion, is clearly emerging as the political flash point for the 100th Congress.
The new Congress will gather against the backdrop of movement toward a new round of trade talks designed to expand world commerce while curbing protectionist sentiments now fashionable in many circles, including within Congress.
Unfortunately, with the exception of Treasury Secretary James Baker III and Japanese Prime Minister Yasuhiro Nakasone, no commanding international figures are now calling for a primary focus on world commerce. Yet, a global agenda is in order.
The world community needs to revise existing rules to curb protectionism. Trading rules should be enlarged to include forms of trade other than just manufacturing. Also, the major industrial nations of Europe, particularly West Germany, need to rev up their economies somewhat to stimulate growth. Japan, to its credit, has outlined a modestly expansionary economic program.
The United States, meanwhile, needs to take much firmer action than has been the case. For its part, the Reagan administration has not been remiss. Indeed, the trade deficit narrowed somewhat in October, continuing declines made in the two months before that. But further steps are needed:
The trade deficit is not going to be reduced overnight, or even next year. What is called for, therefore, is a 10-year, or even 20-year, program to restore US manufacturing excellence. A presidentially appointed blue-ribbon panel (which includes people from labor, academia, business, and finance) should take a hard look at US competitiveness and how it can be improved.
The US must get its budget deficit under control. Nor should tax policy be ignored. The new tax reform bill is not geared to capital formation. Yet the low savings rate in the US inhibits many companies from underwriting the costly technological steps necessary to make themselves more competitive.
The US must press the robust newly industrialized nations of Asia to adjust their exchange rates and buy more American goods.
A healthy, expanding global trade policy is in everyone's best interest. There should be no higher economic priority.