Avoiding Economic Policy Wobbles

BEYOND GLOBALISM: REMAKING AMERICAN FOREIGN ECONOMIC POLICY by Raymond Vernon and Debora L. Spar, New York: Free Press, 245 pp., $22.95. WHEN the word ``diplomacy'' is tossed out, one tends to think of matters of war and peace or oddities like the Salman Rushdie affair. Yet today, much, if not most, of a diplomat's time is devoted to economic issues.

As national economies mesh with one another, the need to reconcile business and financial interests internationally becomes more pressing. If the issue is not a developing country's external debt, it is United States exports of hormone-treated beef to the European Community, or South Korean import restrictions, or Taiwanese copyright violations.

Deals between nations often cover numerous functional fields, such as bank safety, taxation of foreign income, exchange rates, and communications satellites. Or they may be bilateral, such as the free-trade agreement between the United States and Canada that came into effect at the start of this year.

The period for creation of such important multilateral entities as the International Monetary Fund (IMF), the World Bank, or the Organization for Economic Cooperation and Development (the ``rich men's club'' of industrial democracies) may be past.

Thus it is useful that a veteran international economist like Raymond Vernon of Harvard University and a doctoral student, Debora L. Spar, wrote this review of American foreign economic policy. Their book is sweeping in its analysis of the post-World War II era, full of common sense, modest in its recommendations, and clearly written.

Vernon and Spar see foreign economic policymaking today as ``a new game.'' They write: ``As long as the United States was dominant in the international economy, it could easily afford the costs of inconsistent, even incoherent, policies. In the decades to come, however, this country will be much more constrained by external economic forces and will have to reconcile itself to an international system of which it is no longer the undisputed leader.''

In the past several decades, US foreign economic policy was often the result of initiatives by an innovative leader. There was, for example, the Marshall Plan, which helped rebuild war-torn Europe (named after Secretary of State George Marshall), and President Truman's Point Four program to help developing countries.

Congress, influenced by lobbyists, often altered the original concepts of such administration figures. When principles were bent to accommodate American self-interest, it roused the resentment of other nations. Vernon and Spar see the US government's ability to lead other countries in new initiatives as visibly declining. The Atlantic alliance, they add, has lost much of its cohesiveness.

So, they conclude, the ``wobbles'' that have characterized US policymaking in the past will become less tenable. One wobble: The US promoted world trade liberalization through the General Agreement on Tariffs and Trade, and subsequently introduced major trade restrictions. Another wobble: It led in the creation of the IMF, and then ignored the fund during the process of first devaluing the dollar in 1971 and later floating exchange rates.

To deal with this situation, the authors suggest that the US can no longer afford to allow its international economic relations to be fashioned and run by ``amateurs,'' that is by transient political appointees. In many other industrial nations, veteran and expert civil servants play a significant role. They speak of the desirability of earlier and more continuous contact between the Congress and the executive as a prelude to international negotiations, even in areas where Congress has been relatively passive. This might avoid policy ``wobbles.''

The next major phase in the development of international economic policy is ``more likely to be conceived and developed by a number of nations, reflecting a m'elange of national experiences and ideologies,'' Vernon and Spar speculate.

But this may not be easy for the US. They write: ``The doubts and misgivings that some Americans have been expressing in the 1980s regarding US foreign economic policies have not yet fostered much tolerance for the disparate views of other governments on international economic relations. A capacity for listening and learning has still to be developed.''

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.