Trade Troubles
PRESIDENT Clinton is developing a trade policy with an attitude.
Frustrated by, among other things, the stalled talks in the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) and Japan's persistently high trade barriers and surpluses, the White House has adopted what some have called "managed trade" in its approach to key players in the global marketplace.
This is a troubling sign. As the International Monetary Fund warns in its semiannual report on the state of the world economy, released April 28, the "significant benefits of free trade" are threatened by protectionist measures and a "dangerous proliferation" of bilateral agreements based on the notion of "managed trade."
Yet two major United States trading partners, Japan and the European Community, seem to be leaving the Clinton team with few other options, at least in the short term.
In Luxembourg, farm ministers from the 12 EC countries met and failed to clear the muddle over agriculture subsidies, the main snag to completing the 114-nation GATT talks. Last November, the US and the EC's executive commission drew up a deal to cut European subsidies beyond the EC's own subsidy reform, adopted in December.
France, Belgium, and Ireland are balking, asking that the November deal be subject to further study. If it goes through as written, France pledges to veto any GATT agreement when it comes before the EC for vote.
As for Japan, US Commerce Secretary Ronald Brown has noted the failure of trade agreements focusing on Japan's market processes and said the administration would focus on results: specific market shares, joint ventures, the proportion of American-made components used in Japanese products, or a general increase in US imports. All of these smack of quotas.
The US focus on these two partners masks a more positive trade record for the world as a whole. The IMF notes that due in part to relatively high economic growth rates outside the industrial countries, the total volume of world trade has been growing. This suggests that the US may need to more aggressively market its wares to developing nations.
The outlook for the EC and Japan remains one of slow growth at a time when the US economy continues its recovery, a pattern that is likely to boost the US trade deficit.
For domestic political and economic reasons Clinton may have little choice over the short term but to try managed trade. More helpful may be the decline in the dollar's value against the yen. Over time, this should deter US imports of Japanese goods while increasing US exports to Japan.
