Pressures Building for 'Results Oriented' Trade Policy

Article excerpt

Pressures are building in Congress and among business groups for the Bush administration to impose on its trading partners quantitative targets for American exports.

Those pressures are stemming from discouragement over the persistence of the United States trade deficit. After declining to $126.5 billion in 1988 from $160.3 billion the previous year, the merchandise trade deficit appears to be growing again.

So the demand is for a ``results oriented'' policy, known as managed trade, rather than free trade. Numerical targets would be set, sector by sector, for the volume of American goods that foreign nations would be expected to buy.

If they failed to reach that volume, the United States would retaliate, or threaten to retaliate, against them. The 1988 trade act gives the president the power to do so.

The president's special trade representative, Carla A. Hills, is the point woman in the administration's drive to negotiate away obstacles to American goods. If import targets were accepted as policy, it would be her job to recommend retaliatory actions by the president when she found discrimination against American goods.

What does she think of a ``results oriented, managed trade'' policy? In an interview, Hills made clear her opposition to the approach. Like many American economists, she regards it as a danger to an open trading system. Asked whether she approves of specific import targets to be reached by individual countries in a specified period, she said firmly, ``No, I do not.''

Many people, she said, feel ``frustrated with the stubbornness'' of the trade deficit. ``Irritation is growing, especially toward Japan,'' she added.

To a degree, she appears to share that frustration. She noted that former Secretary of State Henry A. Kissinger had come out for managed trade, together with business leaders like James D. Robinson, chairman of American Express, and James R. Houghton, chairman of Corning Glass.

Robinson and Houghton are co-chairmen of the Advisory Committee for Trade Policy and Negotiation, which has issued a report supporting import targets.

While rejecting quantitative targets, Hills said she found ``much good'' in the report. She welcomed its emphasis on the importance of macroeconomic policy, and particularly of reducing the budget deficit, if the United States is to get rid of its trade deficit. ``Macroeconomic policy,'' she said, ``drives the trade deficit.''

In a nutshell, given the low rate of national saving, the budget deficit raises American interest rates, necessitates heavy borrowing from abroad, and exacerbates the trade deficit. …