Blueprint for New US Trade Policy Clinton's Sector-by-Sector Approach Sends Wrong Signals
John J. Murphy. John J. Murphy is chairman and Ceo of Dresser Industries Inc., The Christian Science Monitor
AMERICA in 1993 is standing on the threshold of a new era that requires a shift in thinking on trade policy. As the greatest exporter in the world, America must have a trade policy that reflects the fundamental importance of expanding trade opportunities for all US businesses to US economic prosperity and job creation. Indeed, trade must be viewed as a vital part of an overall competitiveness strategy to improve American productivity at home, which also will assure American export viability in global markets.
Since the mid-1980s, export expansion has become a driving force for the United States economy. From 1987 to 1992, export growth accounted for about 44 percent of US economic growth, and for even more during the recession.
Moreover, exports support 1 in 6 US manufacturing jobs and have contributed almost all of the growth in manufacturing jobs for the past eight to 10 years. Export-related industries pay 17 percent more than the average, and they employ more skilled workers and conduct more research and development than import-sensitive industries. Policies that succeed in promoting trade and increasing exports will raise the welfare of the entire nation by moving workers from lower- to higher-wage industries.
President Clinton's goal is to make America more competitive. As he formulates his trade policy, he must keep the following in mind: The best strategy is one that expands opportunities for all US businesses. A narrow, sectoral focus is not the answer, and a trade policy emphasizing import protection misses the point. One of the risks of a sectoral approach is that politics, rather than markets, govern policy. And the global trading system, on which our continued export expansion depends, is threatened by the risk of retaliation and rising recriminations.
While the challenges facing the US in the 1990s may be similar to those of the 1980s, the remedies are different. In the past decade, American policy emphasized trade contraction as a means of easing the pressures felt by US companies beleaguered by imports and the overvalued dollar. Today, many of America's industries have sharpened their competitive prowess, and the exchange rate against most currencies no longer places US exports at a major price disadvantage.
A recent report of the Competitiveness Policy Council - a bipartisan federal advisory commission with representation from business, labor, public interest groups, and government - lays out a blueprint for a new trade agenda for the 1990s and beyond. The recommendations urge the administration to concentrate America's finite bureaucratic, political, and diplomatic resources on trade initiatives that yield the highest dividends for the nation's trading position: global growth, competitive exchange rates, market liberalization, export financing and promotion, and the removal of domestic disincentives to exports.
The first two, global growth and maintaining a competitive exchange rate for the dollar, are critical to US trade performance in the short run. American exports can grow only if our foreign markets are expanding and if the dollar is priced at a level that permits US firms to compete successfully.
FIRST, the administration should place high priority on developing a global growth strategy with our Group of Seven partners, especially Japan and Germany. Japan's record surplus continues to rise, and Germany's recession is dragging the rest of Europe down as well. The solution is additional fiscal stimulus in Japan, and fiscal tightening in Germany, which would lower interest rates throughout Europe. …