BALANCING THE IMPORT-EXPORT SCALE

The Reagan administration has made a wise move in announcing it will reverse its earlier strategy and propose an omnibus trade bill early next year.

Heretofore, the administration had been content to rely on the de- valuation of the dollar and jawboning our trading partners to halt the growing trade deficit, which is expected to hit $165 billion to $170 billion this year. Whether the decision is political or a genuine recognition that current policies are insufficient is of little matter. What counts is that finally the White House seems to be saying something has got to be done.Trade, like the conduct of war, ought to be a bipartisan issue. Congressional leadership of both political parties seems keenly interested in developing solutions to the deficit. So the question in Washington is probably not whether we should have a trade bill but what form it will take.

President Reagan, as he enters his final two years in office, now has an opportunity to add an important legacy to his White House tenure.

In recent weeks, I've written about a number of steps that would help both the trade and federal budget deficits. The most important of these suggestions is based on the principle that free trade is only workable to the extent it is fair. When countries sell us goods, they should buy a fixed percentage in return, say, for the sake of argument 80 percent. Obviously, that can't happen overnight but could be phased in over time.

When a nation such as Japan sells the United States $83 billion worth of goods and buys only $26 billion in return, that is not only unfair but it could be as bad in the long run for Japan as it is for the United States. On the present course, this country will be half a trillion dollars in debt to the rest of the world by early 1989.

Somehow I don't think Japan really understands that this could also be their problem, that like many Latin American countries, this country could become so burdened with debt that we would have to dramatically reduce imports. Where would that leave Japan?

For five years now we've heard about how the Japanese government was working to open its markets. Thousands of stories have been written about new beginnings, etc. Yet, despite the promises, Japan will buy considerably less

from the United States in comparable dollars this year than it did in 1980!

Actual Japanese purchases from the United States totaled $20.7 billion in 1980 and are currently projected at $26 billion for 1986 (a figure inflated by the purchase of $3 billion in gold purchased elsewhere but transshipped through the United States.

One would think that Japan would be bending over backward to placate its best customer, the United States. To be sure, the revaluation of the yen and other steps may begin to reduce Japan's huge trade surplus with this country. But so far, the principal results are to make Japan Inc.'s manufacturing sector even more efficient (as a result of cost cutting to preserve market share), and its portfolio of U.S. holdings, purchased with cheap dollars, ever larger.

I don't want to be construed as a Japan basher. One of Japan's problems has been that it has been too successful. I have tremendous respect for what it has accomplished. Management and motivation of workers in Japan are probably the best in the world. We need to learn from them.

But then I read about the incredible hurdles Motorola faces in trying to sell cellular radios in Japan or how U.S. construction firms are being excluded from bidding on the $8 billion Kansai Airport project in Osaka. As a matter of fact, the Heritage Foundation reports U.S. companies have not been awarded a major Japanese construction project since 1965.

The conclusion one is almost forced to reach is that Japan is incapable of voluntarily doing anything significant that will have a negative internal impact. The only way anything is going to happen in Japan is if it is forced. By linking the ratio of imports to exports, we could indeed force the Japanese to buy a lot more U.S. products. And the nice thing about it, we could finally

put the ball in their court and make them responsible for gradually bringing about a more balanced trade between the world's two greatest economies.

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