IMPROVING US COMPETITIVENESS

The Reagan administration is doing a study. It is pulling all stops, says an official, to find ways to improve U.S. international competitiveness.

President Reagan, it is suggested, may unveil the discoveries in his State of the Union message in January.The administration's suddenly concentrated focus on international competitiveness recalls the fellow who just managed to jump on the departing train.

For this particular train - the Trade Bill Express - the next stop is Capitol Hill.

The question of international competitiveness is hardly new. The Reagan administration itself commissioned a study over three years ago on how to improve the ability of U.S. firms to compete in international markets.

The commission, chaired by John Young, president of Hewlett-Packard, submitted its recommen dations to the White House in late 1984. The Reagan administration's reaction? Low key, says one businessman.

The National Association of Manufacturers, in a trade report of its own this summer, lamented: The Young Commission study has yet to receive the attention or action it deserves.

Congressional Democrats, meanwhile, had been trying to persuade the administration to focus more on the competitiveness issue.

The House Ways and Means Committee, in its ill-fated trade bill of this year, incorporated several provisions to help U.S. industry compete - establishment of an industrial competitiveness council, drawn from business, labor, government and academia, and $1 billion for worker training and state educational agencies to improve math, science and foreign language curricula.

Over in the Senate, a Democratic work group, chaired by Sen. Jeff Bingaman, N.M., introduced a five-point bill to improve U.S. competitiveness. The bill, similar to the Ways and Means measure, would promote research and development by U.S. universities, expand U.S. access to foreign technologies and create a national computerized job bank.

Two other senators - Max Baucus, D-Mont., and John Chafee, R-R.I. - and two House members - Reps. Buddy MacKay, D-Fla., and Claudine Schneider, R-R.I. - have formed a congressional caucus on competitiveness.

They plan to coordinate their proposals with another new group, comprising business, labor and educational leaders, being formed by Hewlett-Packard's Mr. Young, in a kind of reprise of his 1984 effort to get the government to address the competitiveness problem.

But is there a U.S. competitiveness problem, really?

All the recent discussion on U.S. competitiveness, or the lack thereof, seems to have stemmed from the massive U.S. merchandise trade deficit, estimated this year at $170 billion.

But Allen J. Lenz, director of the Commerce Department's office of trade and investment anal ysis, suggests that a nation's trade balance, at least for the short term, is a very flawed measure of the country's ability to compete internationally in advancing its living standards.

In the department's recently published United States Trade Performance in 1985 and Outlook, he points out that over time all nations must achieve a rough cumulative balance in their foreign trade. The markets, he says, force changes in exchange rates, economic growth and prices, to bring about long- term equilibrium in the trade account.

The question before the United States, Mr. Lenz says, is how the country will right its trade balance. Will this come about through a decline in wage levels and a resulting fall in America's living standards, or through greater productivity, where economic growth is not sacrificed?

The United States, most data suggest, has a competitiveness problem. The growing U.S. international trade and payments deficits are but one indicator. The Bureau of Labor Statistics offers others - slower U.S. manufacturing productivity gains and faster rising unit labor costs than in most other industrial nations over the past dozen years.

At the same time, the U.S. standard of living is starting to slide. In the 1950s, Sen. Baucus notes, U.S. non-farm workers netted average annual pay increases, after inflation, of 2.5 percent. In the 1960s, the rate declined to 1.7 percent and in the 1970s to 0.2 percent. In the 1980s, their pay has been falling by an average 0.3 percent a year.

In 1986, he says, these workers are no better off than in 1965.

The kinds of proposals to try to deal with this malaise are obviously already being explored.

Besides a greater emphasis on engineering and sciences curricula in U.S. schools and greater funding for research and development, the Young Commission or others have urged reform of U.S. tax, product liability and antitrust laws, a more cohesive U.S. export policy, and, of course, lower federal budget deficits and further initiatives to reduce foreign trade barriers.

This year, the U.S. government did relatively little to advance the competitiveness cause. A tax law was voted that many industries warn will lessen their competitiveness. Repeal of the investment tax credit, tighter depreciation rules and a minimum corporate tax may work to reduce U.S. investment, businessmen warn.

Moreover, Richard Darman, deputy Treasury secretary, has acknowledged, the new law may have a slightly adverse effect on the quality of the U.S. education and research and development programs.

Congress rejected administration attempts to change the product liability and antitrust laws to assist U.S. firms in the international marketplace. The administration resisted congressional efforts to liberalize U.S. export controls. The Export-Import Bank's funding was reduced.

But progress appeared to have been made in cutting the budget, U.S. interest rates fell and so did the dollar. International trade negotiations got off to a tentative start.

The administration's heightened interest in U.S. corporate competitiveness in part may mark another attempt to deflect congressional pressures next year for a protectionist trade bill.

Whatever the motivation, the new inter-agency study can only be welcomed. For the long term, it could generate actions that really will help U.S. competitiveness. For next year, it might help forge a bipartisan consensus on trade legislation.

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