NEW ENGLAND: BUST TO BOOM

As a young reporter, my job, for the better part of a decade, was to preside over the final demise of the New England textile industry. In four years, jobs in the Rhode Island woolen and worsted industry fell from 80,000 to 8,000. That's a greater decline, a more rapid decline, than anything that's happened in recent years to steel, autos or transportation.

What happened? The industry went South - literally. The buildings were old. The machinery was old. The management was old and unyielding, the unions even more so.It was far easier for mill owners to sell out to people ready to set up a brand new shop in the Carolinas than to fight year after year for work rules that would permit more than three or four looms to a weaver when the automated technology would permit 12 to 15.

If there was a single person identified with the move South, it was Roy Little - nephew of Arthur D. Little with whom he had grown up - the founder of the first modern conglomerate, Textron.

To the old-time Yankees who sold out to him, keeping their banks, their newspapers and their radio stations, Roy Little was the incarnation of evil. To the shareholders and to Wall Street generally, he was a latter-day saint or at least a prophet.

I remember as if it were yesterday covering Roy Little's takeover of the giant American Woolen Co. In grabbing the old and doddering company, Roy Little was able to latch onto $100 million in cash - a huge sum for its time. That became the hoard that helped him launch Textron.

For all the seriousness of the situation to New England, the rest of the country virtually ignored what was going on in this small corner of the world. Detroit, just getting into the era of tail fins, could do no wrong. California hadn't even invented Silicon Valley. And while New England licked its wounds, the South licked its chops.

For the last 10 or 15 years, the shoe has been on the other foot. Measured by rising real estate values as well as job opportunities, New England has come to be recognized as the American land of opportunity, bar none.

But it has done so largely on its own. I don't mean to suggest that Federal Government help played no part whatsoever in the New England turnabout, but there was no Chrysler bailout for the American Woolen Company. There were no quotas to restrict the flow of textile products from the new

mills in the South. There were no currency barriers affecting the pricing of these products. There were no investment curbs affecting the movement of capital. And there were no restrictions on migration.

All this was so because this huge and devastating relocation of 40 years ago occurred within the largest and most successful customs union, currency union, capital union, people union the world has ever known, the United States of America.

The fact that New England has made its way back, triumphantly, is testimony not only to the inventiveness and managerial skill of its people but a shining tribute to the effectiveness of free, open and unimpeded markets.

I have no problem with wanting our trade negotiators to take a tougher bargaining position. Too often, it seems to me, foreign policy considerations of every other kind get top billing in Washington. And trade matters are left to wither on the vine.

Witness the economic summit in Tokyo earlier this year. Everything else under the sun was discussed there. But our special trade representative, a man who has brought a new dimension to U.S. bargaining, wasn't even brought along.

Again, it's hard to believe that a nation as inventive and progressive as the United States has no need at all for basic industries like steel, chemicals, cement, etc., if only to meet defense requirements.

As I said, I have no problem with advocating a tougher U.S. bargaining stance in its trade negotiations. But the aim, we should make quite clear, is to open world markets, not to restrict them further.

President Reagan, I think, understands this well. He is one of the few people now on hand in Washington who personally bore witness to the horrendous effects of the Smoot-Hawley Tariff, that infamous early 1930s bit of legislation that upped tariffs on both farm and industrial products, provoking widespread retaliation, and sending trade into a downward spiral that almost guaranteed the Great Depression.

That's the problem with a tougher bargaining stance. It's not unlike our possession of nuclear weapons. We know that if we ever should pull the trigger we would certainly teach the other guy a lesson. But we're not at all sure that when he strikes back he won't hurt us as much or more than we hurt him.

Also, we sometimes fool ourselves mightily. Take the matter of the voluntary export limitations we induced the Japanese to put on their automobile industry. We did that, of course, to "save" the foundering U.S. automobile industry. And it worked. Or did it?

The Japanese who had dominated the low-price end of the U.S. automobile market shifted gears. They began sending in higher priced vehicles - at much higher markups.

While the U.S. companies did indeed survive, the Japanese grew fat and rich, accumulating their greater earnings on each unit to solidify their takeover of the U.S. position worldwide.

Does anyone want to contend that the Japanese aren't more formidable competitors today than they were before voluntary restraints?

What's needed is some deft poker playing. We have to be able to win a hand or two, then lose one, without upsetting the game as we steadily improve our position.

What's not needed are rules so rigid that bargaining becomes impossible. Unfortunately, that's true of many of the proposals now before Congress, the trade bill already passed by the House and now before the Senate, in particular.

That bill says its purpose is to strengthen the hands of U.S. negotiators. Then it gives them less time to dicker. And it mandates the action they must take, regardless of the likely reaction in the other country. The result is to box our trading partners into a corner. They can give in to the United States, risking the possibility of having their governments thrown out of office, or they can stonewall it. The process is not bargaining, it is responding to an ultimatum.

In this connection, steps taken to save endangered industries - assuming we can find a genuine reason for saving them - should be limited in time and made conditional on improvements in efficiency and productivity.

You're a widget manufacturer, for instance, and you have succeeded in convincing Congress that widgets are essential to the national defense (or some equally impelling justification.) In turn, Congress has imposed quotas on imports of widgets from abroad.

First, you should be given five or seven years, a finite period, to put your house in order.

Preferably, the quotas should decline as the years advance. Quotas should be conditioned on your modernizing your plant and equipment, getting your unit labor costs down, and otherwise bringing your industry in line with the lowest costs worldwide. Any evidence that you won't or can't achieve this objective should cause the quotas to be lifted at once.

Actually, most economists agree, it would be far better for the government to provide direct grants or subsidies. Then the costs would not be hidden. And they could be weighed against the benefits.

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