US MUST REGAIN COMPETITIVENESS

The rapidly deteriorating position of the United States in international trade is the most important and most pressing problem this country has faced since we were suddenly plunged into World War II. Everyone agrees that something must be done about the $170 billion trade deficit which is eroding our standard of living and jeopardizing our economic survival, but no clear-cut program of action has emerged.

A wide range of solutions are being proposed by politicians, businessmen and concerned citizens. Unfortunately, these proposed solutions are not being converted into programs of action which truly address the problem. Meanwhile, even if the annual deficit declines somewhat, total U.S. indebtedness will still increase as these yearly deficits accumulate.Some experts are talking of an international debt of nearly one trillion

dollars by 1990. If they are right, interest costs alone to the United States could approach $50 billion.

We are engaged in an economic war as dangerous as any military conflict in our history. At stake is our position as a world power, and our ability to defend ourselves without relying on foreign suppliers for critical products and technologies.

We cannot afford to get bogged down in partisan bickering and fault- finding over who bears responsibility for the record deficits. We need an immediate program from the administration and the Congress to limit the build- up of foreign debt and to ensure that industries critical to our economic well-being and national defense are able to survive. This program may require limiting imports as well as encouraging exports. The techniques to accomplish this may include, but not be limited to, bilateral negotiations, quotas, tariffs and taxes.

These are only stop-gap measures. What we must do as a country is address the root-cause of our international trading problem - our lack of competitiveness in global markets.

We need a total bipartisan commitment to restoring America's competitive edge in international trading. This is going to be a long-range program with no ready-made solutions or leaving things to chance.

The administration and the Congress must be in step on this one. We need them to encourage and sponsor a "National Competitiveness Program" to evaluate the problems and come up with workable solutions.

There are many contributors to our growing trade deficit. To begin with, we have import barriers erected against us by many of our trading partners - typified by Japan. Also, we have low domestic consumption by many of our trading partners, such as Japan. We have low growth in some other parts of the world, in particular the OPEC countries, South America and Europe. And the United States, surprisingly, has some very serious restrictions on international trade which are justified by national security and political issues. Finally, and most fundamentally, the United States has a lack of competitiveness in world trade.

The word "competitiveness" has become a buzzword and, as a result, is difficult to define. I would like to quote the definition of competitiveness issued in 1985 by the President's Commission on Industrial Competitiveness: ''Competitiveness is the degree to which a nation can, under free and fair market conditions, produce goods and services that meet the tests of international markets, while simultaneously maintaining or expanding the real income of its citizens." In other words, "competitiveness" means we should be determined to balance the trade deficit without lowering the standards of living of the American people.

Let's look at some statistics. Japan's exports to the United States exceed her imports from the United States by more than $65 billion a year. West Germany's surplus is more than $16 billion a year. Those conditions cannot go on indefinitely.

There is much we must do for ourselves. We can go back to the basic of what America was all about. We knew how to invest things, to make things, to sell things. We started out as a nation of tinkerers and emerged as the greatest industrial power in history. But at the core of our strength was the ability to make things better, cheaper and faster than anyone else. We have lost that leadership. Our survival rests on our ability to recapture that old Yankee knack of making things that people want, at a price they can afford.

Many economists tell us that we can sell enough services and technologies abroad to make up the massive deficit in manufactured goods. That's pure poppycock. The answer is we must regain our competitiveness in manufacturing.

But there is much our trading partners can do to help us. The U.S. government has been urging its trading partners, particularly Japan and West Germany, to take positive steps to spur the growth of their own economies, which would increase their ability to buy more American goods. But so far they have been slow to respond.

Our massive deficits reflect a simple economic fact of life: we are importing more than we are exporting. We are running huge deficits in automobiles, apparel, iron and steel, oil and many other basic industries. In fact, only aircraft is generating a substantial surplus for the United States.

Over the short-term, a weaker dollar, stronger consumption of goods and services in foreign economies, and freer entry into foreign markets would help reverse the trend toward bigger deficits.

The recent decline of the dollar against most foreign currencies is a welcome sign, but it has not had any meaningful effect on exports, as yet. The reduction in the exchange rate from around 240 to 150 yen to the dollar has the Japanese concerned. But an exchange rate of around 125 yen to the dollar would be needed to close the trade gap with Japan.

Of all the factors that affect competitiveness, productivity and capital- related costs are the two most critical factors which must be assessed and addressed.

There is no doubt that we must increase productivity in order to compete. Either that or reduce wages, and nobody is advocating that.

We must determine what factors hae the greatest impact on productivity - technology, job skills, work ethics, efficiency of management, government regulations like OSHA, and many others.

We also are concerned with capital-related costs and how they affect prices charged for goods. Elements to be concerned with here are: real interest rates, amount of capital employed and how efficiently it is being used, taxes paid to various levels of government and government regulations.

We need to know which of these elements must be changed to achieve maximum

gains in productivity and maximum reductions in capital costs. The long-range secret to our trade deficit problem may very well lie in answering those questions.

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