Free trade is only answer to our rivals' challenges


For five decades, America was the foremost champion of free trade. We chose not to sit smugly on our 50 percent post-World War II share of the planet's wealth; instead we worked assiduously to expand global commerce.

But our success carried the seeds of discontent. We got used to being unchallenged. We got happy, then fat, then arrogant. As others sang "We're No. 2, and we try harder," we sang, "We're No. 1, and we don't need to try."

When national icons like General Motors grew obese and complacent, upstart foreigners started sending excellent products our way -- especially those that hurt our pride: e.g., automobiles.

While we slowly started to shape up in the 1970s and 1980s, we also became defensive. Ronald Reagan, an avowed free trader, presided over a fourfold increase in the percentage of U.S. goods protected from imports. George Bush did little to stem the creeping tide of protectionism.

(Many of our sins lie in the unsung details. Read James Bovard's "The Fair Trade Fraud" for a startling glimpse at reality. To wit: "The U.S. has 193,000 fishermen; by contrast, there are only 1,000 people employed in manufacturing fishnets in the United States. Our fishermen must compete every day with foreign fishermen. Yet, the tariff on fishnets is 17 percent. A 17 percent tariff on fishnets makes as much sense as a government decree that American fishermen must cut holes in their nets.")

And now welcome President Clinton, Trade Representative Mickey Kantor and Council of Economic Advisers Chairwoman Laura D'Andrea Tyson. Clinton is all over the map on trade, behaving dismissively toward Japan, blaming Boeing's mostly self-inflicted wounds on foreigners, then giving a major speech touting open markets. Kantor is taking potshots at the General Agreement on Tariffs and Trade and the North American Free Trade Agreement. Tyson's "managed trade" doctrine is questionable at best.

In 1986 we determined that Japanese producers were dumping commodity semiconductors. So we forced them to raise their prices, thereby hurting U.S. companies that use the chips and giving the Japanese a $4 billion windfall.

In her book "Who's Bashing Whom?" Tyson argues that the finding of dumping was legitimate, but that our response should have been to subsidize American semiconductor makers, rather than reward Japanese producers. Though the thought of Silicon Valley stalwarts on the dole sickens, who can fault such logic?

Trouble is, the marketplace doesn't follow the rules of logic. The Japanese mostly wasted their bonanza by building excess production capacity. In the United States, despite the mandated price increase, several companies, most notably Intel, saw the glut coming, got out of the commodity business and migrated, fast, to sophisticated "design-rich" chips. Lo and behold, we top BTC the charts in overall semiconductor market share again, the Japanese are foundering in a sea of red ink, and the Koreans sneaked in from the back 40 to take the lead in the commodity end of the market. The real point: None of this was foreseen, and Tyson's sensible-on-paper solution doubtless would have made matters worse -- e.g., Intel might have stuck with commodity semiconductors.

With Clinton and his lieutenants indicating they plan to "get tough" on trade, the beggars are lining up. In his keynote address to the National Automobile Dealers Association meeting this February, Ford CEO Red Poling's Japan-bashing was sickening. Even the airline industry, perhaps the worst managed in America, is blaming its past suicidal tendencies on foreigners.

Enough! If I were "in the loop" on trade, I'd say:

* Do GATT now. The General Agreement on Tariffs and Trade is the crown jewel of trade expansion. The new GATT benefits our enormous service sector, and even makes a wee dent in the world's insane agricultural protectionism.

* Ratify NAFTA. Little should be more exciting to us in the United States than the resurgence of Mexico as a vital, stable neighbor.

* Work with Japan. Clinton seems to be following the Reagan-Bush Atlantic first, Pacific second, how do you spell Japan approach. When will we learn? No relationship more urgently demands time, attention -- and care -- than that with Japan.

* Help Eastern Europe and the Commonwealth of Independent States. There is a matchless opportunity to let these fragile economies do what they can do best -- and avoid a global fiasco.

The more open the world's markets, the brighter and more secure America's future will be. Now is not the time to close the door.

(Tom Peters' column is distributed by the Tribune Media Services Inc., 720 N. Orange Ave., Orlando, Fla. 32801; [407] 839-5600.)

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