Free trade is an idea whose time may have come - and gone.
"I've never seen such a free trade cabinet," says one trade specialist of the Carter cabinet. Nevertheless, virtually every major interest that has sought protection - the shoe, television and sugar industries - has gotten it, and the steel industry is now about to join the list.
Abroad, it's the same story. The European Community armtwisted the Japanese into restricting their exports to Europe (and probably, thereby, diverting some to the United States). Now, community officials are working actively to constrain textile imports from developing countries.
As for Japan, it maintains a myriad of restrictions against U.S. imports. Despite a massive trade surplus, the Japanese decline to make concessions - such as easing quotes on citrus fruits or beef - to redress the balance.
In short, the emerging attitude is simple: everybody for himself.
The basic forces at work here are clear. A large constituency for free trade extisted only in an expanding world economy, when growing trade left more beneficaries than victims. Now, the victims appear increasingly numerous, visible and vocal.
Meanwhile, the risks of restrictions seem remote. Import restrictions may push up prices, but the impact is widely dispersed. As for the self-defeating nature of protectionism, the point is hard tomake.
If country A limits country B's exports, then country B has less foreign exchange to buy from country C, which, in turn, may be a major buyer from A. Trade expansion - and economic growth - suffer. But that logic is not likely to impress firms and workers hurt by imports.
Finally, in the United States, the statistic make economic impact of the trade deficit look worse than it actually is. In 1977, the trade deficit will hit an estimated $3 billion, but take away $45 billion of oil imports - which, after all, create employment by providing energy - and the United States would have about a $15 billion surplus. If oil exporters reinvest their dollar earnings in the United States, we are getting a free ride for some oil. We don't have to export to pay for it.
What may seem strange about the current surge of protectionism is its timing. Two years have passed since the 1974-75 recession. If most countries could resist protection then, when unemployment was steepest, why not now?
The crucial change involves psychology. Consider an analogy to a man in pain. If you tell him the pain is temporary, he is likely to bear it and avoid taking a debilitating pain killer. But, when he realizes the pain is permanent, his courage flags.
The trade situation is the same. In 1974, following nearly two decades of trade expansion and rising prosperity, most government leaders could hope that the recession soon would end and trade problems abate. Three years later, the pain - though slightly duller - seems semi-permanent. Resistance wanes.
Like most other countries, the United States has bent to domestic pressures. The Carter administration has hoped that each concession to restrictionist demands would be the last. It negotiated voluntary import restrictions on shoes and television sets, arguing that Congress would have imposed stiffer restrictions. Indeed, congressional actiona did force the adoption of higher sugar duties.
But the collective effect of these actions probably is to persuade more industries and unions to seek help through one of the multitude of relief provisions in the 1974 Trade Act (88 Stat 1978). And once such complaints are filed, the White House loses much control over the result.
Steel is the latest example of this haphazard process. Having encouraged steel firms to use the anti dumping law as an alternative to quotas, the White House belatedly is discouraging that strict application of the U.S. dumping law actually could imports from Europe. And, if the U.S. industry is in trouble, the European steel industry is in deeper trouble. It is operating at less than 60 per cent of capacity and faces the permanent loss of 80,000 to 90,000 jobs.
The administration reportedly is trying to avoid this collision by adopting so-called reference prices for steel, possibly based on Japanese productiion costs. In effect, this would be a minimum price below which imports effectively would be excluded. The Treasury Department reportedly wants a price that would allow enough imports to satisfy the Japanese and Europeans without losing the support of the U.S. industry. In return for assurances from importers that they would notunder cut this "reference" price. Treasury reportedly would discontinue existing anti-dumping complaints - a power it theoretically has.
If this sounds simple, it isn't. No one knows whether such a magic price exists. It could be challenged in court. If unions are unhappy (a good possibility), they could go to Congress and ask for stiff quotas. Even if the scheme works, if represents an important precedent, making it difficult to resist the pleas of other industries for similar help or attack such devices used abroad against American exports. Basically, the reference price is simply a giant tariff and price umbrella for domestic producers.
Premature obituaries for free trade have been written before. This could be such a misleading report. But the patient remains in pain and seems increasingly inclined to take a pain killer - debilitating or not.