Foreign trade hit home in 1977.
U.S. workers and industries learned that in this third year of global stagnation, the fast-growing U.S. economy was the target of an import barrage, that cost jobs and production. The United States also learned for sure that new trade laws passed in late 1974 made it easier to get protection from import competition. And get protection they did.
It was also the year that the new administration took over. And Robert S. Strauss became the dominant force behind U.S. international trade policy as President Carter's special trade representative.
Strauss, the former chairman of the Democratic National Committee, had minimal schooling in the esoteric and technical world of foreign trade. But his innate political horse sense, his ability to deal with an increasingly protectionist Congress and to speak for President Carter on trade issues (which despite the length of tariff lists is a political not a technical area) gave life to the multilateral trade talks that had sputtered for four years.
Strauss and the Japanese apparently reached a major breakthrough Friday in the U.S.'s attempts to force Japan to reduce its sizable current account surplus with the rest of the world. The $10 billion surplus is contributing, among other things, to the huge trade deficit the United States has incurred as well as to the troubles the dollar faces.
Japan and Geneva will likely require most of the attention of the top U.S. trade officials as they seek to reduce the enormous $28 billion trade deficit and draw up a code to guide international trade for the next decade.
The Geneva negotiations will be important to the health of the international economy for years to come.
But, as one top trade negotiator noted, Geneva likely will lack the drama of heavy layoffs or steel plant closings, that punctuated the U.S. trade story in 1977.
Last year, one American industry after another lined up to demand relief from foreign-made goods at the Treasury or the International Trade Commission (refashioned by Congress in 1974 to administer parts of the law that it didn't want to give to the generally free-trade-oriented Treasury).
Some, such as the steel industry, accused the foreigners of unfair trade practices. Others, such as the color television industry, merely argued that foreigners were gobbling up too big a share of the market. But under the 1974 trade laws, both had equal claims to protection.
The new administration was forced to give enough relief to the complaining industries to forestall even stiffer sanctions from an increasingly protectionist Congress while at the same time avoiding a serious confrontation with the nation's major trading partners.
This year, officials expect fewer demands for import relief. There is no backlog of major cases pending at either the trade commission or the Treasury, noted C. Fred Bergsten, assistant secretary of the Treasury. And top Carter officials think they handled the 1977 crush well, giving protection where it was needed without being protectionist - a view that is not universally shared by industry and labor.
In any event, whether there is a lineup outside the Treasury - and if the administration's complicated trigger-price scheme to help the steel makers will be back for help - the general economic conditions that fed protectionism here and abroad will not go away.
Three years of slow economic growth and high unemployment have made workers and businessmen across the globe less tolerant of import competition and more anxious than ever to sell their goods to foreign countries to maintain employment.
That attitude promises to make it hard for world trade officials to sell their respective nations on substantially liberalizing world trading rules. But that liberalization is the goal of the four-year-old multilateral trade talks in Geneva that, barring unforeseen developments, will take most of the time of U.S. trade officials this year.
They'll also spend a little time with the steel plan (more with steel if the plan fails) and for the next few months will also focus on the bi-lateral problems with Japan, where there is a recognition by Japanese officials of the need to reduce their $10 billion current account surplus, but worries that they will be unable to, even with the best of intentions.
But even as they wrestle with Japan, government attention will focus more and more on one issue: negotiating a reduction in tariff barriers and forging new rules to govern non-tariff barriers to trade where no rules now exist.
Besides the Japanese issue, trade problems will focus on one issue: negotiating a reduction in tariff barriers and rules governing non-tariff restraints to trade where no rules now exist.
Strauss must negotiate a package that Carter can sell to Congress - one that helps American farmers as well as manufacturers. Strauss will play a key role in that convincing job, which will be made tougher by a continuing large deficit in the nation's trade balance.
Time is running out on the trade talks. U.S. negotiating authority will expire in less than two years, but effectively it will run out before early 1980.
As Strauss points out, this is probably the last time nations will get together for a decade to establish broad rules about world trade and what actions governments may take under what circumstances to encourage exports, discourage imports or subsidize farm products.
And as tariffs have become less important barriers to international trade throughout the years, non-tariff restraints against imports and government boosts to exports have been the biggest distorters of world trade. Governments are finding it difficult to get together to decide what to do about those restraints and subsidies, one of the reasons the talks stalled for so long.
Strauss, who has become one of the President's closest advisers (some say his role as trade representative is almost incidental to his role as adviser), was not only instrumental in forging the political decision to break the impasse, he will be a key to the negotiations that begin in earnest this month.
As one top European official put it, "Strauss has introduced a new political dimension to the talks, an area which has largely been the world of the technocrat." Although Strauss and Treasury Secretary W. Michael Blumenthal - who headed the U.S. negotiating team at the last major worldwide trade talks in the Johnson administration - have their differences, aides to both say that the two are in substantial agreement on the goals of the negotiations and that Blumenthal has stayed out of the way.
This week the negotiations in Geneva are supposed to get down to the brass tacks. Working documents defining the scope of the negotiations went out Christmas Eve, Strauss said.
The Texas lawyer said the American negotiating team is going to "succeed or fail" in Geneva. "We're not going to sit back and bay at the moon."
The trade talks are looking for agreements in these major areas, according to Alan Wolff, deputy special trade representative:
Tariffs. Although tariffs are not the barrier to trade they once were, duties still limit trade in many areas.
Subsidies. Governments are getting more and more into the production of goods by having equity participations in plants and making capital loans. It has been 10 years since the last round of trade talks, and subsidies are a rising impediment to free trade.
Government procurement. All governments give preference somehow to domestic suppliers. The talks hope to set rules on how much preference a government should give.
Standards. Although this area has little sex appeal, Wolff notes, it can mean a great deal to exporters. "Our citrus fruit has rotted crossing the Pacific because Japan refused to allow fungicides." A standards code won't set standards, he said, but will set down procedures for determining whether a standard is an illegitimate barrier to trade. The United States is turning into a massive standard-setter - automobile emission regulations for example - and resolution of these issues will be a key to the U.S. market.
Agriculture. Government policies are often directly in conflict here as foreign governments seek to protect their inefficient farmers while efficient U.S. producers are shut out of foreign markets in good years. Subsidies are also a large problem in the agricultural area.
Safeguards. When, and how, should a country be permitted to protect a domestic industry from a sudden onslaught of foreign competition, even if that competition is fair. In other words, in what circumstances ought countries be given the right to soften the impact of foreign competition on their domestic economies.