Americans are prone to overdramatize and overgeneralize. We've done precisely that with our huge dependence on foreign oil. Suddenly, any dependence on foreigners frightens us. They will, we tremble, emulate the oil cartel and subject us to economic and political balckmail.
The latest indicator of this fear comes from the International Trade Commission, which recently urged President Carter to restrict anhydrous ammonia imports from the Soviet Union. The ammonia serves primarily as fertilizer, and the Trade Commission (on a 3-2 vote) found that the imports cause "market disruption" and could create a dangerous dependency on the Soviets "for a vital raw material." From nothing in 1977, Soviet imports may hit 11 per cent of U.S. use by 1981.
Like other peoples, Americans dislike relying on anyone -- especially the Soviets -- for anything. Given our historically high self-sufficiency, it's a new experience.
But the parallel with oil is not the right one, though domestic industries seeking protection -- not just ammonia producers, but steel firms, sugar interests and others -- naturally seize upon it. Such comparisons make two assumptions: first, that foreigners can manipulate supplies and prices; second, that higher imports automatically translate into strategic weakness.
Both assumptions are wrong. Oil is clearly of strategic importance, and the Organization of Petroleum Exporting Countries does exert some control, though it's exaggerated. What really sent prices up in 1979 was the Iranian revolution and the resulting drop in oil output.
But, elsewhere, producer control is even more tenuous. There are too many of them to control prices, let alone manipulate supplies for political purposes. The same problem, incidentally, would hamper us in using trade as a political weapon, even in commodities -- such as grain -- where we dominate.
Nor do most imports possess strategic meaning. Being dependent on foreigners for our sugar (about half our supply is already imported) is no more dangerous than being dependent on them for coffee -- something we have endured for years. And, in today's world of multiple suppliers, even steel is not truly a strategic good, with the possible exception of some key alloys. What counts is our ability to capture foreign export markets that are, in part, created by our own payments for imports.
To think we would be better off without this interdependence is a myth, as the fertilizer case shows. Basically, this trade benefits us. The United States is running short of natural gas, the principal raw material for fertilizer; today, natural gas represents about two-thirds of U.S. ammonia production costs -- a proporation that will probably increase. By contrast, the Soviet Union has the world's largest natural gas reserves.
The conversion of gas to ammonia utilizes the world's scarce energy resources more fully and enhances food production by keeping fertilizer supplies ample. These steps represent small, but important, contributions toward improved global economic stability and human welfare.
Suppose the president approved quotas on the Soviet imports. Given the rising price of natural gas, the price of fertilizer would have to increase substantially to justify new investment in the United States up from the current$130 to $140 a ton to $200, according to a Trade Commission economist. Sooner or later, higher fertilizer prices would inevitably be reflected in higher food costs.
The chance always exists, of course, that the Soviets won't be reliable suppliers -- mostly because they may botch things up, not because they want to punish us. The Soviets have had repeated technical problems with their advanced fertilizer plants imported from the West.
The remedy to this, however, lies in a diversity of suppliers, so that interruptions from a single suplier cause only a ripple in the market, not a tidal wave. In fact, many countries with natural gas reserves (including Mexico) are turning to fertilizer production. We should do nothing to stop them.
But international trade and investment require a climate of certainty and confidence. Slapping restrictions on Soviet imports would simply add a new element of uncertainty about the openness of one of the world's major markets. The provision of the Trade Act of 1974 invoked against the Soviets closely resembles another provision that could be turned against any foreign supplier.
The lessons here apply elsewhere.
Without ample supplies of basic mineral and agricultural raw materials, there is scant hope of reducing worldwide inflation and sustaining economic growth. Yet, in a recent study for the National Planning Association, mineral economist Raymond F. Mikesell wonders whether supplies of such key commodities as copper will be adequate.
Developing countries contain many of the best mineral deposits. But Mikesell believes many of these countries -- by themselves -- can't command sufficient technical or financial resources to assure needed exploration and development. He further worries that contract disagreement between new governments and profit-seeking private companies will frustrate necessary investments.
Against this background, protectionist policies that pretend to provide security of supply have superficial appeal. Private firms -- faced with new competitors abroad or the difficulty of investing overseas -- prefer to retreat into home markets behind protective barriers. This is politically attractive, because it concentrates investment at home and allows us to thumb our noses at foreigners.
But the promise of security is phony. Rather, we risk trapping ourselves into costly supplies that burden scarce energy and capital resources, contributing to inflation and domestic stagnation. We shouldn't be penalizing the firms ingenious enough to open new international sources of supply -- in this case, Occidental Petroleum Corp., which imports the Soviet fertilizers. Most industries (sugar may be an exception) that face imports won't be obliterated. Steel imports rarely amount to more than one-fifth of use; even a rapid expansion of fertilizer imports isn't likely to bring their market share to more than that.