The United States should change completely its habit of responding to serious competition from imported goods with short-term solutions that come only after industries and workers have been severely harmed, a report released today by the Northeast-Midwest Congressional Coalition urged.
The report, the work of the Northeast-Midwest Institute, a research group sponsored by the coalition, called for creation of an "effective early warning system" that could identify industries likely to face substantially greater competition from abroad in the future, and adoption of a "comprehensive set of policies for major [industrial] sectors, in which trade will play an important, though not dominant, role."
"The United States treats import competition as an occasional irritant to domestic industrial growth, and almost always responds with short-term solutions," it continued.
"Congress long ago decided that the Federal government should help workers and firms hurt by imports, both directly with financial assistance and indirectly with import restrictions. However, these policies generally lack coordination and almost always are enacted after domestic industries have been injured.
"Further, import restrictions can have the unwanted effect of insulating some American businesses from foreign competition, reducing their incentive to adopt new technologies and management techniques to increase productivity," the report said.
In response to "fair" competition from foreign products -- as opposed to "unfair" competitive involving subsidization by foreign governments or dumping, the selling of products here for less than sold abroad -- the report said the United States and some other nations have imposed import barriers. "In the long run, this reaction solves nothing; rather, it leaves both labor and capital locked in inefficient uses, keeps consumer prices unnecessarily high and rarely accomplished more than extending the pace of adjustment," it concluded.
Instead, the institute's report said the government should develop an early warning system to identify likely trouble spots, and then target its response, "more realistically." "The solution . . . is not permanently prop up companies to save jobs, but to use assistance to help workers adjust to the new situation by developing effective retraining programs for employes, helping firms close down in an orderly manner, bringing new industries into the same labor market and promoting the creation of local companies to generate replacement jobs," it asserted.
The report went on to suggest expanded use of committees involving labor and management representitives along with those from government, as well as an array of new tax and credit incentives to help those firms that appear likely to survive.
Among those specific recommendations, the report urged Congress to "consider not reauthorizing the current trade adjustment [assistance] program when it expires, replacing it instead with a sectoral adjustment program to deal directly with the problems of changing industrial structure."
Rep. Charles A. Vanik (D-Ohio), a member of the coalition who is also chairman of the Ways and Means trade subcommittee, said in a statement released along with the report that "the institute's paper makes the absolutely essential point that unless the U.S. gets on top of its trade problems, unless we anticipate future areas of difficulty and provide sector-by-sector industrial programs to insure competitiveness, forces of protectionism will continue to grow in this country and eventually legislate an end to trade."