A new world war is in the winds. But the weapons this time are not bombs and missiles. This war is being fought with toasters and television sets, steel beams and designer jeans.
The Reagan administration is becoming seriously concerned that the relationship between the United States and its trading partners is approaching intolerance, possibly escalating into a full-scale protectionist trade war.
With unemployment exceeding 8 percent and the nation in recession, Americans are following the lead of other depressed economies in fighting the invasion of imports as a way to keep their jobs.
This month, the U. S. Steel Corp. threatened to file unfair trading practices complaints against at least nine European countries, and the Commerce Department has already taken the unprecedented step of initiating its own steel-dumping complaints against five nations in an apparent effort to head off other complaints from private industry. The European Common Market in turn has threatened retaliatory action against the United States for the steel cases.
Because Canada threatened to cut off some American trade and investment within its borders, the United States has warned its neighbor about possible retaliation.
Already this year, several skirmishes have left increased tension in their wake not only among the trading nations but within the Reagan administration. Before the new administration had a chance to take office last January, it was faced with the argument over whether to seek a voluntary limit on Japanese automobile imports.
And now the world's major textile producers are attempting to hold down imports from developing nations as part of a major new multifiber agreement being negotiated in Geneva.
"We're trying to see if there's any human way to deal with the trade problem, to get by the next six, 12, 18 months of hazard," said U. S. Trade Representative William E. Brock. If the United States places barriers against foreign steel, Brock said, retaliation may result. "There are very few areas where we don't have serious problems," Brock continued, "agriculture . . . steel, pharmaceuticals, chemicals, craft paper, textiles."
Commerce Secretary Malcolm Baldrige has publicly expressed concern about a trade war. Last week, U. S. Ambassador to Japan Mike Mansfield warned that Japanese imports flooding U. S. markets have "the potential of inflaming protectionist forces within the United States and elsewhere."
Yet, for all the complaining about imports, American consumers continue to buy them. Last year Americans purchased $252.8 billion in imports, from mushrooms to manhole covers, from precious metals to metallic shoes, without a thought for the impact on the domestic and world economies. Imports equaled 10.5 percent of the U. S. gross national product and surpassed the GNP of some developed countries such as Italy. Many countries such as Japan survive solely by exporting to other nations.
Today and for the next two Sundays, The Washington Post will explore how imports have become an indispensible part of American life, from foreign oil to Japanese Sony tape recorders. Imports have also changed the nature of employment in the United States, often eliminating the jobs of American minorities, women and the less-educated. Also to be explored is the future of global competition and whether U. S. industries will be able to compete in the world market.
After World War II, when the United States was the undisputed leader in manufacturing, imports didn't seem so important. Today, the United States has an undisputed lead in only a few products--heavy earth moving equipment, aircraft and some textiles such as synthetic carpets and linens. Even in the area of electronics, American manufacturers, while still ahead, are being hard-pressed by Japan, Korea and Taiwan. Japan also has begun to build such high-technology equipment as satellite earth stations.
Black-and-white television sets are no longer made in the United States. Neither are most radios, tons of steel and millions of automobiles and garments used here.
These products, once proudly marked "Made in U.S.A.," now are made in Japan, Korea, Sri Lanka, Brazil and Mexico. It is almost impossible to buy a shirt, a CB radio or a ripe tomato that hasn't originated overseas. America has become a melting-pot of goods from all over the world. But the pot has reached the boiling point.
At Woodward and Lothrop, Garfinckel's and other department stores probably 10 percent of the goods are imports. "The consumer is looking for the quality and the price," said Hanne Merriman, president of Garfinckel's. And in many cases that means imports.
"If there's something made here that is bought overseas it's probably because they retailers can get a price break," said Lex Carnie, executive assistant to the president of Woodward and Lothrop. "Our customers expect to see imported merchandise. When we import, we try to import something not available in the U.S.--something different, new, that has prestige value.
"When we import something that can be made in this country, we hear a lot of flack from the unions that we should apply restrictions," continued Carnie. "But if we did, our customers would only be supporting inefficient manufacturing. 'Buy American' is all very well. But really, it doesn't make a lot of sense. It eliminates legitimate competition and encourages inefficiency."
Consumers are buying more imports now than 20 years ago because U.S. markets are more open than those in other countries with protective tariffs, quotas and other barriers, said AFL-CIO spokeswoman Elizabeth Jaeger.
But free-traders disagree. "Imports afford the consumer as much choice as possible," said Doreen Brown, president of Consumers for World Trade. "The minute you remove a consumer's choice, he's at the mercy of the retailer."
"Socially, it's dangerous," Jaeger countered. "In economic terms it's absurd for a country to pretend this is all just about getting it cheaper somewhere else. Who is it cheaper for? I haven't seen prices go down."
The major prize in the protectionist wars is the politically important goal of creating jobs. Jaeger insists that without some protection American workers will lose jobs and taxpayers will end up paying even more in welfare, unemployment and other benefits. "Imports aren't cheaper for the consumer in a wide variety of ways because the consumer happens to be a taxpayer and the consumer happens to be a jobholder," Jaeger said. "There's an old Irish expression: 'What's cheap is dear.' "
Free-traders, such as Consumers for World Trade, a Washington-based international-trade watchdog organization, oppose government protection of domestic industries through tariffs, quotas or "Buy American" legislation, and favor forcing American industries to compete or die.
According to the free traders, the American consumer would end up paying higher prices for protected goods because prices of restricted imports will rise, causing domestic prices to do likewise. According to research done for the group by David G. Hartman of the Harvard University economics department, the U. S. public is paying an additional $2.7 billion annually for clothing because of the 29.3 percent average tariff on apparel imports. According to the old Council on Wage and Price Stability, the public pays $81,000 each year for each textile job that is protected by such tariffs and quotas.
A Brookings Institution study estimated that quotas and other agreements to restrict steel imports are costing consumers $1.25 billion annually in inflated prices.
Altogether, protection of U. S. industries is costing consumers $15 billion a year, Hartman said.
In addition, cutting back imports often forces foreign producers who have captured large shares of U. S. markets not to offer their less expensive product lines. By concentrating on their more expensive goods, foreign producers can make more profit per unit on U. S. sales. This leaves fewer low-cost goods for low-income people, Brown said. For example, when the U. S. restricted imports of shoes from Taiwan and Korea three years ago, those countries tended to send only their most expensive goods. White House press aide David Gergen said the president decided not to extend restrictions partly because it prevented the poor from having a variety of low-cost shoes.
Import restrictions also prevent domestic industries from being more competitive, Brown said. For example, many free-traders question whether Detroit would have moved so quickly after the Arab oil embargo to make fuel-efficient and better quality cars if they hadn't been prodded by competition from the Japanese.
But, some economists say, many U. S. industries may never return to the dominance they once enjoyed. Less developed countries are taking up where American firms left off, for example in steel. Brazil and Mexico are eager to break into the auto business in which Japan has become a leader.
How did this happen? After World War II, Japan was left in ruin and the economies of countries that had been relatively undeveloped before the war remained the same or declined. Aided by an infusion of foreign aid, these countries built new plants, often for textiles and steel production to pave the way for future exporting. American companies, on the lookout for low-cost investments and cheap labor, provided some of these undeveloped nations with the technology to build up their own businesses.
As communications and transportation became more accessible, firms in the less developed countries were able to copy American innovations. At the same time, a strong dollar in the 1960s made imports less expensive here and our exports cost more, giving many foreign-made goods an inroad.
But there were other factors, too. Although American labor unions were doing a good job for their constituents, bargaining for and getting high wage rates and benefits, those costs were added to the prices of goods they produced. Foreign governments often subsidized their industries to make it easier for them to produce and sell to overseas markets. At the same time, they raised protective barriers to imports from other nations to give their infant industries room to grow.
Meanwhile, the U. S. government during the 1970s added a plethora of high-cost environmental and other requirements, making investing in new capital or conducting research more difficult for American firms.
And unlike the cheap trinkets that used to line souvenir shop shelves, the high-quality goods now made by Japan and other countries became one of their major weapons, along with low price, to beat back American competition. Armed with the latest technology, new equipment and low and often subsidized prices, the less developed countries were able to fight their way into the largest world market: the United States.
But perhaps one of the largest influences on the reduction of U. S. exports and an increase in cheaper imports are exchange rates. High U. S. interest rates have attracted foreign money here, helping to strengthen the value of the dollar against other currencies. This tends to make American-made goods more expensive and less attractive to overseas buyers. On the other hand, imports become relatively cheaper and more attractive here.
Although the United States has a surplus in its balance of trade in manufactured goods, some economists believe that the strength of the dollar and the current high interest rates will create a deficit again, and that cries to protect the higher-priced American goods will grow louder.
"I'm afraid a problem is simmering again," said C. Fred Bergsten, a former assistant Treasury secretary now with the Institute of International Economics. "The trade deficit will rise sharply. Current accounts will rise. Again there will be cries that the nation can't compete. Monetary things are always esoteric. It's indirect. You don't see it in the same way as a tariff or quota and it's easier to blame someone else."
Administration trade officials have already predicted a trade deficit next year, exacerbated by the strong dollar and lower world-wide demand for goods. In addition, more and more American workers are out of jobs because of the administration's economic policies, increasing the pressure for import protection.