Edward G. Jefferson is chairman of E.I. du Pont de Nemours & Co.
E. I. du Pont de Nemours & Co. Inc., a major producer of textiles, chemicals, high-technology products and energy, provides a vivid example of the damaging impact of a strong dollar on U.S. industry. Its net income for the first half of this year was down 59 percent from the same period a year ago because of slowing growth in this country and increasing import competition.
Edward G. Jefferson, chairman of Du Pont and co-chairman of the Business Roundtable, is a leading advocate of new trade and economic policies to help strengthen the competitiveness of U.S. industry. He discusses prospects for policy change with Washington Post staff writer Peter Behr.
Q: The dollar has slipped back from the high points of last winter. What is your assumption about where it's heading? Do you expect a continuing decline?
A: I don't know. It would help life if it was clear everybody wanted that. It isn't quite that clear. As somebody said, how can you expect a banker to be unhappy when his currency is strong?
Q: You're concerned that the U.S. banks are at cross purposes with manufacturers?
A: I think banking has been generally less concerned with both high real interest rates and currency strength. . . . It's difficult to get a consensus when people have their own particular salvation to work out. . . . The recent moderation in the dollar's strength is helpful, but not enough. I think it would help life as well if it was clear that the administration and the Fed the Federal Reserve Board both would like to see interest rates lower.
The view that the present abnormal strength of the dollar is a tax on our exports and a subsidy on other people's imports is very clear. It is a major, major problem. The trade deficit -- if we continue down that path -- you find that we're a debtor nation by 1990 to the tune of a trillion dollars. That's just not acceptable. . . . Setting a strong competitive trade performance as a national objective has only recently gotten a great deal of support. But it's overdue.
Q: What evidence do you see of a shift in administration policy on trade toward something more to your liking?
A: I hope we'll see more attention -- the problem of the dollar has to be dealt with. But it isn't the whole answer. There has to be a new approach to trade -- I think you have to get everybody together again. The GATT (the General Agreement on Tariffs and Trade, negotiated following World War II). . . served the world very well. There was an enormous growth in trade over the subsequent decades. But the world has changed. Free trade is an absolute myth. It doesn't exist. . . . Nor can you expect that other nations are going to agree to essentially free trade. I think they've got a complex of economic interests they've got to deal with. We've got to be reasonably firm that access to our markets has to be conditioned to reasonable access to theirs.
You can only wrestle those things out if you go through the grinding, untidy, difficult process of trade negotiations . There isn't some nice, simple, broad generality like free trade. I think a lot of people who call for free trade see it like a simple religious faith. If you can embrace it, life is a great deal easier for you. But it isn't that way.
And then there is the currency problem. If you go back to 1971 when the Bretton Woods international monetary arrangements were abandoned, the currencies have been terribly volatile since then. Orderly growth of trade is unlikely under those conditions. Depending on where your currency is in the cycle, you're either advantaged or disadvantaged in a way that completely transcends technology or anything else.
Q: What is your solution?
A: I know this would not be popular with many bankers. When I was in Geneva last year, I brought up again the thought that we should find a way of getting an agreement to control currency relationships between bands or established limits. You set a band, and if the currency falls outside that, there has to be something done about it. It's not a tidy approach, but perhaps it's better than where we are. Because the effect on industry of the current situation is enormous, and I don't think tolerable. That's why you're seeing protectionist legislation dropping into the hopper in Washington. The only thing that would stop that is a feeling that we're really, finally, going to design and implement an economic policy that took due account of the need to be competitive around the world in trade.
Q: There's not much sign of such a consensus now?
A: If you poke around informally, I think you find more and more concern. I do think it needs some leadership, and several of us thought that perhaps this would be an area where the president could show leadership, perhaps with a special assignment for Vice President Bush.
Q: President Reagan in several of his speeches this year focused not on the current problems of major industries like Du Pont, but on the importance of the small entrepreneur as the key source of growth and energy for the U.S. economy. What's your reaction?
A: Well, we were disappointed by that. . . . It's a piece of mythology to believe we can look to a future without good, strong core industries. I think there's a misfortunate understanding that exists. It's this idea of a vaguely defined, sort of high-tech future. It is a misreading, just as it would have been a misreading if you'd said we're going to abandon agriculture and put all of our efforts into industry 50 years ago. You need a balance, both for employment, for trade, and indeed to provide customers for high-tech producers -- you need some of these core industries. I wonder who people think are the biggest consumers of the products from computers and other sophisticated electronic instrument manufacturers? They're people like Du Pont. . . . The view, where it exists in the administration, that the core industries are expendable is very much wrong.
Q: Have you had a chance to talk to the president about it -- how he feels about the role and future of basic industries?
A: No, I haven't. I don't know how he feels. I've carried the message I've just described to others in the administration.
Q:[Secretary of State George P.] Shultz?
A: I have. Secretary [of the Treasury James A.] Baker, Vice President Bush, and others. And I think most people may have points they would make in detail, but generally agree for the need for this competitiveness and for the sustaining of core industries. We've got a long way to go.
Q: Do you mean a long way to go to get a general acceptance of that idea?
A: I think perhaps we've gained the acceptance of the idea. The thing that has to evolve from this is one, economic policies that give adequate weight to trade and economic competitiveness, and two, a clear focus and development of trade policy -- one that ceases to be passive, that accepts -- as other countries have long accepted -- that the promotion of our exports . . . is an essential part of our activities.