The president's Council of Economic Advisers, in its annual report to Congress, yesterday attacked the notion that the recent decline in manufacturing jobs and sluggish economic growth was caused by foreign competition and record trade deficits.
The report provides the economic underpinnings for the administration's case against a widely expected rekindling of protectionist fires in Congress this spring as election campaigns gear up. It also appeared to be the first time that the administration has flatly denied that the country's trade problem has hurt factory jobs and the economy.
Some politicians and economists have blamed the country's record trade deficits for three consecutive years for the economy's sluggish growth in the past 18 months and the loss of 325,000 jobs in manufacturing during the first nine months of 1985.
Meanwhile, the Office of Technology Assessment reported yesterday that adult education and job training programs "have not kept up" with the needs of 11.5 million "dislocated" workers.
Some economists said as many as 3 million jobs have been lost because of imports. The trade deficit for 1985 was $148 billion, surpassing the record $123 billion in 1984.
The idea that the trade problem has hurt manufacturers has been the backbone of Congress' battles to pass legislation either imposing surcharges on imports or keeping some out altogether. The CEA said that its analysis was intended to discredit the trade-jobs relationship and the protectionist bills designed to remedy the trade situation.
The CEA contended that the loss of jobs is due to improved efficiency in the manufacturing sector and high wages, and that any reduction in exports or market share have been offset by increased sales within the United States.
A CEA official said yesterday some industries lost jobs because of foreign competition, but manufacturing overall has not suffered.
"Some commentators blame increases in (the trade) deficit for massive job losses and a reduction in the U.S. growth rate," the CEA said. "Others argue that the deficit is deindustrializing the economy and eliminating manufacturing jobs. These arguments are based on an inadequate understanding of the benefits of trade and of changes occurring in the U.S. economy."
However, Sen. Lloyd Bentsen (D-Tex.) said in an interview yesterday, "To argue this trade situation isn't harming our manufacturing base is like arguing up is down." He added that the CEA's thinking is "out of step with the general concensus among economists."
The administration is "trying to reduce the trade deficits and saying it's not harmful to the economy anyway," Bentsen said. "It's ridiculous to argue that huge trade deficits have not been harmful to the United States."
Sen. John C. Danforth (R-Mo.), chairman of the Senate Finance trade subcommittee, said during recent trips to the Far East that, while not all of the decline in manufacturing is due to imports, some is.
"If you look at what has happened to our trade balance in manufacturers since 1982, it's pretty hard to deny a relationship exists" between the trade deficit and the problems of manufacturers, Danforth said yesterday.
Some administration officials, who declined to be identified by name, said that the CEA correctly argues that manufacturing productivity improvements have led to fewer factory jobs. However, they aslo said that the trade problem is part of the problem. Trade has also contributed to reductions in U.S. economic growth, the officials said.
The CEA said that manufacturing output has grown steadily with the economy in the past two decades and "there has been no radical shift in demand away from U.S. manfuactured goods nor has growing international competitive pressure substantially altered this relationship" between manufacturing output and the general growth of the economy.