The Third World debt crisis has torn through the U.S. economy, hurting sales to countries that previously were major markets, causing the loss of as many as 1.6 million domestic jobs and threatening political instability in Latin America, a series of witnesses told a congressional subcommittee yesterday.
"Their debt crisis was our trade crisis," said Alan Wolff, a trade lawyer and former deputy U.S. trade representative.
And current solutions to ease the debt problems of Third World nations, especially those in Latin America, have helped the banks that loaned them the money at the expense of U.S. jobs and industries without providing long-term solutions, said Stuart Tucker, an economist with the Overseas Development Council.
"The general perception within the commercial-banking community is that 1985 was another year weathered without a debt disaster. Yet a quiet disaster continues in the U.S. economy," Tucker added.
The testimony came during a hearing by the House Banking Committee's international development subcommittee on legislation being prepared by its chairman, Rep. Stan Lundine (D-N.Y.), to ease the impact of the debt crisis on the U.S. economy. His bill would go further than the initiative of Treasury Secretary James A. Baker III by offering more help while putting more pressure on debtor countries to open markets to U.S. products.
"Just 10 years ago, the developing world was emerging as this nation's largest market," Lundine said. "But today, the sharp decline in U.S. exports to indebted countries has contributed significantly to our enormous trade deficit."
Paula Stern, head of the International Trade Commission, said U.S. exports to seven of the largest debtor nations -- Brazil, Mexico, Venezuela, the Philippines, Chile and Nigeria -- dropped from $34 billion in 1981 to $18 billion in 1983, "accounting for nearly one-half of the total decline in U.S. exports during this period."
Over the past two years, the U.S. trade deficit with Third World nations has been about $50 billion -- approximately one-third of the total $148.5 billion trade deficit last year -- and Tucker said it is likely to remain at that level this year. "Most of the U.S. trade deficit with the Third World is a result of debt, not unfair trading practices," he said.
He estimated that nearly 1.6 million U.S. jobs have been lost because of the drop in exports to Third World nations, including 200,000 last year alone.
Stern said farm exports also have suffered as a result of the debt crisis. From 1981 to 1983, for instance, Mexican imports of U.S. farm products dropped by $1.3 billion, a decline of more than 50 percent. Over the same period, Brazil's imports fell by $210 million, a decline of one-third.
Moreover, the austerity programs that commercial bankers and the International Monetary Fund forced debtor nations to undertake are taking a political toll in those countries, said J. B. L. Pierce, treasurer of Boeing Co. This could lead to political instability, especially in Latin American nations such as Brazil, Mexico and Venezuela, switching the debt crisis from a financial problem to an internal security issue, he said.