Former Reagan administration trade negotiator Clyde Prestowitz, one of the leading advocates of a tougher trade stance toward Japan, has shifted direction to focus on America's lagging international competitiveness.

Backed by $1.4 million a year in largely corporate funding, Prestowitz has started a Washington-based think tank, the Economic Strategy Institute, which he said is aimed at developing "an overall approach to make the U.S. highly competitive" in a changing world in which "the competition is going to be more geo-economic than geopolitical."

ESI will hold its kick-off dinner tonight, bringing together a number of America's political, corporate and labor leaders. The dinner committee includes House Majority Leader Richard Gephardt (D-Mo.) and Senate Minority Leader Robert Dole (R-Kan.); the president of the National Association of Manufacturers; the heads of the steel workers, auto workers and communications workers unions; and senior executives from high-technology corporations such as TRW Inc. and Motorola Inc. and a major textile producing firm, Milliken & Co.

"We are going to try to redefine what economic strategy is," said Ronald A. Morse, ESI's executive director. "We want to look at it from the corporate standpoint, not the Washington policy or the macroeconomic standpoint. We are going to be the think tank of the '90s, the think tank for America."

Like Prestowitz, Morse is a Japan specialist. He was one of the first U.S. analysts to suggest that heavy Japanese spending on Washington lobbying, including the use of former U.S. government officials, tilted the U.S. decision-making process in favor of Tokyo.

Prestowitz was controversial as a U.S. trade negotiator with Japan, and his book on the U.S.-Japan trade relationship, "Trading Places," was controversial when it was published two years ago. Following form, Prestowitz's think tank also is likely to be highly controversial.

Although neither he nor his primary associates are economists, Prestowitz does not hesitate to express disdain for what he calls conventional economic wisdom, especially the free market views espoused by rival think tanks. He dismisses them as "highly theoretical" and "based on assumptions made to simplify economic models that everybody knows do not hold in the real world."

Traditional economists, Prestowitz argues, believe it doesn't matter if America produces $100 worth of potato chips or $100 worth of computer chips. "We think the composition of the American economy and American trade is important," he said, emphasizing that computer chips are a technology for the future, while potato chips belong to the past.

"I'm smiling. I've been called a lot of things in my life, but I've never been accused of being theoretical," said Fred Bergsten, head of the Institute for International Economics, a rival think tank.

Prestowitz said his think tank's contribution will be the creation of "an overall approach to making the United States highly competitive." The ESI approach calls for doubling the rate of investment, stressing long-term gain over short-term goals and a trade policy "that deals with the world as it it."