In the year of testing American resolve and American unity, there lies ahead one aspect that is entangled in fierce nationalistic passions. That is the growing demand for barriers sheltering U.S. industry from foreign competition. This is directly related -- and there should be no illusions about it -- to the war against inflation.
Foreign competition is an important restraint on the domestic price level. In the same way, the drive for exports turns on remaining competitive in the world market.
A key is Japan, which is the target of the protectionists in industries that are vulnerable to price competition. But it is also the key in the extraordinary development just shaping up in Asia.
That is the growing economic alliance between China and Japan. When China's great reserves of oil, coal and other natural resources are put together with Japan's highly efficient industrial machine and dedicated workforce, the total adds up to a giant that dominates all of Asia.
Presidnet Carterhs action in normalizing relatins with China can speed up the immediate benefits of U.S. industry on the technological side. But it will be a fatal error for the long pull to be counted out of the Asian Game by the loud cries of the protectionists.
When he was in this country recently, Mike Mansfield, U.S. ambassador to Tokyo, talked of the staggering volume of trade with Japan, with exceeded $31 billion in 1978 -- by far the largest trade in history between noncontiguous states.The largest volume is agricultural, with Japan taking 15 percent of total U.S. farm production. Thanks to the efforts of trade boss Robert Strauss, Japanese restrictions on beef and oranges were lowered, with sharp increases during the past year of Japanese imports of both. These are highly sensitive political points, and the Japanese concessions were an important breakthrough.
"The big story for the rest of this century," Mansfield said in a speech in Orlando, Fla., "will be the rise of East Asia -- Japan, China, the nations bordering China and the islands adjacent thereto. That area has the people, the resources and the markets. It is there that our future lies and it is there that we are determined to stay."
Mansfield outlined the steps that Japan is taking to overcome the trade imbalance that has weighed so heavily in the decline of the dollar. He believes that the mounting evidence shows the U.S. trade account with Japan is beginning to move toward balance.
But if the United States is to play in the tough Asian game, thedeficiencies of the past will have to be faced up to. Compared to the 25,000 U.S. firms with potential prospects in Japan, only about 2,500 have made the effot. Too often their trading headquarters in Japan lack sufficient specialists with language and equipment for the job. And too often they are interesed in short-term profits as against an established long-term base.
An important factor is the slowed pace of research and development in U.S. industry. This is reflected in the figures showing that Japan's manufactured imports from the European Economic Community were gaining substantially faster than those from the United States. The gain for EEC for the first months of 1978 in machinery was 42 percent; for the United States it was 22.9. For precision machinery, the EEC gained 33.4 percent; the U.S. gain was 20.2.
The loudest demand for protection has come from the television industry, which charges that Japanese color TV's are being "dumped" in the U.S. market, with the cost secretly subsidized by the government. It was put bluntly by John Nevin, chairman fo Zenith Corp.:
"The question is whether Japan is going to open up or the rest of the world is going to shur down Japan."
The United States already has substantial so-called voluntary or negotiated quota restrictions on imports of textiles, clothing, shoes and color TV The "trigger price system" for steel is protectionist, and it operates against European steel imports as well as those from Japan.
Revelutionary changes are at work in a part of the world long taken for granted. The revolution in Asia must be met by drastic changes in this country. Far greater tax credits for industrial research and development is the kind of fundamental change that can help to restore competitiveness to U.S. production.
It is a turning point in history, and merely to stay immobile behind tariff walls is to miss an opportunity that may not recur again. Normalization of relations with China was a step. But it was only a belated first step, and a small step. So much must follow quickly if we are to play a part in the Asian game.