The rush to China is on. It is reminiscent of the drive to trade with the Soviet Union when detente unfolded in 1972. U.S. businessmen are eager to supply nations throughout the world with the capital and technology that they seek to help them become modern industrial states.
The new export opportunities are welcome. But they foreshadow a significant expansion in worldwide industrial capacity that will eventually affect world trade in fundamental ways and severely test both our commitment to free trade and our ability to compete. The emergence of new centers of industrial capacity abroad is a challenge that to date we have largely ignored.
The dilemma was captured by a question often raised during my recent trip to India: Why does the United States continue to produce goods which can be made more cheaply in other countries?
An answer based on the need for jobs in a nation with six million unemployed is unpersuasive to a nation that suffers a hundred million idele -- a total that is roughly the size of our entire labor force.
It is not surprising that pressures for protectionism are strong today. They will mount as worldwide industrial capacity expands. With the help of Western capital and technology, China in time will be selling machinery, steel, chemicals and similar goods to the rest of the world, including the United States. Countries such as India, with far fewer resources, will intensify their demands for access to Western markets for products such as textiles, with which the world is already oversupplied. The Soviet Union has ambitious plans for major new factories, built with Western equipment and technology, to produce truck tires, automobile engines, television tubes, even blue jeans. The image of a generation of card-carrying comrades clad in American-style blue jeans gives as much pause, perhaps, as the one now being offered for refreshment in Peking.
As China, India, the Soviet Union and others build their industrial bases, they will make for themselves things they now buy from us; they will intensify their demands to sell in the United States; and they will compete with us in Third World markets.
In response, we can retreat into fortressed America, erecting walls around domestic industries threatened by competition from "cheap foreign labor" and restricting the transfer of capital and technology abroad.
But to do so would be inefficient, because it would lock us into wasteful patterns of production and would violate the basic principle of competition, which helped build the richest country on earth.
It would be self-destructive, because it would trigger a chain of similar defensive measures around the world.
And it would be irresponsible, because it would condemn the world to missed opportunities as the engine of change embodied in U.S. economic power withers from lack of competition.
Alternatively, we can view what is happening as an opportunity, not a threat -- an opportunity to apply our resources to the things we do best and most efficiently. Increasingly, much of our advantage will lie in the high technology and service industries. Increasingly, too, the change will involve a shrinking of old industries with all the pain that such decline entails. But if we believe that world wide economic growth promises a better life for all mankind, we have a profound responsibility to help rather than hinder that promise.
Mere recognition of the gains from trade and a willingness to let it occur are not enough. Our survival as a world leader and our commitment to expanded trade cannot be taken for granted in a world reshaped by powerful new participants in international trade, many of which have highly centralized economies and are capable of bending economic decisions to political objectives.
To survive and advance, economic policy-makers must look further ahead than is our custom. We need a clearer notion of probable shifts in the composition of world output and a realistic assessment of our future competitive strengths. We need to sustain an economic Environment in which industries that offer the best promise for the United States in the years ahead can emerge and prosper. High employment, rationality in regulation and a tax system that encourages private initiative should all be part of this environment. At the very least, government should take care not to impede industrial development.
In short, we need an industrial policy that permits us to take advantage of the trade opportunities that lie ahead. We now lack a clear sense of direction, perhaps because we continue to think of our markets as domestic rather than worldwide.
Although these are not new issues, China dramatizes their importance. If industrial development around the world is to be a positive force and if we are to compete effectively with powerful new economies now bursting on the world scene, we shall have to do more to emphasize our industrial strength by providing the climate necessary to permit its full expression.
In recent discussions with Soviet leaders, I stressed the fact that trade itself is not our common goal.The goal is the well-being of all people, and reaching that goal is a common responsibility.
All of us will have to adjust. Countries that seek our markets will have to open theirs. We, in turn, must accept rapid economic evolution as our charter and deal with it with foresight. To do otherwise would impair mankind's chances for a better life. History will judge harshly a generation that fails to meet that challenge.
Perhaps cola in China, vodka on U.S. tables and blue jeans on Soviet youths will help ease the way.