The current Washington catchword in the field of foreign trade is "reciprocity." In its current and novel use, reciprocity seems to say that the United States will decide whether American goods are receiving treatment abroad equal to the treatment we give to foreign goods here. If not, then we will equalize matters by new restrictions on imports.
Alas, things are not so simple. Legislation to enforce a one-sided American view of reciprocity can open the door to some very unpleasant events. For the administration to encourage Congress along this line would be a reckless opening to protectionism.
Some of the steam behind the drive for reciprocity comes from the notion that we should be in balance in our merchandise trade account. Last year the United States trade deficit with the world was in the order of $28 billion. The deficit with Japan alone probably will turn out to have been about $16 billion.
Before reading too much into the meaning of these numbers for reciprocity, however, it is well to look more closely at our international transactions. When everything is counted--trade in goods, trade in services, returns on past foreign investments--lo, we will show a surplus of as much as $12 billion (Japan, which runs a deficit in service transactions, will have, coincidentally, considerably smaller surplus). In 1981, in other words, we did not pay out more to foreigners than we received. Our current international accounts were "favorable"--in a year when an overvalued dollar burdened all aspects of our foreign commerce.
When we focus narrowly on bilateral merchandise trade we see the large imbalance with Japan. But we also find an American surplus of some $11 billion with the European Community. Should the community argue that it is getting non-reciprocal treatment? The community in turn registered a huge trade surplus with its small neighbors in the European Free Trade Association. With Austria and Switzerland alone it will have been $12 billion. And Japan has a chronic trade deficit with Australia-New Zealand and, of course, with OPEC.
These surplus-deficit trade positions follow in large part from structural differences in national economies. Even under pure free trade, bilateral imbalances would be there, possibly greater than ever. They provide a poor excuse for scapegoating our trading partners.
The international trading system gave bilateral balancing an extended trial during the 1930s. Through quotas, exchange controls and outright barter, not only Hitler's Germany but other countries, large and small, tried to avoid having deficits with anyone. That disastrous experience was the background for the post-World War II return to the multilateral idea, embodied in the General Agreement on Tariffs and Trade. It would be the saddest of ironies if the United States, the leader in the postwar move to free up trade from its prewar shackles, were now to lead the trading world back to bilateralism.
Country-by-country balancing seems, however, so outlandish a notion in the 1980s that one must suppose that the push for trade reciprocity will be in a narrower context, by product or by industrial sector. This could mean a slightly slower march back to the 1930s.
The fact is, of course, that trade takes place because competitive conditions differ from country to country. To seek to balance trade product by product or sector by sector would be no more rational than to aim at balance by country.
But, it may be replied, reciprocity need only mean balanced opportunities to trade. That indeed is a sensible objective. The GATT itself rests squarely on the principle of reciprocal bargains.
How to determine the balance-of- trade opportunity is the question. After more than 30 years of negotiated reductions in trade barriers, tariffs by product or sector are not equal country to country. This is not because of differential protectionism but because past bargaining very frequently involved an exchange of concessions on, say, a chemical product for concessions on, for example, a machinery category. It is sheerest hypocrisy, however, to say that trade barriers, tariff and non-tariff, exist only in Japan and Europe, none in the United States. Everybody sins. What is bound to bring no end of trouble is for the United States to assert a unilateral right to judge the sinners and to assess the gravity of their offenses. "Trade war" is a term often used loosely, but some form of commercial hostilities cannot fail to follow from such an assertion.
To take the point to a not implausible extreme, consider the European commercial airliner, the Airbus. By all accounts it is an excellent aircraft, competitive with comparable American planes. Neither tariffs nor other official trade barriers hamper its sales here, but American carriers have been reluctant to buy the Airbus, no doubt for good business reasons. Is it imaginable, however, that the Europeans will not choose to believe, and once we provide the example, to act on the belief that the Airbus has been the victim of a hidden American non-tariff barrier?
No one should quarrel with the administration's efforts to get other people to lower their trade barriers. We have rights bought and paid for under the GATT. We have the new GATT non- tariff barrier codes, hardly tested so far. We can, if GATT procedures seem excessively slow, discuss and negotiate with our trading partners, as we are doing with Japan. What does not make sense, even under the narrowest construction of American interest, is to lay claim to virtues no one possesses and to play the bully in pressing them on others.