THE FORD Motor Company told Congress the other day that despite fierce competition from imports, it will not support the local content bill. That bill is the most dangerous trade protection legislation now before Congress, and Ford's case against it helps to sharpen the issue in the votes ahead. The bill is supposed to protect jobs. But, as Ford's chairman, Philip Caldwell, points out, it would have no practical effect on employment for at least several years.

Mr. Caldwell's testimony ought to give pause to any congressman who thinks that requiring local -- i.e., American-made -- content is a cheap and easy solution to unemployment in Detroit. Ford does not object in principle to protectionism; it has vigorously supported the present quotas on Japanese imports. Ford has lost an important share of its market to the Japanese. And yet even Ford warns Congress that this bill ought to be considered only as a "last resort."

Others, including ourselves, argue that a local content rule would be a disaster under any circumstances. It's a threat to every American company that exports -- and American exports of manufactured goods far outweigh the imports. But Mr. Caldwell and his company are at the center of this struggle, with a highly uncertain future if American automobile production continues to fall, and they are entitled to the most careful hearing.

The exchange rate between the Japanese yen and the American dollar, Mr. Caldwell emphasizes, is crucial. The yen has been dropping sharply against the dollar, cutting the prices of Japanese goods in the American market. What's causing it?

Here we come back to the familiar subject of the federal budget deficit. The United States is making headway in reducing inflation, as the very modest change in consumer prices last month has demonstrated. But that feat is being accomplished at a time when the federal deficit is very high, and rapidly rising. The result is high unemployment and high interest rates. Japan, in contrast, has managed to bring its inflation rate down to zero and is holding its interest rates significantly lower than those in this country. Capital is flowing out of Japan and into this country, pushing the yen down and the dollar up.

The moral of the story is that the budget deficit is not merely a financial abstraction. It has real consequences in American factories and the communities that surround them. Bad economic policy here in Washington means falling sales and falling production in hundreds of other places, where anxious people blame Japanese imports instead of the real cause. Just as an excessively high dollar is a burden to Ford as it fights off foreign competition at home, it is equally a burden to Boeing as it tries to sell aircraft abroad in competition with Europe's Airbus. Local content legislation won't help. The only real remedy is to get deficits and interest rates down.