So-called local content legislation was passed by the House last week. Strongly favored by the labor unions, it would, if enacted, direct that imported automobiles could only be marketed in this country if a certain proportion of American labor and materials had been used in their manufacture.
Such legislation presents a real problem to our trading partners. It also presents a problem to traditionally free-trade-minded Democrats. We asked seven Democrats widely regarded as presidential candidates to tell us what they thought of the local content legislation.
In an act of unprecedented brutality, we also required that they keep their remarks to around 300 words. Their answers follow. Walter Mondale:
Last week, I called for an emergency economic summit to confront the deep and persistent international recession, which threatens to unravel the fabric of global economic cooperation and foster political extremism. The summit's agenda should focus on four key objectives: restarting the engine of global economic growth; rectifying distorted currency valuations; shoring up the shaky international system of banking and finance; and arresting the drift toward a world trade war.
Throughout the postwar epoch, the United States has spearheaded the effort to forge a fairer and more open regime of international commerce. I've fought throughout my career in public life to lower trade barriers. But at a time when all the nations of Europe have slammed the door on Japanese autos, when more than 30 nations have already adopted local content laws, when the value of the yen is seriously distorted in relation to the dollar, this country cannot continue to act as though free trade is a reality. The American automobile industry is getting clobbered. The effect on American workers and their communities has been devastating. We must act promptly and firmly to force a change in this unfair situation. As a result, I favor domestic content legislation.
At the same time, we must spur domestic growth by reducing our intolerable budget deficits while adopting a forthcoming and sustainable monetary policy. We must do our part to rectify currency distortions. And we must use the Ex-Im Bank and the Commodity Credit Corporation to match the export subsidies foreign governments offer their manufacturers and farmers.
I am convinced that once the rest of the world sees that we mean business, they will be much more inclined to negotiate fair reductions in trade barriers. In the global meetings I envisage, local content legislation as well as other measures would certainly be on the table, subject to negotiation.
But one thing is absolutely clear--we cannot fail to act, because our people are suffering. If responsible public figures don't exercise leadership, pressures for harsh and damaging action will become irresistible. We confront new challenges that can only be met with new approaches. Let's get on with it. Alan Cranston:
I support the domestic content legislation because I believe we must have the fairest possible trade if we are to have the freest possible trade. This legislation can help ensure fairer trade--and more free trade--in the future.
Today, the U.S. economy is heavily reliant on trade --particularly the American jobs produced by our exports of agricultural and manufactured products. But can we really have free trade without fair trade? I think not.
There were 1.8 million Japanese-built cars sold in the United States last year. Only 4,201 U.S. cars were sold in Japan. The disparity is due in some significant measure to numerous Japanese trade barriers. Try to tell an unemployed auto worker that this is "free trade"!
Negotiated "trade reciprocity" hasn't worked. The United States has had highly skilled trade negotiators, like Republican Bill Brock and Democrat Bob Strauss. But enormous barriers remain to the sale of U.S. goods abroad. And recent international trade negotiations designed to reduce these barriers have gone nowhere.
We must back up our diplomatic talk with legislative action. Thirty-one countries already have some form of domestic content law--often the result of constituents' pressures. We have our constituents, too; about 20 million of them are unemployed or underemployed. We need to respond to their needs and concerns.
Some have argued that by threatening to curb some of our markets, we still ultimately lose jobs in the United States. This is debatable. But if selectively closed markets do ultimately harm employment, then we can take some comfort in the fact that the Japanese and the Europeans--who retain enormous barriers to U.S. exporters--will be the first to feel this pinch and to alter their policies.
I am an advocate of free trade. But we need a legislative stick to go with the diplomatic carrot. After all, just because one is for peace doesn't mean we need not have an army and a strong military deterrent. We must not unilaterally disarm our trade negotiators. Rather, we should give them the leverage they need to protect American workers' rights and ensure more fair trade. This is what we in Congress are trying to do by pushing the domestic content legislation. Gary Hart:
Our national interest and a healthy economy require a modern, competitive automobile industry. We must take every constructive step necessary --including short-term relief--to achieve this goal. But, we must resist the temptation of protectionism. Our only hope to become the world's leading economic power in the 21st century is international trade.
I have not cosponsored the domestic content legislation pending in Congress. But if it proves to be the only way to avoid the collapse of our auto industry, I will support it.
No one can argue with the bill's basic, underlying goal: preserving the jobs of American auto workers. My concern with domestic content is not over such an objective, for I strongly support it. The dangers with domestic content are: its antithesis to more open trade objectives and principles; its legality under international trade laws; whether the bill's current schedule would provide relief soon enough; and whether its content percentage formulas are too harsh. But its fundamental flaw is that it does not contribute the key objective of developing a globally competitive auto industry.
I believe better alternatives can be constructed before this bill comes before the Senate. But this wider range of actions should directly link immediate short-term relief with long-range measures designed to make the industry competitive by the late 1980s:
* immediate reversal of monetary- fiscal priorities to help restore more realistic dollar-vs.-yen ratios;
* possible extension of the voluntary import restraint on Japanese cars;
* a revitalized Trade Adjustment Assistance program, with immediate emphasis on adjustment and retraining; and
* cooperation by government, the industry and labor on developing a long-term plan for achieving industry modernization.
Domestic content legislation outside the context of a plan to modernize our auto industry would be inadequate and self-defeating. Reubin Askew:
I am concerned about the plight of American auto workers and the American auto industry. I firmly believe the American auto industry can modernize and succeed.
But I am also concerned about the American consumer. And, as a former U.S. trade representative, I do not believe we will ensure the success of the auto indus- try or protect consumers by establishing domestic content requirements for motor vehicles sold in the United States.
Such legislation would raise new car prices in the United States by 1985 by 10 percent--about $1,000--and cost the economy between $3 billion and $5 billion.
Also, this legislation could violate our treaty obligations and thus free foreign countries to retaliate against more than $15 billion in U.S. exports--including aerospace, electrical components, and wheat, corn, soybeans and other agricultural products. American agriculture would be the first victim in an exchange that could lead to an unraveling of the world trading system.
Moreover, the nonpartisan Congressional Budget Office calculates that, if other nations retaliated, by 1990 this legislation would add 70,000 jobs in the auto industry but would cost 220,000 other jobs, for an overall net loss of 150,000 jobs to the American economy.
Unlike steel, there has been no allegation of unfair trade practices by Japan in the auto sector. We should continue to press the Japanese to increase their automotive and other manufacturing investments in the United States. But this cannot be accomplished constructively by coercion, and it need not be accomplished at the high price that will be the ultimate cost of domestic content legislation.
The fundamental problems of the American auto industry are domestic in nature. Needless trade barriers will only divert us from addressing those problems--which can only be solved through a fundamentally new working relationship among labor, management and government. John Glenn:
Our basic industries no longer dominate international competition as they once did. Continuing high levels of imports, aggressive foreign industrial policies and a prolonged recession are threatening the economic vitality upon which our national security depends. With American industry operating at only 68 percent of capacity--in steel at only 32 percent--that danger is clear and present. We must face these facts and shape our policies accordingly.
This means getting tough where previously we could afford to be benevolent. It means defining our rights and priorities and pursuing them as tenaciously as our trading partners pursue theirs.
What are those rights and priorities?
First and foremost, we need a strong and diverse manufacturing base. This is essential to realize our broadest national goals: full employment, technological competitiveness and a high standard of living. Most critically, our national security, and that of our allies, rests on America's ability to mobilize its industrial strength. We cannot defend our national interests with fast foods and video games or by launching microchips at enemy tanks.
Second, government has a legitimate role in maintaining our basic industries. It must do this by acting vigorously against unfair or injurious import competition. We have a clear, international right to do this--a fact that administrations nostalgic for simpler times tend to forget.
Third, we must be more aggressive in using our greatest bargaining leverage--the rich and vast American market--to open foreign markets and to ensure we are treated fairly on matters, such as investment, not currently covered by effective international rules. Companies that enjoy sales benefits in our open markets should invest, produce and pay taxes here as well. That is the point of local content legislation.
Finally, beyond the problems posed by foreign industrial policies, our government must act positively to make U.S. industry competitive. If our goal is to maintain industries that can compete successfully, an expanded commitment to research and development is an essential first step.
Times have changed. And just as we can no longer tolerate the predatory practices of our trading partners, neither can we take American competitiveness for granted. But with effective government leadership, Americans can still outproduce, outinvent and outcompete anyone on the face of this planet. Morris Udall:
Why is a free-trader like Mo Udall cosponsoring and voting for an admittedly protectionist measure like domestic content legislation?
This year, America will suffer a record trade deficit--more than $30 billion, with half of it due to the trade deficit with Japan. Today our auto industry is being devastated. Auto-dependent industries also suffer. In my state of Arizona, there are over 12,000 unemployed copper workers.
In times like these, we are all going to be tested. I represent the largest copper- and uranium-producing state in the country. Our copper and uranium producers are faced with stiff international competition, and the competition is not always fair. A 90- year-old smelter in Douglas, Ariz., is in danger of closing down because it cannot meet pollution standards. Yet 40 miles away in Mexico there are plans to build a new smelter with foreign assistance that would generate more pollution than the Douglas smelter.
We all have sensitive trade concerns. Americans are not going to sit idly by and allow the auto industry, which took 60 years to build and accounts for one out of 10 jobs, to die overnight.
Given world trade tensions, it is important that we give renewed support to GATT as a means of resolving trade disputes. The Japanese must be encouraged to relax their nontariff trade barriers. We must meet the challenge of international competition by promoting the growth of our high-tech industries and meeting new educational challenges, such as computer literacy.
Whatever happens, we face a difficult transition ahead. We have millions of displaced workers. Not all will be rehired at their old jobs. For those who need new jobs, we should provide extended unemployment benefits, trade adjustment assistance and, most important, job retraining support.
The vote on the domestic content bill should be taken as a warning by our trading partners. They need to exercise restraint. It is better to fire a warning shot over the bow today than to risk a full-scale trade war later. Ernest Hollings:
I favor the content proposal not so much to put Japan on notice as to put the Reagan administration on notice. America is not competing in international trade because we lack trade policy. The administration is hopelessly divided on trade theory, and trade practice is stymied by lack of coordination between the agencies the president oversees. We never know on any trade issue whether the trade representative or State or Treasury or Commerce or Agriculture is calling the shots.
America will not be competitive again until we relearn the lesson that economic survival depends on government, labor, business and agriculture working together. The greatest disservice of this administration is fostering the idea that government is the enemy. The countries outcompeting us head in exactly the opposite direction, with comprehensive trade strategies and everyone pulling together. We require a wholesale change of attitude at the top. We can do what is necessary without passing lots of laws or establishing myriad new agencies. Indeed, it is better done without all that. But this administration is too stubborn to change course without the strongest prod. With the message across, we wouldn't have to threaten with laws like this one.
Today we couldn't start a trade war if we wanted to. The content bill would put us 32nd in the line of nations having automobile trade requirements. In this stiffest trade competition, America must compete. Our automotive industry--given breathing room to retool and update--can be fully competitive again. That policy worked for our textile industry, which again leads the world in productivity.
I don't mind signaling the Japanese on the need for reduced barriers and trade reciprocity. But much more, I want to signal the president on the need to compete for economic survival.