Congress will soon decide to support or deny the administration's request for an increase in our contribution to the International Monetary Fund. Few bills are more important to global economic recovery and, consequently, to our own prosperity.
My colleagues raise a number of objections to the IMF legislation. They say that it would be nothing more than a "bail-out" for the big New York banks. They note that the administration is quick to intervene in the international arena when the "magic of the marketplace" fails, but clings to the ideology of the marketplace when it comes to helping the poor and jobless at home. They argue that the IMF bill would throw good money after bad unless there is a long- lived economic recovery in the United States. Wven if the merits of the bill were compelling, they say, voting for $8.4 billion in "foreign aid" when there are hard-pressed constituents at home would be political suicide.
Each objection has some merit, but none paints a complete picture. For instance, the "bail-out" charge must be put in perspective. The IMF legislation will help indebted countries pay interest on their commercial loans, but it will also help these countries pay for imports that they could otherwise not afford. The imports benefit our export industries, industrial workers and farmers.
The relationship between the IMF and U.S. exports and jobs becomes clear when we examine the recent history of our trade with Mexico, third largest among our trading partners. In 1981, we exported roughly $18 billion in manufactured goods and farm products to Mexico. By the end of 1982, our exports had fallen by $6 billion due to Mexico's liquidity problems. Were exports to Mexico to remain at year-end levels, we would lose approximately 250,000 jobs.
Hope for an increase in our exports to Mexico lies with the IMF adjustment program. With IMF financing, conditioned on the imposition of sound economic measures in Mexico and renewed commercial lending to that nation, Mexico will get its economy moving and increase its purchases of our products. Without IMF involvement, Mexico's economy will deteriorate further, and more American exports and jobs will be lost.
Underlying the "bail-out" charge is the idea that taxpayers are being forced to pick up the tab for greedy bankers. The idea assumes that our banks, more than 1,400 of which lent to Mexico alone, conduct their activities in an economic vacuum. This is simply not so. Private bank lending to Mexico and other developing countries means exports for our industries and jobs for our workers.
Most of us are familiar with the figures that show the importance of exports to our economy. Trade with developing countries plays a prominent role in the overall scheme. American sales to these countries grew 30 percent per year from 1978 through 1980 and now account for more than 30 percent of our exports. In manufactured goods, the share is even higher--almost 40 percent, up 10 percentage points in a decade. In the late 1970s, four of every five new manufacturing jobs were created for export. It is no accident that the growth in our export sector coincided with the growth in international lending by our banks.
This is no apology for the practices of the banks. They lent too generously in the past, and now are exacting disturbingly high fees as they reschedule loans. Efforts to improve supervision of foreign lending and to ease current rescheduling practices are to be applauded, but we must not lose sight of the economic benefits of the lending itself.
My colleagues are right to point out that international economic intervention is not wholly consistent with detachment from domestic economic problems. However, legislators should not withhold support of the Reagan administration when it takes a right step simply because it takes a wrong step elsewhere. Bearing in mind that every American administration since Bretton Woods has supported the IMF, we should let the issue's merits guide our decision.
My colleagues are also right to argue that an expansion of IMF resources is meaningless without the sustained recovery of our economy. The recovery, however, does not take place by itself. Economic growth in other nations and a stable international financial system reinforce recovery here.
The IMF bill is needed because the global economy faces unprecedented problems. The IMF, whose current resources are almost totally committed, is the key international institution to deal with these problems. The IMF helps member nations adjust their economies so that they can grow in a sustained manner. It buttresses the open trading system. Failure to enact the IMF legislation would send an immediate signal to indebted countries and world financial markets that the United States was unwilling to do its part to get the global economy moving again. The results would be plummeting world trade, thousands of jobs lost, and dashed prospects for economic recovery.
Some of my colleagues worry because their constituents view the IMF bill as foreign aid legislation. Our job is to make our constituents understand that IMF financing is not foreign aid. All member nations give resources to the IMF, and all have the right to use them. In fact, after the United Kingdom, the United States is the largest user of IMF funds.
Many legislators are understandably reluctant to vote for the IMF bill at a time when so many constituents suffer. Some may be tempted to hold the IMF bill hostage until the administration adopts different social policies, but no doubt such linkage would delay, and perhaps jeopardize, enactment of the bill. Given the importance of the IMF and the need to enlarge its resources, this would be a mistake.