PRESIDENT REAGAN'S proposal for a new Department of Trade is not a very useful gesture. Moving the boxes and lines around on the organization chart won't help much as long as there's no clear agreement on trade policy.
In terms of the internal debate within the administration, Mr. Reagan's rather tepid endorsement of the reorganization is a concession to those--for whom the Commerce Department is the spokesman --who want the government to defend and promote American products more actively in an unfriendly world. But Mr. Reagan is by no means ready to reject the economists' counter-argument. They hold that this country's trade troubles are chiefly the result not of foreign governments' manipulations, but of the dollar's very high exchange rate.
That case is currently being made forcefully by Martin Feldstein, the chairman of the president's Council of Economic Advisers. The high exchange rate is the result of high interest rates, he points out, and the high interest rates in turn are the result of the very large federal budget deficits in prospect for the years ahead. If you want to do something really useful for American exports, and for the American industries that compete with imports, he concludes that you have to attack those budget deficits.
Mr. Feldstein is absolutely right about that. A lot of the prevalent anxiety about alleged industrial decline and loss of competitiveness would quickly vanish if interest rates were to drop back into the normal range. But to say that Mr. Feldstein is right does not completely settle the issue. The Commerce Department has been arguing that in one crucial area--the high-technology industries--exchange rates make less difference, because governments provide powerful assistance. The proposed Department of Trade would be the vehicle for focusing national support for the American export industries.
The model is clearly Japan's formidable MITI-- the Ministry of International Trade and Industry. Mr. Reagan is asking Congress to lay the foundation for an American MITI. The new Department of Trade would be the present Commerce Department, stripped of some of its less exciting functions but taking over the functions of the White House trade office.
Abolishing the White House trade office, and transferring its responsibilities to a renovated Commerce Department, would certainly have one immediate effect. Instead of serving the president's very broad constituency, the trade negotiators would find themselves working for the Commerce Department's narrower one--mainly the trade associations and some of the manufacturing companies. That would not necessarily elevate the quality of American trade policy. Nor would it move policy toward Mr. Reagan's ideal of open markets.