It is news that an administration which came to office vowing to kill the departments of Education and Energy should now be proposing to create a new Department of Trade. This is at least as bad an idea as the Department of Education and probably worse than the Department of Energy.
Why a Department of Trade?
One answer is that trade responsibilities are now diffused among a number of agencies. Another, which is not necessarily connected with the first, is that our international trade in goods is chronically in deficit. A third, which seems too frivolous to be accepted, is that Ed Meese wishes to reduce the size of the Executive Office by transferring out the special trade representative and staff.
Trade is the most pervasive aspect of our foreign relations. Can one imagine a secretary of state so self-effacing as to foreswear a role in making trade policy? As the foreign debt crisis has brought sharply into focus, the link between trade and finance means the Treasury has a basic interest in trade policy. The Department of Commerce, representative of the nation's business sector, cannot be excluded.
Other Cabinet departments are involved. Labor, of course, Justice (antitrust), Defense (East-West trade, the mobilization base), Interior (fisheries and minerals) and Energy all have good claims to have their views represented.
Among the non-Cabinet agencies are the Export-Import Bank, facilitator of big-ticket exports, the Federal Trade Commission, sharing an antitrust interest with Justice, the Overseas Private Investment Corporation, and the International Trade Commission. It would be unfortunate if the Council of Economic Advisers, a reliable voice for good sense, were not to be consulted on trade issues. In the past at least, it was not unthinkable to have a member of the Federal Reserve Board at interagency meetings on trade.
Then there is Agriculture. The essential hollowness of the idea of a Trade Department is that no one expects that Agriculture will be asked to give up any part of its trade responsibilities. And agricultural goods normally make up 20 percent of our exports. Some centralizing of responsibilities.
With or without Agriculture, there unquestionably is a coordination problem. Where should the coordinating responsibility be lodged?
For about 20 years it has been in the Executive Office, where in our government differences among the departments usually are refereed and resolved. To put it in a renamed Commerce Department is not going to prevent intra-Cabinet differences from being taken to the White House. No form of organization can deny a Cabinet secretary the right to make his case to the president.
So what is to be gained? The president says that a Department of Trade will have us "speak with one voice on trade." Does he really mean that we now speak with more than one voice after his administration has made a decision? And surely he does not mean that he wishes to silence the interagency debate that precedes a decision?
Whether a Department of Trade would tilt policy toward more protectionism is arguable, I suppose. The Commerce Department has never been the steadiest or staunchest defender of free trade, which follows from the fact that the department's business constituency includes important groups with a stake in obtaining or perpetuating import restrictions. At any rate, there is a more than hypothetical risk that to try to centralize the trade responsibility in a slightly altered Commerce Department would tend, case by case, to weaken resistance to pressures for protection.
It takes a large act of faith to believe that a Department of Trade could do much for the nation's deficit in merchandise trade. None of the departments or agencies concerned with foreign trade can have been entirely happy with high interest rates and the consequent strong dollar that has hampered exports and encouraged imports. None had the power to change things. Would a new department be able to bring the deficit under control, or persuade the Federal Reserve to adopt another monetary policy?
Microeconomic influences on the trade account are likely also to be beyond the reach of any department, new or old. Like it or not, policies toward human rights, bribery, trade with the East and the Arab boycott do have a negative impact on exports. Congress and the executive are aware of this and have accepted the consequences. To assume that a Department of Trade could persuade them to the contrary requires a suspension of disbelief.
It would be interesting to question those members of Congress who cheerfully rejected President Ford's 1975 proposal to allow oil prices to rise to the world level. If they had been told by a secretary of trade that this decision infallibly would inflate the import bill, as it did for the next six years, would they have acted differently?
A persistent notion has it that we lag all other nations, especially Japan, in managing trade policy. Not so. Everyone has a coordination problem, for the same reasons that we have one. In Japan seven major ministries and a number of non-Cabinet agencies are in the act. The Ministry of International Trade and Industry, or MITI, despite its awesome press notices, is one among many. It does not even have charge of trade negotiations, that being for the Ministry of Foreign Affairs.
The bottom line is that a Department of Trade could perform no feats of magic. It could not eliminate the need for tedious interagency conferences and clearances. It could not free the president from having to decide the difficult ones. It could not do what all present departments of government wish could be done quickly and painlessly: make our giant, sprawling economy more productive, competitive and prosperous. To expect it to remove even minor impediments to exports is the merest hope.