AMERICAN ANXIETIES about imports arise from a feeling that the country's basic manufacturing capacities are being eroded. The accusation holds that world trade does more than substitute jobs in an efficient plant for those in an inefficient one. Instead, it argues, current trade patterns are inflicting large losses in manufacturing jobs on the American economy and, beyond that, losses in the ability to manufacture. Further, these losses are being aggravated by the policies that other countries --meaning Japan--use to promote their products.
That's the indictment. Does a rigorous examination of actual experience bear it out?
In one word, no. The economist Robert Z. Lawrence, writing in the current issue of the Brookings Papers, carefully reviews the evidence and comes to several conclusions that deserve the attention of all the people now warming up for next year's election. In the crucial period of rapid change that began with the 1973 oil crisis and ended with the 1980 recession, the number of jobs in manufacturing rose slightly in this country. It would have fallen but for the net gains in industrial jobs created by foreign trade.
The United States has not lost its comparative advantage in manufacturing; to the contrary. It has certainly lost ground in certain industries--those that are labor-intensive, capital-intensive and dependent on well-known technologies. But, Mr. Lawrence finds, in the 1970s Americans developed capacities in the high-technology industries that more than compensated for the losses in older and simpler products.
There is a lot of pain and tension, unfortunately, in this process of shifting advantages and resources from familiar industries to the new ones. The degree of social distress has created an illusion of a general industrial decline. But it's an illusion, so far.
Since 1980, the pattern has changed. There have been two recessions, and the dollar's exchange rate has soared. That has made all American exports less competitive abroad because their prices have risen. With normal growth and a lower dollar, Mr. Lawrence concludes, manufacturing employment will recover with the rest of the economy.
But while he does not get into the subject, there is also a less optimistic corollary to that conclusion. If the dollar's exchange rate stays very high for a long time--a period of years--the damage to export industries could well be more than temporary. High interest rates are holding the dollar up. That's another reason why it's important to get them down, and soon.