A CERTAIN AMOUNT of protectionist legislation is always pending in Congress. It's part of the background noise. But this year, hurting industries have spun the volume knob to LOUD. More than half the members of both houses -- 288 in the House, 53 senators -- have signed onto a bill to cut textile imports by a third. Bills have been introduced to keep out other foreign products ranging from bicycles and shoes to lumber and uranium. Other legislation would reduce the discretion of the executive branch to deny relief to petitioning industries in the future. The pressures are serious.
The temptation is to dismiss these bills as symptoms, not of a fundamental economic problem, but of a character defect in Congress. Let any large wheel squeak, this minimizing view of the matter goes, and members will rush to grease it, no matter what the long-term consequences. To buy votes in the next election, they would risk a trade war. But that explanation does not wash this time. The problem is not congressional politics but underlying U.S. economic policy.
The U.S. merchandise trade deficit rose from $25.5 billion in 1980 to $107.4 billion last year, and this year is expected to be higher still. A leading cause has been the strength of the dollar, which has risen in value more than 40 percent since 1980 relative to other currencies. A strong dollar adds to the cost of U.S. products abroad while reducing prices of foreign goods here; it makes exports less competitive, imports more so. The dollar in turn has been held up in part by high U.S. interest rates -- and interest rates have been propped up by record federal budget deficits and government borrowing. The budget deficit -- which has risen from $59.6 billion in fiscal 1980 to more than $200 billion this fiscal year -- has helped produce and sustain the trade deficit. The two deficits are different reflections of the same fact. America is consuming more than it produces; it has been living beyond its means.
It is hard to speak of retrenchment -- spending cuts, a tax increase -- when unemployment is still over 7 percent. But that is what is needed. The textile bill is thought likely to pass; so may some of the others. The administration is correct to oppose them. But it is not offering a strong alternative trade policy. It is playing on the surface of the trade issue; it has resisted acknowledging the relationship between the budget deficit, which is a direct reflection of policy, and the trade deficit, which it has suggested is not. The president should take the lead in pointing out that the budget and trade problems are interdependent. It would strengthen his hand in dealing with them both.