Trade legislation will be the big story after Labor Day: an angry Congress, convinced that Japan has contrived to run an "unfair" trade surplus with the United States, will try to pass retaliatory measures.
A Democratic proposal to slap a 25 percent extra duty on imports from Japan (with Taiwan, South Korea, and Brazil thrown in for good measure) will get a big push in the House. Republican-sponsored bills take a different approach, but all are directed to the same end. With worsening monthly trade statistics predictable this fall, the result will be scare headlines and the-sky-is-falling bulletins on the evening news.
President Reagan's gutsy decision not to yield to pressure for quotas on shoe imports may merely whet the protectionist appetite on Capitol Hill, adding to the charge that the administration has "no policy" on trade. Senate Majority Leader Bob Dole, it should be noted, predicted while junketing in Asia that Congress is "going to take back" trade policy from the White House.
The backdrop for the big protectionist drive in Congress is an economy much weaker than the administration and many private forecasters had expected, with no real signs of a predicted resurgence. A certain unease about the direction of the Reagan administration in its second term, and about the health of the president, may be contributing to the concern.
But the major problem clearly is the strong competition from imported goods. This is adversely affecting manufacturing businesses in this country, and will continue to do so as long as the dollar remains overvalued.
Even if Congress goes protectionist, it will make only a small dent in our global trade deficit -- running around $150 billion a year -- and at the expense of touching off a trade war and inflation in consumer prices. Quotas and export surcharges are a cover-up for industrial weakness, not a solution of the basic problem.
In a recent book, "The Competition: Dealing With Japan," published by the Hudson Institute, authors Thomas Pepper, Merit E. Janow and Jimmy W. Wheeler, make a key point: "The Japanese are not responsible . . . for the revitalization of the U.S. economy. That depends on the attitudes and actions of Americans themselves."
American businessmen for too many years have taken it for granted that their products are the best. But global customers have another view. From videotape recorders to microwave ovens to telephone-answering machines, the Japanese have taken ideas or inventions created by others and successfully applied modern methods to marketing and merchandising. What's happened to the old Yankee trader spirit?
Beyond the obvious need for American managers and workers to rededicate their skills to marketing and to product quality, the Japanese and American governments must take some sensible policy actions.
Having profited in a spectacular way from global trade expansion, Japan has a clear obligation to do what is neccessary to keep the global economy functioning smoothly: there can no longer be a single-minded Japanese dedication to export-led growth. Liberal Democratic Party leader Kiichi Miyazawa made the point in a recent visit that Japan must now emphasize housing and other goals that will improve the Japanese quality of life, and expand its real capacity to import foreign goods.
On the American side, the first priority should be to deal with the overvalued dollar by taking serious measures to reduce the federal budget deficit. Economist C. Fred Bergsten's rule of thumb is that each one- point shift in the exchange rate is worth about $3 billion in the trade deficit: over the long run, a 20 percent fall in the dollar would cut the trade deficit by about $60 billion.
Expansion of the domestic economies in Western Europe, coincident with similar steps in Japan, would also work to achieve a better trade balance and more sensible currency relationships.
Then, if we are to be serious about meeting the competitive challenges of Japan, there should be a new American commitment to education, especially in math and the sciences.
Reagan should be applauded for his stand on shoe imports, as well as his general resistance to the protectionist urges of Senate Republicans. But he must supplement his "free trade" posture with a realistic program to ease the impact of import competition on employers and employees. It is not enough to say that we have created 6 million or 8 million new jobs despite the huge trade deficit.
That, after all, is a net figure. According to Pat Choate of TRW Inc., it disguises the fact that technological advances have permanently erased jobs for as many as 2 million workers who as individuals cannot cope with the challenges of vast economic change that bring benefits nationwide.