REVIEW & OUTLOOK (Editorial): The Big Trade 'Disaster'
The way everyone's carrying on about the 1984 U.S. merchandise trade deficit you'd think a flying saucer had landed and threatened to spray us all with poison gas. The National Association of Manufacturers is calling the record $123.3 billion deficit a "disaster." Rep. Don Bonker (D., Wash.) naturally thinks the Reagan administration needs to be "held accountable."</br></br>Presidents need to be held accountable for things they should control, but the president, thank goodness, does not dictate how much Americans buy and sell abroad. Even if he did, he would find it extremely hard to kill the trade deficit his critics think so horrendous without at the same time aborting the U.S. economic recovery.</br></br>As every dime-store clerk knows, 1984 was anything but an economic "disaster" for the U.S. The trade deficit stems from the fact that, with a few sectoral exceptions, the U.S. economy came roaring back from recession with immense vigor. When demand booms, it sucks in goods of all kinds. U.S. industries give exporting a lower priority as they rush to meet domestic demand. U.S. trade will move toward balance when the U.S. economic growth rate falls more into line with the average growth rate of U.S. trading partners. You will know this is happening when those who are currently viewing the trade deficit with alarm start complaining that America is falling behind in the world.</br></br>This is not to say that politicians cannot affect trade. They certainly can and they do, almost always for the worse. A good Ph.D. thesis could be written about the damage Washington did to the world competitive position of the U.S. auto industry in the 1970s with misguided overregulation, best represented by fuel-efficiency standards that disrupted the industry's product planning and opened the import door to foreign luxury cars.</br></br>That is why we are always wary when politicians and industry lobbies start yelling "disaster." When the subject is trade, the next word that comes after "disaster" is "protection." If the U.S. wants economic trouble, that's the way to get it.