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US trade commissioner urges US industries to forgo protectionism

US industry needs to face up to the reality that government cannot protect it from the long-term forces of economic change, says Patricia Bailey, a member of the Federal Trade Commission.

The commissioner, speaking last week to a group of students and faculty members at Tufts University's Fletcher School of Law and Diplomacy, said that rather than pushing for trade sanctions to protect domestic firms, the United States in many cases should be establishing priorities to facilitate a private-sector restructuring of American industry toward areas where the US holds a clear, long-term comparative advantage over foreign competitors.

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''The government has a limited ability to protect the jobs and living standards of workers and to protect businesses - and certainly not in the long-run,'' she says. ''The only people who can really do it are the industry (managers) and workers themselves. In the end, they are going to have to make themselves competitive.

''What the government can do is provide some sort of adjustment assistance.''

Ms. Bailey, a Republican appointed to the five-member FTC during the Carter administration, stressed that such ''readjustments'' may take 30 years in some industries. She cited high technology and services as potential lucrative growth areas to take up the economic slack from waning smokestack industries.

''Protectionist pressures are more intense now than at any time since the 1930s,'' she says. The pressures are rising as American industry faces continued stiff competition from foreign imports, as evidenced in last year's record $70 billion trade deficit. This year the trade deficit is expected to rise to $110 billion.

The deficits have come in part as a result of the continued stength of the US dollar relative to other currencies. The strong dollar - propped up by heavy government borrowing to finance the large federal deficit - enables foreign competitors to sell their goods at an effective discount in American markets.

American industries have also long complained that they are losing domestic markets to cheap imports from government-subsidized or government-owned foreign competitors. Executives and labor leaders argue that they can't compete against governments that view their industries as sources of jobs, rather than primarily as profitmaking enterprises. The result in the US has been production cutbacks, plant closures, and layoffs.

Ms. Bailey stressed that there are occasions when trade sanctions should be used. ''We should never get ourselves in a position where we allow foreign imports to be dumped (on us) or subsidized in such a way that what they do is destroy an American industry,'' she said.

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But Ms. Bailey noted that not all requests for quotas, tariffs, and other import restrictions are warranted. She said that while import restrictions may help save jobs and maintain US industrial output in the short term, over the longer term they may only serve to prolong industrial inefficiencies in the US.

''Competition advocates, such as those of us at the FTC, believe - and quite strongly - that competition provides the best stimulus for producers to become more efficient,'' she says. ''Removing competition often removes the incentive to adjust and can addict an industry to government protection.''

An industry's ''real problems'' may be bad management, outdated production equipment and techniques, improvident wage concessions, or a long-term decline in demand, Ms. Bailey notes, adding that government protection against imports will not solve those problems. In addition, she says, protectionist measures ultimately result in a ''hidden tax'' paid by American consumers.

The FTC commissioner cited a Washington University report estimating that in 1980 US trade restrictions cost the average American family of four $1,000 more for its purchases. A Brookings Institution study has estimated that voluntary quotas on Japanese cars cost Americans $4.3 billion in 1983.

''It translates out to about $100,000 per job saved in the auto industry,'' says Ms. Bailey. ''These numbers suggest, frankly, that American consumers would be better off if they just paid laid-off workers their normal salary plus benefits, directly, rather than paying to preserve their jobs.''

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