WORLD economic summits tend to have their own importance -- and momentum. It is increasingly clear that the upcoming summit at Bonn in May will be especially important for the global economy, in terms of defining the type of trade patterns which will prevail during the remainder of this decade. The leaders of the major industrial nations must take all possible steps to avoid protectionism, while working toward a new round of international tariff reductions. The summit leaders -- from the United States, Western Europe and Japan -- must also take practical measures to bring their currencies into an equilibrium, to avoid the type of trading distortions that have occurred in recent weeks, as imports in the US have surged at the expense of US manufacturing production. The reason is clear: It is the US economy that has been the driving force behind the present global recovery. Thus, it is vital to world economic well being that the US economy remain vibrant. A strong manufacturing sector in the US is a key component of a healthy US economy.
Unless corrective measures are taken to upgrade America's manufacturing prowess, the result could well be a permanent -- or at least, long-range -- loss of overseas markets for many US firms; continuing job losses; and perhaps more serious, a diminution in the standard of living of Americans in general, particularly for the large middle class. Manufacturing sector jobs more often than not tend to lead the economy as a whole in terms of wage gains and benefit packages. It takes some 9 or 10 workers in a fast-food service establishment to equal the impact on the economy of one worker in a manufacturing job such as steel or auto production.
Imports have their benefits. They help hold down prices, resulting in lower inflation. But as noted last week by a Commerce Department economist, the United States ``can't keep growing if we're importing all our goods.'' Yet, as the latest economic figures out of Washington show, American consumers seem to be turning to lower-priced imports whenever possible. Europeans, for their part, as the editorial excerpt reprinted on this page from The Times (London) indicates, are aware of this crucial shift in US consumer preferences.
Last week's ``flash'' estimate out of Washington shows the economy growing at a slower pace than anticipated during the first quarter of 1985 -- at a seasonally adjusted annual rate of 2.1 percent, sharply below the 4 percent growth expected by most economists.
For technical reasons, the first-quarter growth figure could well be revised upward later. But a modest revision upward would not reflect the type of vigorous growth that is necessary to accommodate a growing work force. Most economists say that the economy must grow at least 3 percent or more annually to absorb new job entrants. Any growth below that level would be expected to add to the unemployment rosters.
Most economists still believe that the recovery will continue throughout 1985 -- and that the nation's growth will be between 3 and 4 percent. Still, there is no denying the current impact of imports on the manufacturing sector. A significant part of the new jobs in the economy continue to be in lower paying service industry jobs.
To an extent, of course, modest downward pressure on the dollar -- as has occurred in recent days -- will lead to a self-correction of the value of the dollar vis-`a-vis other currencies. And that will mean lessening demand for imports. But such a gradual self-correction would come over time, probably months down the road. In the meantime, more US markets abroad will be lost.
What then is to be done to aid US manufacturing industries? A number of interrelated steps seem in order:
Foremost, of course, is a need for quick action on the budget to help bring down massive deficits, which put upward pressure on interest rates and, in turn, prop up the dollar. Congress and the White House need to work out a budget freeze that includes defense spending.
Within the United States, meanwhile, the federal government needs to develop a long-range and coordinated trade policy. There should be a Cabinet-level department tying together all trade-related agencies, as is common in European nations. Antitrust laws should be altered that inhibit joint ventures abroad. Tax laws must recognize the importance of investment in new technologies. And finally, should Congress now end long-term jobless benefits, as called for by the White House, at a time when few new jobs are being created in manufacturing? Many of the workers receiving such benefits are workers displaced from their positions in older manufacturing industries.