Reagan magic, a world trade abyss, and bipartisanship

RONALD Reagan and Walter Mondale made a mistake of omission in their 1984 debates. So did America. Now a warning has arrived. The two candidates failed to engage in any serious discussion of fair trade, protectionism, jobs in the United States in relation to jobs in Korea and Brazil, and how better to resolve conflicts. Neither Messrs. Reagan and Mondale nor voters at large wrestled with the question of how to repair the international trading system that so expanded the world economy after the 1940s.

So, instead of debating the matter in national terms during a national election, Americans are now lurching toward debating it in local terms during midterm congressional elections.

The House of Representatives set the agenda last week with a bill that passed by an almost 3 to 1 majority. That wasn't quite a Gulf of Tonkin sweep. But the result could prove almost as unfortunate as that famous resolution which so popularly led America into its most unpopular war (Vietnam).

True, the House vote is only one step along the road to protectionism. And the President stands, veto ready. The Reagan administration is counting on that veto, the President's persuasiveness, and a guess that House Democrats want the issue, not eventual passage of a law. The White House is further counting on another year or so of the weaker dollar to cut the $150 billion annual trade deficit sharply, and thus relieve pressure for protection.

But the House has already put pressure on Senate Republicans up for reelection. And no student of contemporary history should ignore that perceptive interpreter of GOP and national trends, Kevin Phillips, who has been saying bluntly that the era of gradually freer worldwide trade, which began in the late 1940s, has been doomed for some time -- and that we are sliding toward a new era in which the globe will be fragmented into trade blocs.

If Mr. Phillips is right, the free-market nations could face a breakdown into groups of trading partners whose products and consumption needs are complementary. If so, that process might spur something akin to bankruptcy proceedings for heavy debtors in Latin America and Africa, and quite possibly for those Pacific Rim states that have so far been able to outgrow their heavy debt load by exporting.

Of course, no lawmaker who voted for the House trade bill envisions any such result. Two earnest and understandable motives impelled most of those votes: (1) a desire to save jobs in local industries troubled by import competition; (2) a hope that pressure would produce not reprisals abroad and a trade-barrier war but bargaining toward that elusive ``level playing field'' in world trade.

That's how it looks on Capitol Hill. Unfortunately, it doesn't look the same way in industrial board rooms (and trade ministries) in Kuala Lumpur, Sao Paulo, and D"usseldorf. There, planners hold their breath, count on Reagan's magic working once again (it seems to respond to rubbing more times than Aladdin's lamp), or draw up contingency plans for seeking alternate markets and/or laying off workers.

Reagan's magic (and veto) probably will work again. The President made a successful preemptive move on specialty steel imports in 1984 only a few weeks before the election. His crew has held off a lot of individual trade-restriction bills since. They can use the veto threat to shape moves in the Senate. If need be, they can choose to emphasize some of the more useful subsections of the House bill in bargaining with GOP senators. Those sections include tightening copyright and patent protection, removal of export controls over some marginally strategic US products (some types of machine tools would be candidates), and funding for retraining workers and restructuring industries damaged by imports benefiting from cheap labor, subsidy, or cheap capital.

Thus the free-market world would muddle through -- one hopes. But remember that the Tonkin resolution was also built on hope that a sharp warning would prevent expanded war.

Something more than hope, and midterm election politics, is called for on trade. Mr. Reagan's team ought to be thinking now about strategy for the period after the fall elections. One aim should be to carry more bipartisanship into planning for 1987 meetings of the Group of Five finance ministers or the big-seven economic summiteers. That doesn't mean that Treasury Secretary James A. Baker III or the President must have House Speaker-designate Jim Wright manacled to his side for those meetings. It does mean key Democrats in Congress should help to shape, and be better able to sell, the negotiations for more-level fields.

The Western world has made significant progress in coordinating interest-rate policies. Similar coordinated progress is needed on trade barriers, industry subsidies, innovation protection (patents, etc.), and perhaps interest payment moratoriums for nations such as Peru.

We already live in a world of global markets in large numbers of products and services. Many nations have disassembled regulation of internal industrial competition in the interest of spurring global competition.

It would be utopian to suppose that parallel international regulation (on government subsidy of industry, on antitrust/anticartel fairness, on labor fairness, product safety, Chapter 11 bankruptcy, etc.) will quickly replace national rules to make the larger playing field fair. But it makes sense to keep bargaining going toward as much fairness as compromisers can write.

A constant effort at bipartisanship would help all the democracies avoid sudden setbacks. And avoid the big setback Kevin Phillips foresees.

Earl W. Foell is editor in chief of The Christian Science Monitor.