Warning from Volcker

WHEN Federal Reserve Board chairman Paul Volcker talks, not just Wall Street, but the global financial community listens. And well it should. Mr. Volcker is now right on target in urging the United States - and governments elsewhere - to adopt a more judicious mix of policies to keep the global economic engine humming and avoid a shutdown triggered by recession. Volcker is cautioning the Reagan administration to avoid any further reliance on a weaker dollar to boost US exports and thus reduce the trade deficit. He argues that the US needs to trim its budget deficit, which would ease the need for large-scale borrowing, with its upward pressure on the dollar. He again urges America's overseas trading partners to more aggressively stimulate their domestic economies, which should ultimately help US exports.

Japan, to its credit, is at last moving in this direction - announcing a $34 billion program to rev up that nation's faltering economy. West Germany, whose export industries have been hard hit by the lower dollar, should also consider stimulating its economy. Other specific steps that are now in order:

There is still far too much fat in the US defense budget. The House is correct in seeking a budget resolution that holds military spending closer to current levels. Also, a modest tax hike in the $20 billion range is hardly excessive.

Reducing the trade deficit must ultimately be linked to improved US competitiveness, rather than an artificial lowering of the dollar's value.

Imports to the US are to be welcomed - not disdained. They hold down prices. They provide diversity. They link the US to the world. Japan's massive investment in the US represents a vote of confidence in the US political and economic system, not a plot to elbow individual Americans out of work.