Trading Up

When the U.S. Senate last week passed the new foreign trade bill giving the President unprecedented power to cut tariffs (see THE NATION), the majority of U.S. businessmen cheered. The burgeoning of Europe's Common Market had left the U.S. little alternative to an all-out drive for freer trade; the U.S. must barter down

Common Market trade barriers by offering European business a relatively tariff-free shot at U.S. customers. It will take the U.S. at least two years to decide on the specific list of tariffs that it wants to cut, and probably another year or two after that to negotiate reciprocal agreements with foreign nations involved. With luck and good management, however, the general tariff revision could provide a massive stimulus to some already prospering U.S. industries--and could prove the salvation of some that are now in trouble. Items:

MACHINERY. So advanced is the U.S. in production of computers, earth-moving equipment and other specialized machines that machinery last year accounted for roughly a quarter of the nation's $19 billion in exports. Some experts predict that if the Common Market nations dropped their tariffs on U.S. machines, machinery sales to the Six would increase by at least $1 billion. Says Carter L. Burgess, chairman of American Machine & Foundry Co., which exports everything from golf clubs to nuclear reactors: "If we take proper advantage of it, the new trade act can only strengthen U.S. leadership in international business."

AUTOS. Though U.S. trucks and autos are mightily admired abroad, they must buck tariffs averaging 16.6% worldwide. The Commerce Department estimates that elimination of trade barriers could boost the U.S.'s annual auto exports of $1.3 billion by another billion.

COAL. U.S. mines are now so automated that coal is one of the nation's most competitive exports. "It is literally true," says Commerce Department Economist Paul McGann, "that we can mine coal and ship it to Hamburg for less than the Germans can produce it." If the Six could be cajoled into lowering their tariffs and relaxing their quotas, U.S. coal exports would quickly jump to three times their current $350 million annual volume.

TOBACCO. Nearly half the $475 million worth of tobacco that the U.S. exports each year goes to the Common Market, despite tariffs that average 160%. Since some European governments depend heavily on tobacco duties for their revenues, U.S. tobacco men do not expect any tariff reductions. But they do hope that the new trade act will enable Washington to forestall steeper Common Market barriers against U.S. tobacco. Cries Tobacco Institute President George V. Allen: "If we get frozen out of the Common Market, the adverse effect on the American to bacco industry will be tremendous."

Inevitably, a general tariff relaxation would hit some U.S. industries hard. Foreign toymakers might well double the $65 million worth of business they now do in the U.S. each year. Stripped of the 38.1% tariff advantage that they now enjoy, U.S. watchmakers would almost surely lose most of their domestic sales ($100 million a year) to European competitors. Imports of steel, hi-fi equipment, radios and whisky would spurt forward by at least $100 million each.

But the U.S. has less to fear from free trade than most nations. Only 40% of the foreign goods imported to the U.S. are products competitive with the output of U.S. manufacturers. Overall, the Commerce Department estimates that a general revision of tariffs would increase imports to the U.S. by no more than $1.5 billion a year, while U.S. exports ought to climb by at least $3 billion.

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