Crisis in Money and Trade

As seen from Europe and Japan, U.S. international economic policy is a mess. The Nixon Administration appears confused and confusing, showing open disregard for its trading partners, taking actions that run counter to its announced determination to correct the steadily shrinking value of the dollar overseas, the massive U.S. balance of payments deficit and the continuing American trade gap. Last week foreigners were shocked by a new and ominous U.S. policy: the imposition of controls on exports of farm commodities and steel scrap, a move the Administration insists is necessary to build up domestic supplies and hold down raging U.S. prices.

The controls will create shortages and aggravate inflation overseas. Under a new licensing system, U.S. exporters can now ship no more than 50% of the soybean orders that they had on hand as of June 13, and 40% of the orders for soybean meal. No orders after that will be filled until October at the earliest. To head off a rush by foreigners to buy substitute feed supplements, the Administration slammed a total embargo on 41 other commodities, retroactive to June 13; they include edible oils, animal fats and such livestock feeds as linseed-oil cake and peanut meal. The restraints could cost the U.S. about $500 million in lost exports of soybeans alone.

In addition, the White House clamped an almost total embargo on exports of iron and steel scrap. Steelmakers contend that surging foreign demand has lifted the cost of some scrap to $55 a ton, the highest since 1956. Scrapmen vigorously deny that there is a shortage, which was the main reason for the embargo. They attribute the ban entirely to protectionist pressures from American steel manufacturers, who are worried about competition from Japan, which buys two-thirds of all U.S. scrap exports.

Angry Customers. In defense of their controls on farm exports, Administration officials argue that the zooming price of food has made a shambles of their anti-inflation crusade and must be brought down at all costs. Says John Dunlop, chief of the Cost of Living Council: "Until October, we really don't have any other measure to deal with food prices except export controls."

The possibility of livestock-feed shortages was, in fact, apparent as early as last fall, before bad weather destroyed some soybean crops. The Administration nonetheless made a much publicized deal to sell to the Russians and Chinese about 54 million bushels of soybeans. The Europeans and Japanese are regular customers, and the fact that the U.S. did not show much interest in providing for their needs rankles. Speaking of the new export controls, one American agriculture attache in Europe complains, "As diplomats, we're being forced to defend something that may be indefensible."

The controls are felt most painfully in Japan, which is the biggest single customer for U.S. scrap and soybeans. The ban on edible oils and animal fats came as a staggering blow to Japanese producers of margarine, shortening and soap. Koichi Kawamura, a high Japanese Agriculture Ministry official, warns, "Japan has no choice but to make a fundamental reappraisal of its agricultural policies." That means that Japan will increase its soybean crop (which was reduced in the belief that the U.S. would honor its repeated promises to supply all Japan's needs) and place long-term soybean contracts with China. The Europeans point out that the U.S. has persistently badgered them to buy more and more American farm goods. Yet now the U.S. is acting like a shopkeeper who closes his store when the customers arrive.

At a meeting of members of GATT (the General Agreement on Tariffs and Trade) in September, the Administration will urge Common Market countries to lower trade barriers on American goods. But in resorting to export restraints, the U.S., ironically, has strengthened the arguments of the French and other protectionists who insist that the U.S. cannot be trusted to keep its commitments. The move also cuts the ground out from under the British, Belgians and Dutch, who have long argued that freer trade between the U.S. and Europe would benefit both.

The U.S. needs all the foreign trade it can get if it is ever to reduce the dollar-debilitating deficits in its balance of payments. During the past two years the once-mighty dollar has lost 26% of its value against the currencies of major nations (excepting Canada). Last week the dollar again plummeted to new lows -it was selling for fewer than 2.3 German marks and fewer than four French francs -leading French President Georges Pompidou to assert that "The world is facing a new monetary crisis. We must define a defense policy for France and Europe against this pernicious sickness."

The embracing of export controls by the Nixon Administration is only part of a growing malaise of American protectionism. In the past two years, while most major nations were making some moves to dismantle trade barriers, the U.S. has been erecting them. Among other things, it stopped converting dollars into gold, approved a temporary surcharge on imports and leaned on foreign trading partners to "voluntarily" hold down their sales of steel and textiles to the U.S. and their purchases of American lumber. Unless this policy is changed, the U.S. will continue its retreat toward a rampant, self-defeating protectionism that could well make today's money and trade problems seem minor.

This file is automatically generated by a robot program, so reader's discretion is required.