The Battle Over Barriers
By GEORGE J. CHURCH
How many Japanese yen will it take to buy a U.S. dollar? What kind of insurance is going to be sold in South Korea? How many trees will be felled in Canadian forests, and how many pairs of shoes shipped out of Italy or Brazil?
Such questions are usually the arcana of traders and government specialists. But now they are at the center of the hottest, and most complicated, political fight of the year. The arguments, though often phrased in economic jargon, involve gut issues: prices and jobs. The battle has been joined not only by Washington and Wall Street but by the major industrial powers as well. At stake is nothing less than continued prosperity and friendly relations between the trading nations.
The most immediate question is what the Reagan Administration and Congress are going to do about the outsize dollar and trade imbalances. That they have to do something, and quickly, is not in any doubt. The U.S. trade deficit, or excess of imports (shoes and shirts from Taiwan, cars, steel, just about anything made in Japan, to cite some particularly contentious items) over exports (farm products, jet planes, computers are major ones), is heading toward a record $150 billion this year. That is nearly four times what it was as recently as 1981. The surge in imports and lag in exports are beginning to hold back the whole economy. Output of goods and services is growing at a rate of around 2% this year. That is much slower than it would be if the U.S. share of domestic and export markets were the same as it was even a few years ago. It is too low, besides, to bring down unemployment.
How to begin righting this imbalance, however, is the subject of heated disagreement in Washington. On one side is the White House, which clings to the ideal of free trade. On the other is an apparent majority in Congress, which seems convinced that the U.S. is being played for a sucker by its so- called friends abroad. As they maneuvered for position last week, both sides made major moves:
The Administration, in concert with four other ranking financial powers, began what amounts to a campaign to devalue the U.S. dollar. Emerging from an extraordinary Sunday meeting at the Plaza Hotel in New York City, Treasury Secretary James Baker and finance ministers and central bank governors of Britain, France, West Germany and Japan appeared before TV cameras with a major announcement. "Orderly appreciation of the main nondollar currencies against the dollar is desirable," said the five, and they "stand ready to encourage this." Blunt translation: the greenback is grossly overvalued in terms of how many pounds, francs, deutsche marks and yen money traders will exchange for it, and the five intend to cut the buck down to a more realistic size, obviously by selling dollars to drive down the price, though the five did not say so.
There was no need; money traders got the message. As soon as the exchange markets opened Monday morning, private dollar sales began and continued in such heavy volume that American greenbacks fell about 5% against major currencies that day alone. For the rest of the week, though, the dollar drifted down slowly enough, despite actual, coordinated sales by the five governments, to leave the long-range impact of the devaluation drive in doubt. Money traders believe the five governments have specifically targeted the dollar-yen exchange rate; the yen gained 8.8% last week against the greenback, vs. 5.8% for the French franc and 3.6% for the British pound. There is no question that a lower price for the dollar would reduce U.S. imports and increase exports: if a dollar buys fewer yen, then Americans would need more dollars to buy a Toyota, while Japanese would pay fewer yen to purchase American coal. By coincidence or not, while the dollar has been gradually declining in recent months, the U.S. trade deficit has begun to narrow also. It was $13.4 billion in June and only $9.9 billion in August.
But devaluation can no longer even be attempted by fiat, as used to be the case when every government set an official rate at which its currency could be exchanged for other monies. Under the system of floating exchange rates that has prevailed for the past dozen years, governments can try only to influence the decisions of money traders and their clients, who can switch tens or even hundreds of billions of dollars within hours (see box). And many complex factors have been keeping the dollar high. To bring about a deep and lasting drop may require not only prolonged and heavy sales of dollars by the U.S. and its allies but fundamental changes in their economic policies, above all a much greater reduction in the U.S. budget deficit than any now in sight.
Just about as the dollar selling heated up Monday morning, Ronald Reagan appeared before an audience of business executives and Government leaders in the East Room of the White House to deliver a major foreign-trade speech. His talk attempted to strike a precarious balance between free trade and what the President called fair trade. "I will not stand by and watch American workers lose their jobs because other nations do not play by the rules," said Reagan.
To that end, he pledged a sort of export subsidy: $300 million from the Treasury to help U.S. companies match the generous credit terms that exporters in foreign country A, with assistance from their government, might offer to buyers in foreign country B. Reagan also promised to "work unceasingly" to tear down such trade barriers as laws that restrict the sale of U.S. insurance in South Korea and high-tech products in Brazil. He cited world trade treaties that permit highly selective limits on the sale in the U.S. of products from those countries.
At the same time, the President flatly threatened to "veto measures that I believe will . . . diminish international trade." In essence, he was trying to deliver a message to Congress that might be paraphrased this way: Yes, I know we are in deep trouble on international trade. But this is a matter for painstaking, case-by-case negotiation with nations that we want to retain as friends and allies. Don't tie my hands, and above all don't take a chance on starting a global trade war, by enacting sweeping restrictions on U.S. imports.
Congress nonetheless pressed ahead, though with growing misgivings, on a drive to keep out low-priced imports that are thought to kill off American jobs. In the Democrat-controlled House, the Ways and Means Committee approved for floor action a bill that would slash U.S. imports of textiles and clothing, primarily from East Asia, as much as 40%. In the Republican- controlled Senate, sponsors rewrote a companion bill to snare as many votes as possible. The new Senate version would curb imports of shoes in order to catch the votes of Senators outside Southern textile states, while the textile provisions would be softened to fall most heavily on three nations (Taiwan, Korea, Hong Kong), perhaps soothing Senators reluctant to antagonize all of Asia.
The textile, or textile-shoe, bill is the forerunner of more than 200 measures that would curb imports. There are bills that would reduce imports of ^ copper, timber, even roses and "waterbed mattresses, liners and parts thereof"; bills that would penalize all imports from particular countries --mainly Japan, naturally--or groups of countries; bills that would require regular intervention in exchange markets. Many are based on a crude idea of reciprocity: buy more from us or we will buy less from you. Thus a bill drafted by Democrats, but boasting strong Republican support as well, would slap a 25% penalty tariff on anything imported from countries whose sales to the U.S. exceed by 65% or more their purchases from the U.S., unless they start reducing that trade imbalance immediately. In its present form, the bill would raise prices on everything Americans buy from Japan, Taiwan, Korea and Brazil. Two bills introduced by Republican Senator John Danforth of Missouri, who still considers himself a proponent of free trade, would direct Reagan to close American markets to Japanese products exactly as much as Japan closes its markets to American goods and would impose penalties on goods from countries that cannot be persuaded through negotiations to buy U.S.-made telecommunications equipment (possibly Japan, Canada and Brazil).
As the first of these bills to come close to a vote, the textile measure is a kind of test case of protectionist sentiment. Present outlook: some version of it will sail through both chambers of Congress; after all, bipartisan majorities of both House and Senate have signed on as co-sponsors. Reagan will veto it, repeating dire warnings that U.S. protectionism could once again provoke foreign retaliation against what remains of American exports (which is plenty: the U.S. is still the world's biggest exporter by 27% over runner-up West Germany). Such retaliation is what happened after Congress passed the disastrous Smoot-Hawley tariff act in 1930 (see box). Just enough Senators and Representatives will change their minds on a revote to sustain the veto. Then will follow a confused struggle between legislators fearful of a trade war yet determined to force Reagan to do more to promote exports and curtail imports, and a President wary of drastic moves yet aware that he has to do something to start trimming the trade deficit.
Though they deny it, Reagan and his Administration have already changed policy sharply on the dollar. The President long viewed the greenback's strength as a source of pride, a testament to the robustness of the U.S. economy and the eagerness of foreigners to swap their own currencies for dollars to be poured into American investments. The reputation of the U.S. as a "safe haven" for investments that will not be ravaged by inflation or undercut by leftist politicians certainly has been a factor in the dollar's rise, but most economists outside the Administration give far greater weight to an influence that is nothing to boast about: $200 billion budget deficits.
Government borrowing to cover the red ink has kept "real" (that is, inflation-adjusted) interest rates in the U.S. well above comparable rates abroad, pulling in much foreign capital from investors who seek the highest possible return on their savings. Whatever the cause, officials always conceded that the dollar might get too lofty and that intervention on the exchange markets might be needed to bring it down. But they were wary of actually doing it. Privately, some U.S. officials described intervention as "spitting in the wind."
Why then the shift by Washington not only to intervening itself but to orchestrating a coordinated effort by other governments to do the same? Primarily because a drop in the dollar holds the greatest promise of reducing the trade deficit and easing protectionist pressure on Capitol Hill. Indeed, unless the dollar comes down, many economists doubt that anything else will do much good.
To be sure, the trade gap has many causes. In 1983 and 1984, production, jobs and incomes were growing much faster in the U.S. than in many European or Asian economies, so the U.S. was sucking in imports faster than trading partners could expand their purchases from America. The crushing debts piled up by Brazil, Mexico and many less-developed nations have both hindered their ability to buy U.S. products and increased their determination to expand sales in the U.S., so that they can earn enough to continue paying interest on the debts.
Some U.S. industries, notably steel and autos, let their labor costs get out of hand, solidifying America's double-edged distinction of having the highest paid manufacturing workers in the world (see chart). Others turned out products that consumers judged to be of poor design and workmanship, unwittingly setting themselves up as targets for foreign competitors. Standout example: Japanese cars are no longer remarkably cheap in the U.S., but they sell heavily on what Detroit automakers concede is a reputation for superior quality. American automen insist they have improved the quality of their cars enough to equal the Japanese, but many motorists do not believe them. Workmanship is also a problem for U.S. exporters: surveys show that Japanese consumers think the quality of American goods is inferior to that of their own.
By far the biggest cause of the trade imbalance, however, is that the overvaluation of the dollar has made U.S. exports artificially expensive to foreign buyers, and imports artificially cheap to American consumers. Quick example: loggers in the Pacific Northwest figure that the dollar's bloated exchange rate against its Canadian cousin (an American buck was worth $1.36 Canadian last week) gives Canadian lumber exported to the U.S. an automatic 30% price advantage, contributing to a $20 billion deficit in U.S. trade with Canada. With curiously bad timing considering the mood in Washington, Canadian Prime Minister Brian Mulroney last week proposed a new trade pact that would open the two countries still wider to each other's goods.
At the very least, the dollar's overvaluation is responsible for half the trade deficit, and some estimates put the dollar's contribution (if that is the word) considerably higher. By the same token, Rimmer de Vries, a senior vice president of Morgan Guaranty Trust Co., figures that if the dollar's exchange rate could be reduced to roughly 200 yen and 2.4 deutsch marks (vs. 221 yen and 2.7 marks last week), with comparable drops against other major currencies, the U.S. trade deficit might eventually be whacked all the way back down to $50 billion.
That would crimp foreign earnings on sales in the U.S., of course, but Japan and the European powers nonetheless have strong incentives to join the devaluation drive. Most important, the strength of the dollar drains investment capital out of their countries and forces them to keep interest rates higher than they would like them to be to prevent still more money from fleeing to the U.S. A lower price for the dollar might enable them to reduce domestic interest rates and thus speed up their internal economies. And if sales to the U.S. fall? Well, the unattractive alternative is protectionist legislation that might slam the American market shut in their faces and push them into retaliation.
The time looked right last week to begin a devaluation campaign. At its peak in February, the dollar was selling at a far higher price than could be justified by any calculation of economic growth and inflation rates. A slow and irregular decline set in. Money traders, who were already debating how much further the dollar might fall and how fast, pounced on last Sunday's five-government announcement as a signal to start selling greenbacks immediately. In New York some traders came to work at 10 p.m. Sunday to be on hand for the opening of the Hong Kong and Singapore markets (Tokyo was closed for a holiday); others arrived by 2:30 a.m. Monday, in time for the start of trading in Europe.
Even so, the devaluation campaign is a gamble. There is some danger that it might be too successful, setting off a stampede from the dollar that would damage the U.S. In effect, Washington is relying on foreign buyers of Treasury bills and bonds to finance the U.S. budget deficit. Abrupt withdrawal of that capital could force the Government either to borrow more in domestic markets, bringing about a disastrous rise in interest rates, or to indulge in a highly inflationary expansion of the money supply.
Most financial experts in the U.S. and overseas, however, are more wary of the opposite danger: the devaluation drive could fizzle out. The maximum amounts of dollars that the five governments could sell would be insufficient to move the markets much in the long run unless they were supplemented by heavy sales on the part of money traders acting for private-investor clients. And traders are unlikely to make those sales unless they can be convinced that the five governments will back their dollar sales with fundamental changes in economic policy: measures by the European countries and Japan to speed up the growth of their economies and, even more important, a greater cut in the U.S. budget deficit than any now in prospect. Says Mac Destler, senior fellow at the Washington-based Institute for International Economics: "It may be that coordinated intervention will bring the dollar down if you believe that speculation has caused some of the overvaluation. But if you believe that the dollar is strong because of the budget deficit, then even well-coordinated intervention will not make a big difference."
** At best the gradual devaluation that the U.S. wants to bring about would take a long time to work. Export prices would not drop, nor import prices rise, immediately. When they did, sales would not respond overnight. Some economists believe that 18 months or more would pass before the trade deficit came down markedly--and protectionists in Congress are hardly in any mood to wait that long. Accordingly, Reagan set out last week to convince them that their bitter complaints about unfair foreign trade practices have been heard and are getting action.
His efforts set off a backstage squabble among White House aides. The vehicle was a speech that Reagan was to deliver to his Export Council, a group of business executives heavily involved in international trade. Reagan's instincts are pure free trade, and they are shared by nearly all the Administration's top economic and foreign-policy officials, as well as his speechwriters. One of them, Bently Elliott, turned out a first draft that stressed the dangers of protectionism and the virtues of open markets, gave only minimal attention to allegedly unfair foreign trade practices and contained hardly a hint of possible American retaliation. Any gesture in that direction, Elliott and other free-traders feared, would only encourage protectionists.
White House Chief of Staff Donald Regan and other aides concerned with congressional relations feared that Elliott's draft would wave a red flag in front of the protectionists, some of whom have become openly contemptuous of the very idea of free trade. (Sample gibe from Georgia Democratic Congressman Ed Jenkins, an author of the textile bill: "Free trade is a unicorn we've all heard about but never seen.") Regan argued that the speech was not supposed to be an exposition of presidential philosophy but an attempt to address congressional concerns that the U.S. is letting foreign sharpies take advantage of it. Moreover, the Regan faction felt, vigorous prosecution of genuinely unfair practices is hardly inconsistent with free trade. He bounced Elliott's draft and ordered a new version. Elliott's second try pleased him little better. Regan then bucked the speech to Cabinet Secretary Alfred Kingon, who produced a text roughly balanced between free trade and so-called fair trade. White House aides insist all of this was a problem of emphasis rather than substance; there were no policy actions announced to which even the most devout free-traders could take exception.
In fact the only new policy action announced was the $300 million war chest for American companies trying to compete against subsidized foreign exports. It does mark a departure in Administration philosophy; Reagan previously had been so opposed to subsidies that he twice tried to get Congress to kill the export-loan program of the Export-Import Bank. On the scale of world trade, < which totals some $2 trillion a year, $300 million is a piddling sum, but Reagan hopes it will provide enough of a competitive threat to prod foreign countries to drop some export subsidies.
Otherwise, Reagan mainly promised to get tough without giving specifics. He pointed out that he is the first President to initiate complaints against restrictions on U.S. sales abroad--Korean and Brazilian restraints on insurance and high-tech products and Japanese limits on U.S. tobacco products --rather than wait for the industries that had been hurt to yowl. U.S. Trade Representative Clayton Yeutter was given a policeman's role. Said Reagan: "I have instructed Ambassador Yeutter to maintain a constant watch and to take action in those instances of unfair trade that will disadvantage American businesses and workers." Yeutter would be assisted, Reagan went on, by a newly established "strike force . . . whose task it will be to uncover unfair trading practices used against us."
The President encouraged Congress to strengthen existing laws against foreign infringement of U.S. patents and copyrights and against "dumping," which is generally defined as the sale of a product in export markets for a lower price than it commands at home; he asked that Congress establish a dumping test that could be applied to "nonmarket" (read Communist) economies. But Reagan did not propose any specific new legislation. The burden of his talk: Yes, there is discrimination against U.S. trade abroad and unfair penetration of the American market, but it is best countered "through negotiation" and administrative action, not blunderbuss curbs on imports. Those "would invite retaliation by our trading partners abroad, would in turn lose jobs for those American workers in (export) industries that would be the victims of such retaliation, would rekindle inflation (by raising prices of imports and the domestic products that compete against them), would strain international relations."
Congressional leaders invited to listen to the speech were predictably unimpressed. House Speaker Tip O'Neill commented that the President sounded as if he was "trying to stall for time." Said Republican Senator Danforth: "One speech does not make a policy." Reagan, however, did shore up resistance by some Republicans against the Democrat-led drive for protectionism. Said Pennsylvania Senator John Heinz: "We have to have legislation that at least matches the President's rhetoric and perhaps goes beyond it." But, he mused, "Are we going to limit presidential discretion? That is the $64,000 question."
By week's end the more extreme import-curbing proposals were losing steam. This was due less to Reagan's speech than to simple qualms about starting a trade war and perhaps disquieting second thoughts about the protectionist case and the grass-roots support for it. In the House Ways and Means Committee, Missouri Democrat Richard Gephardt, a cosponsor of the textile bill, introduced an amendment that would have gutted it. For one thing, the amendment would have suspended curbs on imports if Reagan could persuade countries shipping textiles to the U.S. to begin new talks aimed at working out some sort of voluntary restraints. Gephardt explained that he has come to believe any necessary restraints on imports of particular products ought to be established by diplomatic negotiation rather than imposed by Congress. The amendment lost by the narrowest possible vote: 18-17. In the Senate, a band of Republican free-traders led by Washington's Dan Evans pledged a filibuster against the measure.
Support for other protectionist bills appeared to weaken too. Ways and Means Chairman Dan Rostenkowski of Illinois, a principal author (with Gephardt and Texas Democratic Senator Lloyd Bentsen) of the bill to impose a 25% tariff on goods from countries running especially large surpluses in trade with the U.S., has always acknowledged that the bill is likely to be rewritten in ways that he cannot foresee. Gephardt now is voicing hope that if the measure does pass in something like its present form, its targets will trim their trade surpluses enough to escape its provisions. But he admits, "I really do not think it is possible the 25% surcharge will go into effect."
Such defensiveness would have seemed unlikely a few weeks ago. Not since Smoot-Hawley days had Washington witnessed such an explosion of demand to limit imports as occurred in August and early September. Fretted Sir Roy Denman, Ambassador of the European Community to Washington: "We have seen protectionist sentiment before, but never anything like this."
Many factors combined to produce that surge. The figures on the trade deficit seemed to cry for action. Last spring the International Trade Commission found that the shoe industry was being crippled by competition from low-priced imports and recommended that Reagan impose a strict quota on foreign footwear. But in August the President refused, warning of a trade war and renewed inflation if he acquiesced. His action convinced many on Capitol Hill that the Administration would not help even the most severely affected industries unless Congress forced his hand.
In addition, some Congressmen, particularly Southern Democrats representing textile-producing areas, got their ears burned when they went home during the August recess. In Sycamore, Ala., Congressman William Nichols convened a gathering in the spinning room of a closed mill. A constituent who said he was a Korean War veteran complained, "I had no way of knowing that when I put my life on the line back then, I would be fighting for a country that was going to put me out of a job." He was referring to heavy textile imports from South Korea.
Many Congressmen returned from the August recess convinced that stopping imports was the cause of the hour. Democrats in particular thought that they had hit on an issue that might at last win back the blue-collar workers, especially Southern whites, who had been deserting them in droves. Some read great significance into a special congressional election in the First District of Texas in August. Democrat Jim Chapman, an advocate of protection, defeated Republican Edd Hargett, who said that he did not understand "what trade policies have to do with bringing jobs to east Texas." Later analysis suggested that many voters were bothered less by Hargett's stand on trade than by a feeling that he might not be especially bright, but at the time Democrats were convinced they had hit political pay dirt. Said California Congressman Tony Coelho, chairman of the House Democratic Congressional Campaign Committee: "The issue is there. Texas One (the First District) proved that." More than a few Republicans suspected that the Democrats could very well be correct, politically if not economically. Wyoming Congressman Dick Cheney, a member of what he described as "a small band of brothers" favoring free trade, was afraid that the issue of curbs on imports provided "an opening for Democrats to reestablish their ties to the blue-collar voter. It's the Iranian hostage crisis in reverse." His meaning: now it was a Republican Administration that looked weak in the face of foreign hostility.
The protectionist surge, indeed, has been pushing some legislators into action against their better judgment. Florida Democrat Sam Gibbons, chairman of a Ways and Means subcommittee on trade, returned in early September from a 24-day swing through Asia alarmed by the prospects of foreign retaliation against American exports, especially farm products, if the bill restricting U.S. textile imports became law. "The Chinese told us without any equivocation, 'If we can't sell you our products, we can't buy your products,' " reported Gibbons. His conclusion: the bill is "about as horrible a piece of legislation as you can imagine." Still, he made no attempt to bottle up that "horrible" bill in his subcommittee; he let it be passed on to the full Ways and Means Committee. Why? Says Gibbons: "Bad as it is, there could be worse things ahead if Congress is not allowed to vote on it. I have a whole host of my colleagues who say, 'Sam, you are right, but I have serious district problems on this matter.' " Meanwhile, Gibbons has written an import-restricting bill of his own. It would impose penalty tariffs on natural resources, such as minerals and natural gas extracted from government- owned land in foreign countries, that are shipped to the U.S. at subsidized prices. This bill, along with the textile bill, the Rostenkowski-Gephardt- Bentsen 25%-surcharge proposal and the two Danforth reciprocity bills, are among the measures most likely to get serious consideration.
Though the protectionist push has begun to worry increasing numbers of Congressmen, it has by no means petered out. So many Senators and Representatives have committed themselves to the textile bill that it is nearly certain to pass, though probably not by margins large enough to override a Reagan veto. But second thoughts are cropping up, spurred by several considerations.
For one thing, it is by no means certain that public opinion is so strongly anti-import as many legislators thought. On the contrary, national polls show sharp divisions and no small confusion. In the latest survey for TIME, taken by Yankelovich, Skelly & White, Inc. two weeks ago, majorities agreed with both these propositions: "We would all be better off if there were fewer restrictions on international trade because prices would be lower" (54% said yes), and "We should stop importing foreign products into the U.S. when these imports cause Americans to lose their jobs" (59% agreed). When asked if imports should be kept out to protect jobs "even though foreign countries might retaliate by keeping American-made products out of their countries," 41% of the 1,014 voters surveyed favored the idea, while 54% opposed it.
< Free-traders have meanwhile been developing a telling case for opposing import restrictions. It is true, they concede, that foreign nations often discriminate against U.S. exports. But the U.S. is a sinner too. From time to time it has negotiated quotas, sometimes disguised as "voluntary" agreements with foreign producers, on imports of steel, autos, sugar and even textiles. In a study for the Institute for International Economics, C. Fred Bergsten and William Cline contend that the U.S. restricts imports from Japan about as much as Japan limits purchases from the U.S. Another widely quoted estimate is that if all the restrictions that American businesspeople complain about were eliminated, the U.S. trade deficit would be reduced by no more than $10 billion a year.
Quotas have often been ineffective in holding down the general level of imports and sometimes even in aiding the domestic industries they are supposed to help. In steel, quotas on shipments from the European Community, Japan and eleven other nations were supposed to hold imports to 20.5% of U.S. consumption, but the actual share is running at 25.7%. What quotas and other restrictions do accomplish is to raise prices of imports and of the American goods that compete against them. The New York Federal Reserve Bank figures that quotas and tariffs on clothing and textiles cost consumers between $8.5 billion and $12 billion in 1984.
The argument that most impresses legislators is the danger of foreign retaliation against U.S. exports, since that is an identifiable threat to specific people, like farmers, in their states and districts. That is not going to stop the protectionist drive. The urge on Capitol Hill to do something, anything, about trade is overwhelming. But there is a trend away from bills aimed against specific products or countries, and increasing talk about writing "generic" legislation.
Some possible provisions of such an omnibus trade bill might be relatively innocuous or even mildly helpful. Examples: more Government help for exporters, retraining of workers who lose jobs to imports. Other probable provisions look risky but not necessarily bad. For example, there is a strong move to tighten sections 201 and 301 of the 1974 Trade Act, which permit the President to put countervailing duties on subsidized imports and retaliate against the products of countries that restrict American exports. Such actions always pose a danger of hampering the flow of trade, but on occasion they can lead to a more open exchange. Take the July "pasta war": the U.S. got the European Community to drop restraints on American citrus products by briefly restricting imports of pasta.
Still other possible features of a generic trade act, however, would be definitely counterproductive. Congress may try to limit the President's power to override International Trade Commission recommendations, like the one to impose a shoe quota. But while the ITC properly focuses on whether industries are injured by imports and what measures might afford relief, the President must consider broader matters, such as the interests of consumers and foreign relations. Reagan is strongly opposed to any restrictions on presidential prerogatives, but he has bent in the past to congressional pressure.
Unhappily, the safest prediction is that no one is likely to focus soon on the one action that would do the most good: chopping the budget deficit. That would permit an effective dollar devaluation, which would benefit trade far more than any other conceivable legislation. But it would require cuts in Government spending going well beyond any that Congress is preparing to enact this fall, and probably tax increases as well. Moving to limit imports is so much easier, but so much more costly in the long run.
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With reporting by Sam Allis, Christopher Redman and Barrett Seaman/Washington