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In a desperate search for support and assistance, businessmen in such smokestack industries as automaking and steel turned to Washington, demanding curbs on imports of foreign-made goods to preserve American markets for American companies. Though the Reagan Administration remained publicly committed to free trade, as the year dragged on, protectionism began to creep slowly into the U.S.'s dealings with other nations on trade matters.
Acting on complaints from American steelmakers, the Commerce Department issued a preliminary ruling in June holding that foreign steel manufacturers, mostly in Western Europe but including Brazil and South Africa, had been winning American customers by unfairly selling government-subsidized steel on the U.S. market. The ruling could have effectively blocked many of the offending companies from the U.S. altogether. In October the Administration, using the controversial ruling as a lever, won concessions from the foreign governments of the producers involved. In the agreement, the overseas governments promised that they would limit their sales in the U.S. to less than 6% of the total market, a cutback of 1¼ percentage points from then current levels.
The robust rise of the dollar, which on average gained 11.4% against the world's major currencies, added to the protectionist pressures. As American exports became more and more expensive and therefore less and less competitive in foreign markets, fears of a record trade deficit mounted. A copious influx of foreign capital, some in flight from economic and political instability abroad and some attracted by the high real rates of return in the U.S., held the dollar up. As West European governments kept their own interest rates high in order to stem the outflow of capital, their economies worsened and their leaders began urging the U.S. to take stronger measures to get interest rates down to tolerable levels. For most of the year, these pleas were ignored.
After recession took hold around the world and global trade slumped, interest rates began at last to decline. Even so, many countries found themselves increasingly strapped for dollars with which to pay their mountainous debts. Among the most surprising victims were a number of oil-exporting nations: Mexico and Nigeria, to name two. Two years ago, the 13-nation OPEC oil cartel gloatingly held the world at ransom for crude oil at prices that eventually exceeded $40 per bbl. But the combination of recession and conservation caused prices to weaken, and by year's end the price of crude had dropped to $30 per bbl. and appeared to be headed even lower. Unbelievable as it would have seemed to most Americans two years earlier, OPEC's survival as a cartel now appears in doubt.
Yet even as the world economy weakened, some businesses boomed as never before. Americans by the millions escaped to the charms of E.T., a 3-ft.-tall space creature lost in suburbia. The movie of his odyssey, E.T. The Extra-Terrestrial, became by far the biggest smash in motion picture history, bringing in $305 million at the box office by mid-December.