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Nixon did much to change that climate by promising in his 1968 campaign to hold down textile imports. Since then, the pressures have steadily grown. Two weeks ago, for example, the Senate authorized Nixon to increase the 10% surcharge to 15%. Indiana Senator Vance Hartke and Massachusetts Representative James Burke have introduced a bill that aims at holding down to 1965-69 levels any imports that start to win a sizable share of the domestic market. That measure appears likely to die, along with nearly 100 other protectionist bills introduced in this congressional session, but the increasing number of such attempts testifies to a growing congressional opinion that there are many votes in protectionism—and few in free trade.
That feeling has been mightily spurred by a change in the traditional political line-up on trade questions. Through much of U.S. history, Eastern manufacturers were the leading protectionists, while free trade was advocated by the South, the farm bloc and labor, all of which correctly saw increased trade as a stimulant to prosperity. Now that alignment has been fragmented. Farmers, who devote a quarter of their acreage to growing crops for export, are still reliably for free trade. But the South, to safeguard its textile mills, has turned protectionist. Big business, which has built up extensive operations overseas, is mostly for free trade, but with some backsliding. Most important, the hard-lobbying labor movement has turned vehemently against free trade.
The classic protectionist line—that imports must be restricted in order to keep foreign products turned out by low-wage labor from bumping Americans out of jobs—is still the basic emotional pitch. Protectionists, however, have also developed a more intellectual position. Its essence is that the free-trade gospel is out of touch with the competitive reality of today's world economy.
General Electric Chairman Fred Borch, for instance, contends forcefully that the U.S. is under a handicap in competing with nations that subsidize exports as a matter of government policy. He points out that between 1960 and 1970, U.S. domestic prices rose 32% and export prices 23%. In the same period, domestic prices in Japan and Italy soared 78% and 54% respectively, but the increase in export prices was held to only 8% for each country, thanks to government subsidies and other special help. As an example of such aid, Borch points to a Japanese law that allows companies to take accelerated depreciation write-offs, and thus reduce their taxes, as the proportion of their sales going into export increases.
U.S. free traders ought to recognize that the handicap argument has some validity. It does not justify protectionism, and indeed Borch does not plump for that. But the Administration could well give U.S. exporters more help by stimulating research and development and providing financial aid for companies entering the export field. White House Trade Chief Peter Peterson promises to design a legislative package including just such measures; it certainly deserves sympathetic consideration.