THE U.S. CAN COMPETE
Published By: NYT, 11/08/1982, Walter F. Mondale

WASHINGTON— A group of leading business executives went to the White House recently to plead with top officials to do something about the enormous undervaluation of the yen relative to the dollar - a distortion that has created huge, rapidly rising American trade deficits with Japan. Afterwards, Secretary of State George Shultz said he had no solutions. Treasury Secretary Donald Regan went further - flatly rejecting any initiatives to rectify the situation.

The Administration has failed to confront one of the most important challenges America faces - regaining our competitiveness abroad. Unless our exports grow, we cannot hope to recover from the recession. To do this, we must restore a sensibly valued dollar, reduce foreign barriers that unfairly hinder our exports, and adopt original strategies to foster innovation and productivity in our key industries.

More than 20 percent of American industrial output is exported. One out of every six manufacturing jobs is directly linked to exports; four out of every five created between 1977 and 1980 were exportrelated. Almost one-third of all corporate profits derive from foreign investment and trade. Two-fifths of our farmland produces for export. Trade's share in our gross national product has more than doubled over the past decade.

The dollar's distorted value clobbers our exports. Farm exports are dropping for the first time in 13 years. Over the past six quarters, our net real exports have diminished at an annual rate of $13 billion. The trade deficit in August was $7.1 billion - the worst in our history. From early 1981 through mid-1982, the trade balance's deterioration was the largest single factor - larger than slumps in housing, autos, steel - pushing the economy into recession.

The Administration's only response to this debacle has been to run up the white flag. But there are steps to take - right now - to create a more realistically valued dollar. We must move toward a better balance between fiscal and monetary policy in order to bring down deficits, reduce fears of resurgent inflation and lower longterm real interest rates, still at near-record levels. Unless we bring down real interest rates, foreign investors will continue to seek out dollar investments, artificially depressing the value of their currencies while maintaining ours at unrealistic levels. And we must induce Tokyo to take immediate steps to discourage the outflow of the yen from Japan and encourage the influx of foreign currencies, thus significantly strengthening the yen.

The trade crisis extends beyond currency distortions. Even with an overvalued dollar, there are many areas -agriculture, computers, telecommunications, petrochemicals, and more -where our products are competitive in quality and price but are being frozen out of overseas markets by quotas and other barriers. And foreign countries have aggressively used export subsidies to increase their share of thirdcountry markets and our domestic market.

We cannot tolerate this trade discrimination any longer. We must tell nations that sell in our market but exclude our products that the time for polite, interminable unproductive negotiations is over. We should insist on equal access and get tougher until we obtain it. We should fully restore funding for the Export-Import Bank, and should fully use that bank to match the export subsidies of our trade competitors, product for product, dollar for dollar. We must do the same for our agricultural exports. We must stop using export-control policy in a way that fails to advance foreign policy aims but drives business elsewhere and undermines our reliability as a supplier of agricultural and nonstrategic manufactured goods.

While we're getting tough with others, we must also get tough with ourselves. American business managers must think less about quarterly profit reports and more about new products and sales strategies to achieve larger overseas market shares. To restore our competitiveness, we'll need billions of dollars of added investment in business - from the Government, banks and pension funds, and from capital being squandered in mergers and acquisitions that neither increase productivity nor generate jobs.

We must embark on a cooperative national effort involving labor, management and Government to revitalize ailing basic industries. To insure economic growth - and national security - in the 1990's, our basic industries must be strong. Our challenge is to restore their competitiveness by introducing advanced technology. Where additional selective restrictions on imports in our basic industries are necessary, they must be linked to efforts by both management and labor to improve the health and competetiveness of those industries.

While debating policy, let us remember that all over America, workers and their communities are suffering. Hard-working people find themselves thrown out of jobs they have held for 20 and 30 years, with no immediate prospects of getting them back. All their lives, these Americans have played by the rules. They deserve better. --------------------------------------------------------------------- Walter F. Mondale was Vice President in the Carter Administration. .