Global Recession and U.S. Trade

Report Outline
Trends in World Trade
Protection Vs. Free Trade
Trade Prospects in 1980s
Special Focus

Trends in World Trade

Political Implications of the Trade Issue

For the first two years of the Reagan administration, the overriding domestic issue was the state of the economy. The focus of concern changed, however, as the deepening recession brought with it a significant drop in the rate of inflation that had preoccupied Americans during the previous administration. With the rise of business failures over the past two years, concern has shifted to the plight of the unemployed. Critics of the administration point first to domestic economic policy and the “supply-side” theory on which it rests. But increasingly, labor leaders and their political allies in the Democratic Party are looking abroad for answers to the nation's economic woes. They maintain that America's trading partners and traditional allies, by applying aggressive export policies and limiting U.S. imports to their own markets, are in effect exporting domestic unemployment to the United States.

Reagan's critics say that what this country needs to get its ailing industries back on their feet and American workers back on the job is a more realistic trade policy than the “free-trade” approach favored by the administration. The trade issue, almost unheard of in recent years, promises to be at the forefront of congressional debate in 1983 and could be a decisive factor in the outcome of the 1984 presidential race.

Rising Trade Deficit and Unemployment

Although the U.S. economy is less dependent upon foreign trade for its health than those of most industrialized nations, a number of domestic industries rely heavily on export of their products for survival, while others are particularly vulnerable to imported products with which they must compete on the domestic market. As U.S. Trade Representative William E. Brock III recently pointed out: “In recent years four out of five of the new U.S. jobs in manufacturing have been created by international trade. One out of every three acres planted by American farmers is producing crops for export. Two trillion dollars of goods and services currently are being traded internationally and the potential for growth is unlimited.”