We're winning the Cold War while losing the Trade War

              THE SUN
BALTIMORE, MARYLAND
SUNDAY, DECEMBER 17, 1989
We're winning the Cold War
while losing the Trade War
By Ernest F. Hollings
The headlines and the hubbub are focused on the dramatic events in central Europe. Yes, the Soviet empire is coming unstuck and Marxism is kaput. But America's current binge of "we won" back-slapping is a danger¬ ous distraction — an exercise in nosta^ia that we can ill afford. Here we are on the cusp of the 1990s, yet still fixated on Germany, Marxism, missiles, tanks, troop levels, etc. It is a classic case of fighting the last war.
Meanwhile, parallel with the glitzy endgame in Eu¬ rope, a new, historic and radically different global con¬ test is already in full swing. If the old game was called "Cold War," the new game is "trade war": it is a no- holds-barred struggle among nations for market share and standard of living in a largely zero-sum world imar- ketplace. To date, not only is the United States losing this new contest, we still haven't the foggiest idea how the game is played. Like the Soviet Union in the Cold War, this time it is we who are cast in the role of dinosaur: outsmarted, unable to adapt to a changing environment, in thrall to a defunct 19th century Ideology ("free trade"), and targeted for extinction.
Rather than mobilize for the new challenge of govern¬ ment-controlled capitalism or "trade war," recent admin¬ istrations have opted for the equivalent of unilateral disarmament. They have rejected the federal govern¬ ment's traditional role as defender of U.S. economic se¬ curity, instead embracing a style of promiscuous "free trade" that would have made Adam Smith blush.
The costs of this folly have been mind-boggling. The United States slumped from the world's richest creditor in 1981 to the world's fattest debtor eight years later ($500 billion in net extemal debt). Trade deficits sky¬ rocketed to $171 billion in 1987, dipped in 1988, and now are heading north again due to a sharp appreciation in the dollar.
This stunning economic reversal was America's duti¬ ful sacrifice on the altar of "free trade." Of course, as the Reagan administration saw it, a hands-off federal trade policy was part and parcel of a much broader anti-gov¬ ernment crusade — a crusade that gained wide popular support and, in the process, left political Washington in a funk. Today, we are bewitched by the great irony of the post-Reagan era: Abroad, the United States is bested by nations such as Germany and Japan that prize their central governments as muscular engines of economic growth and commercial advantage. But here at home, we have been persuaded that "govemment is not the solution; govemment is the problem." Wrong. This rejec¬ tion of govemment reflects a misreading (or, more likely, a non-reading) of American history — which is over¬ whelmingly the history of strong, activist, assertive gov¬ emment. And our cult-like faith in the "Invisible hand" of the world marketplace is no less alien to the American tradition.
The fact is that selective trade protection is as Ameri¬ can as the Firecracker 500; as American as Alexander Hamilton and Franklin D. Roosevelt. It was Hamilton — and Washington and Madison — who led the first Con¬ gress 200 years ago in erecting a palisade of tariffs (as high as 50 percent on some 30 commodities) so that American industries would not be strangled in their cradles by British competitors. Our Fathers reckoned that their hard-won independence would soon be snatched away if it were not matched by economic inde¬ pendence.
Similarly, it was FDR who made it his first order of business to protect and expand the American economy. And he did it in the most brillisuit, paradoxical way. To save the banks, he first closed the banks. To save the farmer, he first ordered the crops plowed under. Today, in that same American tradition of creative, activist gov¬ emment, our challenge in the international marketplace is to raise barriers in order to remove barriers. In order to persuade the Asians and Europeans to remove their own barriers, we must first erect our own, and then negotiate the removal of both ours and theirs in tandem. That is true, reciprocal free trade.
Ernest F. Hollings is a Democratic senator from South Carolina and chairman of the Senate Com¬ merce, Science and Transportation Committee.
THE SUN/19e3
Imported cars arriving in Dundalk: Has the trend finally gone too far?
Let's be clear exactly where America stands, 4V'2 dec¬ ades after World War II. As victor in that war, we didn't wait around for "market forces" to revive the world econ¬ omy. Our govemment set about consciously rebuilding its devastated foes into democratic-capitalist power¬ houses. And, through the Marshall Plan in Europe and the MacArthur plan in Japan, we succeeded magnifi¬ cently. Activist govemment was the great driving force behind that resurrection. We provided an abundance of credits, aid and expertise, and we opened our market wide to imports from all the world.
Rising to this opportunity, the nations of Europe and Japan relied on their governments to spearhead re¬ search and development, to develop and protect domes¬ tic industries, and to orchestrate trade strategy. And today, looking toward 1992, the Europeans are banding together not to open markets but to become a tougher, more disciplined trading bloc.
Forty-four years after the war, it is time for the United States to take away the punch bowl. We are naive to expect the Japanese and Europeans to be grateful to us and open up their markets to America as we did ours to them We tried to set an example of high-minded "free trade" openness, and were mugged. We tried jawboning, and were ignored. Common sense says that our rivals will deal fairly only when we make it in their raw eco¬ nomic interest to do so. To that end, it is time for our government to step up to bat and play hardball with the rest of them.
The basic ground rule of the "trade war' game is thai 90 percent of world commerce today is government-to- govemment commerce — commerce conduct! d accord¬ ing to strictures laid down between governments, in¬ deed, govemment negotiations and state interventions are integral facets of today's "marketplace."
Of course, we Americans also intervene in the mar¬ ketplace, but this is the difference: While our rivals use govemment to expand their industries' market share, we use govemment to expand our people's standard of living. We intmde in the marketplace' to ensure a gener¬ ous minimum wage, unemployment compensation. So¬ cial Security, clean air and water, workplace safety, plant-closing notification, you name it — all of which drive up the cost of production and push U.S. manufac¬ turing offshore. Then we turn around and pontificate about how U.S. Industry needs to come in off the goll course and get competitive. Nonscnst  It is hypocritical