The grim news from the Commerce Department is that the U.S. trade deficit for 1985 was the worst ever–$148.5 billion. So the pressure from industry and labor groups for protectionist laws against foreign goods is worse than ever, too.
But, as U.S. Trade Representative Clayton Yeutter points out, protectionism fails to address the principal cause of the trade deficit–the unnaturally high value of the American dollar produced by the unnaturaly high interest rates generated by the country`s record budget deficits.
This makes American goods sold abroad prohibitively expensive and foreign goods sold here attractively cheap. The dollar has decreased in value some 24 percent since its peak in March, 1985, but it takes at least six months for these changes to be reflected in trade deficit figures. According to Mr. Yeutter, the dollar will have to decline at least another 15 percent before any substantial reduction in the trade deficit can be made.
That means making the hard choices that will further reduce federal spending and changing the tax laws to produce more revenue. The best way to make American goods more marketable is to make them more affordable. Americans can understand that. It`s about time that Congress did.
