December 8, 1976

Production Key To Foreign Competition

A funny thing happened to Jimmy Carter last week on his way to the White House - a ton of steel fell on him.

The major steel companies raised the price of their vital product six percent in a surprise move that ultimately will increase the price of everything from anvils to autos.

It was a direct challenge to the incoming president and a direct response to Carter's hint he might impose wage and price controls if the rate of inflation didn't improve.

During his campaign, Carter said he would hold down prices through "leadership" and "jawboning."  In the crunch he backed away from the problem.  He declined to meet with the president of U.  S Steel though the latter requested it.

On the surface, it appears that Carter is guilty of political hypocrisy; and, indeed, his deeds fail to match his campaign promises.  Nevertheless we should not be overly critical.  Who amongst us really takes campaign rhetoric seriously?

In a way, Carter's inaction in the face of his first economic test is a good sign.

He has caught a severe case of reality, and it is reassuring to find him cautious.  These are perilous times that demand considered actions.  Until he has had some on-the-job training he is wise in keeping a low profile.

Carter learned the first valuable lesson of the presidency, and discovered the depth of the most important economic problem.

The lesson is that you can't shoot from the hip as chief executive of the world's most powerful nation.  You can't blab to the world all options you consider or all your plans.

The possibility of a wage and price freeze scared the pants off American business, ant-it rushed to get price protection on the board before its higher costs were locked in.  U.S. Steel frankly admitted this.

At week's end, Carter had to call a press conference and announce that wage and price controls were temporary expedients for "extreme emergencies".  He declared he had no plans to even ask for standby authority.

This took some of the steam out of the explosive rise in inflation, but the business community is still nervous.  One more loose statement about government control and there will be no stopping the rush to get well.

The problem discovered by Carter is one which neither he nor most Americans generally knew about - the shrinking U.S. share of world markets.

The steel industry panicked because foreign competitors sold approximately eight million tons of steel in the U.S. during 1976.  This, and the sluggish demand for steel, held domestic mills to 40 percent of capacity.

The steel unions last spring campaigned for import quotas on foreign steel, principally that from Japan.  They point out that every million tons of steel taken away from U.S. mills costs 9,000 jobs!  Both the unions and the steel companies want permanent tariff restrictions on imported steel to force up Japanese steel to the higher American prices.

If the steel industry was the only one affected by foreign competition, Carter might continue to ignore the problem in hopes it would go away.

Unfortunately, the malaise is general throughout the economy.

The International Ladies Garment Workers Union has taken to television this Christmas season to beg U.S. consumers to buy American made clothing.  It is too little, too late.  The once flourishing U.S. garment industry is nearly done for.  All the popular brand-named men's shirts now sewn in oriental countries.  Taiwan, Hong Kong and Philippines now turn out 80 percent of the mass produced dresses and blouses.

U.S. makers of color television sets have been given a hearing next month before the International Trade Commission to convince the new administration import quotas should be imposed, again, against Japan.  That country already has taken away all of our radio and tape recorder business.  Unless U.S. taxpayers subsidize the television manufacturers, the nation that invented electronics will have to buy virtually all its sound equipment abroad.

One of my printer friends in Cleveland last month lost a typesetting contract to a printer in Yugoslavia! The foreign typesetter could pick up copy, airmail it to Yugoslavia, set it in English, correct it, make reproduction proofs and return the finished work to Cleveland in 48 hours for less money than Cleveland typesetters.

It is later than we think.

Leadership and jawboning are pitiful weapons against the cut-throat competition of hungry workers in emerging nations.  It was naive of Carter to assert that charisma and talk would solve such complex problems.  Thank God he has so quickly discarded this simplistic approach.

We can only hope the new president will turn his demonstrated powers of persuasion to convincing American workers their salvation lies in increased production at competitive wages rather than quotas and tariffs.

Author: Lindsey Williams