trade in this nation's GNP has doubled over the last decade or so and, if investment is included, the level of U.S. involvement in the world economy is at least as great as that of Japan or the EEC, taken as a group.

This internationalization of the world economy has brought with it numerous opportunities and challenges requiring new approaches in analytical, structural and organizational terms. Many U.S. companies have reorganized themselves more than once in the past ten years to improve the functions of their international operations. The U.S. Government, on the other hand, which naturally plays a tremendous role as policy-maker, negotiator and energizer in dealing with the consequences of economic interdependence, has failed to organize itself effectively to meet these new tasks. There is a growing perception in business, financial circles, academia, the Congress and elsewhere that there has to be a better way to develop and implement the nation's international economic policy.

The dramatic reversal of the nation's trade balance and the dollar's problems in world markets have spurred consideration of alternative organizational proposals. While government intervention in currency markets since late last year has bolstered the dollar, these are not long-term corrective actions and do not address the fundamental problems which underlie the dollar's weakness. Last year the United States sustained another record trade deficit of over $28 billion.

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a figure that would have been unimaginable just a few years ago. This deficit has serious implications for the nation's economy in terms of higher unemployment, dollar problems abroad and growing inflation at home. While most press accounts usually stress the admittedly large role of increasingly costly oil imports in this deficit, it is often overlooked that the decline in our manufactured goods trade balance was more significant last year than oil in accounting for the larger trade deficit. Indeed, our trade position in manufactured goods,

which represent two-thirds of the dollar value of U.S. exports, generally has been

declining rapidly in both absolute terms and relative to major U.S. trading competitors. In just three years, from 1975 to 1978, the U.S. trade account in manufactured goods dropped from roughly a $20 billion surplus to a deficit of over $5.8 billion, while the surplus of Germany and Japan has jumped to over $51 billion and $72 billion, respectively.

BALANCE OF TRADE IN MANUFACTURES,
U.S., F.R. GERMANY, AND JAPAN,

SBILLION

1. 1978 figure based on second quarter, annualized.

The United States has lost its once unchallenged position in world commerce. In 1970 Germany moved ahead of the U.S. as the world's leading exporter of manufactured goods and since has widened its lead. The U.S. share of total world

exports has continued to drop from an 18 percent share in 1970 to only 13.7 percent in

1977

and bear in mind that every one-tenth of one percentage point represents over $1 billion in trade, or 40,000 jobs, $2 billion in U.S. GNP and $400 million

Some will argue that exchange rate developments further devaluation of the dollar or revaluation of the yen and the mark

will rectify the U.S. trade problem.

Others may contend that the current problem is mainly due to the business cycle; i.e., that because the U.S. has grown more rapidly than Japan or Western Europe in the last few years, it is importing more and exporting less than other countries in response to this conjunctural business cycle situation. I believe, however, that reliance on exchange rate developments or business cycle changes to correct the American trade position and improve the U.S. balance of payments position more generally, represents a theoretical view held by some economists, but shared by very few businessmen.

Much of the responsibility for the poor performance of U.S. exports must fall on government, both the U.S. and foreign governments, for their increasingly counterproductive role in international business transactions. The U.S. government, for its part, recently has been succeeding more in discouraging rather than promoting increased exports. The absence of effective export stimulants, the continued growth of bureaucratic red tape and the often counterproductive use of presumed export leverage to pursue non-economic policy objectives, have all served to place a series of self-imposed restraints on U.S. exports. Additionally, the U.S. Government has not been able to act effectively against foreign countries engaging in unfair trade practices which have brought harm to important segments of U.S. industry.

In short, the U.S. Government has not effectively pursued this nation's increased international economic interests, either in supporting U.S. foreign business activities or resisting the unfair practices engaged in by other countries on behalf of their own national industries. We believe that the Government simply has not kept pace with the country's changed economic realities. U.S. interests in the international

This policy area deserves high-level attention on a sustained, integrated basis and requires a top policy spokesman and advocate at the cabinet level of government. Today there is no single government department charged with looking after this nation's international trade and investment position. In fact, the currently scattered system of diverse, overlapping or even competing functions and authorities almost guarantees that there will be no adequate guidance in this vital

economy can no longer be the poor step-child of other national concerns.

national interest area.

INTERNATIONAL TRADE REORGANIZATION PROPOSALS

A number of proposals have been introduced to improve Executive Branch organization for the conduct of trade policy. Senators Abraham Ribicoff and William Roth have introduced a bill (S. 377) to consolidate the currently fragmented federal policy-making and execution apparatus into one Department of International Trade and Investment (DITI). The bill does not expand the size of the Cabinet, since it subsumes the Special Representative for Trade Negotiations post, and does not authorize any new bureaucracy nor government regulatory activity. It does, however, provide a consolidated policy Department with a strong mandate and the tools to promote and protect U.S. international trade and investment interests. Senators Robert Byrd, Adlai Stevenson and others have introduced bills which offer somewhat different consolidation patterns, but are directed at similar objectives.

In the House, Congressmen James Jones and William Frenzel of the Committee on Ways and Means have introduced their bill (H.R. 4567) which transfers the main trade policy functions of the government to the Department of Commerce.

Congress

man Stephen Neal, Chairman of the International Investment and Monetary Policy Subcommittee of the House Banking Committee, has introduced a companion piece to Roth-Ribicoff, H.R. 3859. Congressman Gillis Long has also introduced a bill

(H.R. 4995) which places the main responsibility for trade policy-making and execution in the office of the Special Trade Representative. In late September

the Administration formally submitted its Reorganization Plan Number 3 to the Congress.