Tougher Trade Policies

February 21, 1994

President Clinton's personal intervention to bring off the $6 billion deal to sell Boeing and McDonnell Douglas commercial airliners to Saudi Arabia underscores his administration's commitment to what Commerce Secretary Ron Brown calls "a real economic partnership between government and business."

By using government leverage to the utmost, the president enabled these troubled American aerospace contractors to beat out bids from their heavily subsidized European rival, Airbus Industrie. Not only did he put U.S. Import-Export Bank guarantees on the line; he exploited Saudi Arabia's military dependence on the United States. The U.S. came to the oil-rich kingdom's defense in the Persian Gulf war and is owed $9.2 billion from arms sales whose financing will now be stretched out.

Philosophically, the Clinton administration has reversed the ostensibly purist free-trade, market-forces approach of the Reagan era. Its demand for a "results-oriented" opening of the Japanese import market is described by critics as a form of "managed trade." Its decision last summer to make government research labs available to the Detroit Big Three for the development of the car of the future is disparaged as "industrial policy."

Rather than be put off by these terms, this administration has embraced government activism as a positive instrument in the world marketplace. Soon after his election, the president went to Seattle to promise his help for an aircraft industry that has had to lay off more than half a million workers. He soon focused on Saudi Arabia's plans to buy 50 airliners to replace its entire commercial fleet.

Airbus, a British-French-German-Spanish consortium, was also after this plum. As the president lobbied King Fahd and sent three Cabinet officials to Riyadh, the contest became more than a battle between heavily subsidized industries. Military matters weighed as the desert kingdom swung to its protector and chief arms supplier.

The aerospace deal will undoubtedly increase trade tensions between this country and Europe at a moment of a U.S-induced trade showdown with Tokyo. But neither Japan nor the European Union is in any position to complain about government intervention or aggressive export promotion; both are experts at it.

The very visible toughening of U.S. trade policy just two months after completion of a more liberal General Agreement on Tariffs and Trade is highly controversial. Foreign countries will question the U.S. commitment to freer trade. They will view the North American Free Trade Agreement in terms of regional trade wars. And they will watch to see if markets are actually pried open or slammed shut, to the detriment of the global economy.

Mr. Clinton, of course, is more than an economic nationalist. He is a politician who knows the tens of thousands of jobs that will be saved in California and other key states will stand as a plus for the Democrats in the 1994 and 1996 elections.

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