Remarks to the Annual Meeting of the National Association of Manufacturers

May 29, 1986

It's a great pleasure to be with you once again. This is my first event with Mari Maseng, the new Director of Public Liaison in the White House. Liaisons in the White House -- that kind of sounds like a political potboiler, doesn't it? [Laughter] Mari, it's good to have you on board.

Today I want to address you on one of the most important challenges that faces our nation: keeping our trading system free and fair -- an open, vibrant, and expanding source of prosperity through the end of this century and beyond. I've noticed that dinner speakers or luncheon speakers often start off by saying, ``Before I begin, I'd like to say a few words,'' which I always thought was a pretty handy trick. [Laughter] Today I'd like to try that myself. So, before I begin talking about trade, I'd like to say a few words about your vote tomorrow on the Senate Finance Committee's tax reform bill. You can probably guess my feelings on the subject.

We have before us an historic opportunity to dramatically lower tax rates and to draw America's investment capital out from under the shelters and back into the productive economy where it belongs. With this bill we can liberate the entrepreneurial genius of the American people and put the American spirit of enterprise into overdrive for our race into the 21st century. This is truly tax reform that is profairness, profamily, progrowth, and prosimplification. Now, that last isn't mentioned very often by all those who oppose tax reform, but it's important to everyone who has to deal annually with the Internal Revenue Code. Let me give you an example. Here is the last sentence of section 509(a) of the code: ``For purposes of Paragraph 3, an organization described in Paragraph 2 shall be deemed to include an organization described in Section 501(c), (4), (5), or (6) which would be described in Paragraph 2 if it were an organization described in Section 501(c)(3).'' [Laughter]

Now, you know, there's 57 feet of Internal Revenue Code lined up on the shelf with things like that in it. Well, as for fairness, by dropping millions of working poor off the tax rolls, giving families with children a long-overdue break, lowering the top rate down to its lowest level in half a century, we'll make it easier for every American to climb that ladder of opportunity and to keep the fruits of his or her achievement. You know, more than a century ago, a Scottish economist, John Ramsay McCulloch, spoke of the principle of the progressive tax. To paraphrase him: When we start taxing individuals on any other basis than proportional to their earnings or property, we are at sea without rudder or compass and there is no end to the mischief that can be done. Well, I think we can all say amen to that.

This bill represents a new consensus in America, a progrowth, pro-opportunity consensus. The politics of envy, which produced only bitterness and division, has been consigned to the trash heap of history -- economic history -- and the days of the malaise economy and the zero-sum society are over. We no longer believe that one man's gain is another man's loss. We have a new vision of America, one in which we are all pulling together rather than pulling apart, one where we're marching forward together as one, proud and united. A growing economy with ever-expanding horizons, an economy of boundless energy and infinite possibilities -- this is a vision that does not and cannot stop at our borders. Unfortunately, when it comes to the issue of trade, that old zero-sum thinking still persists. The same faction that brought us high taxes, that locked out opportunity, now wants to throw up barriers to lock out trade.

You know, it's said that if all the economists in the world were laid end to end they still wouldn't reach a conclusion. [Laughter] I can make cracks like that now, because my degree was in economics. But the one thing that practically every economist agrees on -- whether they're left, right, or center -- is that international trade is vital to a growing, high-employment economy, and trade barriers do nothing but destroy jobs and stunt economic growth. But you don't have to be an economist to know that. No one who has lived through or learned the lessons of this century doubts how dangerous it is to play a game of chicken with our trading partners. Because it won't be long until we're both driving over that cliff.

Having celebrated my 39th birthday 36 times now -- [laughter] -- I've been around to witness a sizable chunk of this century. I well remember the antitrade frenzy in the late twenties that produced the Smoot-Hawley tariffs, greasing the skids for our descent into the Great Depression and the most destructive war this world has ever seen. That's one episode of history I'm determined we will never repeat. I also remember that after the war the peoples of the free world pulled themselves from the ashes and swore it would never happen again. From their vision and determination came a great act of statesmanship. With the unimpressive title of the General Agreement on Tariffs and Trade, or GATT for short, the global trading system was opened up and the free world entered an era of cooperation and prosperity unparalleled in human history. In that postwar prosperity, the United States became the world's greatest trading nation in history.

I don't have to tell you about the benefits of trade: that greater choice and lower prices for consumers, businesses, and manufacturers means greater productivity and improving living standards for all. Over half a trillion dollars in goods were traded across our borders last year. Exports account for one out of every four farm acres planted and one out of every six manufacturing jobs. But even more important, trade is a spur to innovation. Despite the faint hearts constantly putting down this country's ability to compete, we remain today the world's largest exporter and the most competitive nation on Earth.

The American economy is blazing a trail toward the future. Since 1980 we've seen commitments to venture capital increase fourfold, record numbers of new businesses incorporated, and a 42-percent increase in companies listed over-the-counter in the stock market. Our entrepreneurs and scientists are in the vanguard of technological innovation. From custom-made computer chips to genetically engineered vaccines to the latest developments in robotics, the label reads ``Made in America.'' And we heard some good news from the Labor Department this morning. The index of leading economic indicators rose 1\1/2\ percent in April, the largest increase since October 1983, while the previous 2 months were revised to show greater gains than earlier reported and productivity figures for the first quarter were revised upward, too -- all signaling good times ahead.

Now, that doesn't mean that in some sectors of our economy the pain isn't very real. In some cases the disruptions of a changing world economy have caused personal hardship for America's workers. And in those cases it's our commitment to help those workers move into healthy and growing industries, and we'll meet that commitment. But no one benefits by antitrade legislation that pits one worker's job against another, that divides American business and industry and sets them off against each other, fighting for a piece of a shrinking pie. America doesn't need to hide behind trade barriers. Given a level playing field, Americans can outproduce and outcompete anyone anywhere on Earth. That's why it is the policy of this administration to open markets abroad, not close them at home.

Now this doesn't absolve other nations from playing by the rules. Free trade means, by definition, fair trade. And where other nations aren't playing by the rules, this administration is more activist, more aggressive, than any other in blowing the whistle on unfair trade practices against American producers. In the past year alone we have gone after Korean abuse of intellectual property rights and we've increased access of American agricultural products to European and Taiwanese markets. And while we prefer to negotiate, we have taken and will take strong action when necessary against markets closed to American goods and services. And to prevent other countries from selling below cost and unfairly moving in on American markets, we have initiated 528 antidumping and countervailing duty cases.

Constant negotiations with Japan are opening markets previously shut to American exporters. Over the past year we've worked to open Japan to American exports of telecommunications equipment, medical equipment, pharmaceuticals, electronics, and forest products; and we're going after transportation equipment. We've been intensively negotiating with the Japanese on semiconductors, and I'm pleased to announce that we have the framework of an agreement which would open Japanese markets to U.S. computer chips and prevent Japanese companies from dumping their chips on American markets. While the precise details still have to be hammered out by Ambassador Yeutter, this framework should allow for significant new market access.

Just last week we began negotiations with Canada, our largest trading partner, on a new, comprehensive free trade agreement which would lower barriers to U.S. exports. From insurance in Korea to computers in Brazil to tobacco and products in Japan, this administration is making sure that American exporters get a fair shake abroad. Now, all these initiatives are important. But if our critics are seriously interested in creating a level playing field for American industry, they have to look with us at the underlying reasons for the imbalance in world trade. The first we have corrected: The dollar is now at a more competitive level with foreign currencies, and that means increasing American exports. The second important reason for the imbalance in trade is the basic imbalance in the world economy. Because we cut tax rates and regulations, controlled spending, and squashed inflation, our economy's been growing and prospering. But the world is not growing along with us. Burdened by tariffs, quotas, oversized governments, and marginal tax rates as high as 80 percent, economies in Europe, Africa, and Latin America have stagnated, even declined. With incomes falling and unemployment high, they can no longer afford to buy our products. And that's one major reason why between 1980 and 1984 imports into Western Europe dropped by 18 percent, Africa by 17 percent, and Latin America by 34 percent.

Now, despite this devastating decline in world trade, America has stayed competitive. The members of NAM deserve a lot of credit for the fact that in 1984 exports of U.S. manufactured goods increased by over 8 percent. And they went up again in 1985. Our share of world exports of manufactured goods has increased, too, from 17 percent in 1978 to 20 percent in 1985. America's manufacturing production has risen steadily and is just as big a part of our overall economy as it was 30 years ago. All those who talked about the so-called deindustrialization of the United States should take a look at the real figures. And then maybe they'd realize that America's best days aren't over; they're just beginning. When it comes to America's future, believe me, you ain't seen nothing yet.

The world doesn't need more tariffs and taxes and the unemployment they produce. It needs more progrowth policies that lower tax rates and interest rates, create jobs, and expand world trade. And once again, America is taking the lead. We're strengthening the world monetary system, the foundation of international trade. And as I mentioned before, the dollar is now at a more competitive level with foreign currencies. We're combating economic decline in the debt-ridden developing countries by promoting high-growth, low-tax, free-market reforms. We're encouraging Japan to reform the bias against consumption that is built into its system. And next September we expect to launch a new round of GATT negotiations with our trading partners aimed at opening up markets for everyone. The docket will be full, including current rules that aren't working properly -- for example, those in agriculture and the settlement of disputes -- as well as the trade issues of tomorrow, like services, intellectual property protection, investment, and high technology.

All of these are real solutions to the real problem of getting the world economy back on the growth track. And that's the track to a future of open vistas and unfolding opportunities, a future where we all grow together, where every nation's prosperity augments our own. Unfortunately the House of Representatives last week turned its back on the future and started marching right back to Smoot-Hawley. Its so-called omnibus trade bill is really an ominous antitrade bill that could send our economy into the steepest nosedive since the Great Depression. This reactionary legislation would force American consumers to pay billions in higher prices, throw millions of Americans out of work, and strangle our economy as foreign markets slam shut in retaliation.

This antitrade bill isn't protectionism; it's destructionism. We've created nearly 10 million new jobs since the recovery began 40-odd months ago. More jobs in the last decade than Europe and Japan combined. But this bill would start wiping them out. The Commerce Department has estimated that the jobs of 5\1/2\ million Americans -- workers -- are dependent on exports. That's 5\1/2\ million American jobs that would be threatened if this bill were passed into law. And who would be some of the first victims? Well, you don't have to look very far. They're right here at home: the aerospace machinist at Boeing's plant near Seattle who builds some of the world's finest passenger planes, the recording engineer at CBS Records, the wheat farmer in Nebraska, and the longshoreman in New Orleans loading grain on ships destined for foreign ports, to name just a few. No job is safe in a trade war. In this modern society all our fortunes are connected by a million links in a chain of interdependence. If these people lose their jobs, what of the automobile dealer who hoped to sell them a new car or the trucker who hauled the cars or the auto worker who made them or the steel worker who fashioned the raw material or the miner who provided coal to the steel factory? And what of the retailers, service people, doctors, and teachers whose livelihoods ultimately depend on their jobs?

This bill is so potentially destructive that even many of those who voted for it did so in the expectation it would be vetoed and so never become law. Well, if it comes to that, I assure them they'll get their wish. The Democratic leadership may think this is clever politics in an election year, but the American people see this for what it is: kamikaze legislation that would take their jobs down in flames. Those who believe this is the way to go are, in reality, economic defeatists. They have lost confidence in the capacity of their own country and their own countrymen to compete in the modern era. They look out at the industrial democracies of Europe and west Asia and the emerging democracies of Latin America, and instead of saying, ``America will lead the world into a better and brighter future,'' they cry, ``Stop the world, I want to get off.''

Well, I don't share that pessimism, that defeatism; I never did. And neither does young America. There's got to be a pony in here someplace. [Laughter] And neither, by the way, do our trading partners who marvel at what Europeans call the American miracle -- 3\1/2\ years of expansion and job creation and advances in science and technology that have left the whole world gaping at the near-limitless capacities of the American people. I saw that firsthand at the economic summit in Tokyo. The leaders of the world's major industrialized democracies all wanted to know how they could inject some of that American spirit of enterprise into their economies.

Well, let me restate, then, the trade policy of this administration. We will root out and take action against unfair trading practices targeted at American products or American workers. We will be alert and aggressive in opening up foreign markets closed to American exporters. We will bring the world with us into a new era of free and fair trade. Free trade with free traders is our byword. But we will not seek false security behind restrictive quotas and import duties. Nations that hide behind tariff walls soon fall behind. America's destiny is not to be second or third or fourth in the march to the future. It's to be in the vanguard, leading the free nations into a brighter and better era.

To those countries whose economies are still enmeshed in statist policies, the American economy is a shining example that freedom not only works, it works wonders. If we further reform our tax structure, closing loopholes and bringing our top rate down to 27 percent, we'll be opening the floodgates of progress and creating a momentum toward economic freedom that will sweep up the world in its currents. We will see a global economy of opportunity emerge, one where markets are not only open but constantly expanding. America has done it before in more trying times. And with your help, we can do it again. We can keep the miracle alive, not only for America but for the world.

Well, thank you, and God bless you all.

Note: The President spoke at 11:33 a.m. in the Grand Ballroom at the J.W. Marriott Hotel. Clayton Yeutter was the United States Trade Representative.