Those who argue for protectionist U.S. trade policies often claim that the U.S. is at an international competitive disadvantage due to: 1) low wages, weak labor standards and lax regulations in emerging economies, and 2) superior productivity and/or unfair trade practices in Japan.

But these arguments are based on a misunderstanding of the relationships between trade flows, labor costs, productivity and exchange rates, as well as simple failure to look at the facts closely.

• Low wages do not guarantee low costs; otherwise countries with rock-bottom labor costs -- such as Bangladesh and Botswana -- would rule world trade.
• To the extent that low wages reflect low productivity, any advantage to employing low-wage labor is offset.
• Productivity and wage levels are closely related in most cases, for both developed and less-developed countries.
• Unit labor costs in several emerging economies are actually higher than those of the U.S. -- which means that the productivity gap is even greater than the wage gap.

International trade benefits the U.S. as a whole. Trade allows international specialization and increased competition, forcing inefficient companies to shape up or close down.

Imports of labor-intensive products from low-wage countries are likely to be harmful to unskilled workers in the U.S., especially in highly unionized and imperfectly competitive industries where wages are usually high.

But experts recommend attacking these and the problem of inadequate skills among some American workers directly, rather than hobbling the dynamic U.S. economy with isolationist economic policies.

Source: Prof. Stephen S. Golub (Swarthmore College), "America-Firsters Have It Backward, Wall Street Journal, January 16, 1996.

The U.S. imposes burdens on American producers who want access to foreign markets through a web of ever-expanding social regulations, trade specialists observe.

• The net annual costs to the U.S. economy imposed by the 1990 Clean Air Act exceed the estimated value of U.S. exports allegedly blocked by Japan's import restrictions.

• U.S. environmental laws sock domestic auto manufacturers with a pollution control bill much steeper than that borne by automakers in Japan.

• Experts suspect that harsh U.S. water quality laws are less cost efficient than Dutch and German experiments with effluent fees.

• Enforcement of certain civil rights laws in the workplace -- including reinstatement with full back pay and punitive damages awarded by juries -- drives up the costs of U.S. products and has no parallel in the rest of the world.

Then there are the costs of product liability suits in our highly litigious society. All of these, as well as other legally-imposed factors drive up U.S. production costs and add a competitive burden on American exports.

While we complain about restrictive trade practices overseas, analysts advise Americans to keep in mind the many regulatory ways we are shooting our own export industries in the foot.

Source: Pietro S. Nivola (Brookings Institution), "When it comes to Regulations, U.S. Shouldn't Cast the First Stone," Wall Street Journal, May 15, 1996.

Nearly all economists recognize that tariffs are taxes by another name. And since tariffs raise the price of foreign goods, they let American firms raise prices without fear of competition. They also limit consumer choice and product quality.

• One study estimates the gains from the World Trade Organization's global round of trade liberalization at $450 billion a year.
• It has also been estimated that, in the 1980s, protectionism cost U.S. consumers about $420,000 for each manufacturing job saved.
• And because tariffs and other measures like import quotas raise prices, they stifle growth in other areas of the economy -- which might otherwise have created additional jobs.
• Moreover, raising tariffs on foreign goods invites other countries to raise tariffs on U.S. goods -- which simply kills jobs in our own export industries.

Apparently, protectionists believe that there are only a certain number of jobs in any economy, and it is the government's role to decide who gets them.

Source: Perspective, "Pat's Problem," Investor's Business Daily, February 22, 1996.

• A two-year study has concluded that the overall effect of antidumping duties is negative -- particularly through the impact on consumers.
  
  
• Everything from paper clips to orange juice has been hit with duties.
  
  
• If antidumping duties could permanently be lifted, it would be as though thousands of goods permanently went on sale.

• The maquila industry, which manufactures apparel and other labor-intensive goods, emerged in Central America in the 1980s when the U. S. government launched its Caribbean Basin Initiative -- which gave certain products from 20 countries preferential access to the U. S. market.
  
  
• Hundreds of foreign manufacturers -- mainly Korean and Taiwanese -- established plants in Central America, plants which became conspicuous for the long lines of young people seeking jobs.
  
  
• In Guatemala alone, maquila industries employed 140,000 at their peak.
  
  
• But under pressure from U. S. labor unions, the U. S. government has periodically threatened to expel Guatemala from the CBI arrangement, leading to the closure or relocation elsewhere of dozens of maquila shops and a decline in the industry.

Contrary to the claims of American trade officials, Japanese markets are not closed to American goods, according to a new study. It concludes that U.S. trade disputes with Japan are less about open markets than obtaining special favors for certain industries.

For example, the study analyzes the claim that there are barriers to sales by the Big Three automakers (General Motors, Ford and Chrysler) in Japan. It found that:

• The Japanese auto market, excluding cars with engines 2.0 liters or less, is 10.22 percent foreign, and the Big Three had a 5 percent market share.

• However, the Big Three don't export any subcompact cars to Japan, although that is 80 percent of the market there.

• In contrast, the market share for U.S.-made vehicles from the Big Three in Europe is less than 1 percent, since most of their cars sold in Europe are made there.

Since there are no legal barriers to U.S. exports to Japan, U.S. automakers and trade officials select statistics to show there must be "invisible" barriers -- which they say must be remedied by guaranteed numbers of sales in Japan. Yet European automakers have been successful in Japan without guarantees.

• Until two years ago, U.S. automakers offered no cars with right-hand steering in Japan, and today offer only four models -- compared to more than 100 from European manufacturers.

• In the 1980s BMW, Mercedes Benz, Volkswagen, Opel, Rover and Volvo invested heavily in market and service operations in Japan.

• As a result, Europeans in Japan sold an average of 125 autos per dealer in 1993, compared to an average of 10 autos per dealer sold by the Big Three.

• Now German cars have a larger market share in Japan than they do in the U.S.

The study notes that trade with Japan is a two-way street. For example, Japan buys more auto parts from the U.S. than any other country, excluding parts the Big Three export to their own foreign assembly plants. And in 1994 the Big Three imported nearly twice as many cars into the U.S. as the three leading Japanese automakers (Toyota, Nissan and Honda) -- 2,249,500 versus 1,325,800.

Source: Scott Latham, "Market-Opening or Corporate Welfare?" Policy Analysis No. 252, April 15, 1996, Cato Institute, 1000 Massachusetts Avenue, NW, Washington, DC 20001, (202) 8420200.