When in Rome, or Tokyo, or . . . : Our High-Minded Restraints Are Hobbling U.S. Exports

By now it’s accepted gospel that American business has not been sufficiently export-minded, and that Washington has not been forceful enough in telling other countries that free trade must be fair trade.

What still hasn’t received much attention, however, is the fact that some of the most burdensome restraints facing would-be U.S. exporters are those imposed by their own government.

At best American businessmen find themselves forced to compete with their proverbial hands tied behind their backs. In some cases they are foreclosed by law from competing at all.

The laws and regulations in question are well-intended. But the result is many billions of dollars in lost business--and the loss of many thousands of jobs.

To cite but a few examples:

--American companies operating abroad are foreclosed from activities that are perfectly legal under the laws of the host country, and that have no anti-competitive impact on the U.S. home market, but are in violation of American antitrust laws.

If Japan surprised everybody by opening its insider-oriented economic system to genuine participation by U.S. companies, the clash between Japanese business practices and our antitrust laws would prevent many firms from taking advantage.

--The Food and Drug Administration, which was created to safeguard the American people from unhealthy or unsafe products, now tries to prevent drug companies from exporting products that are banned here even if they meet the standards of the importing country. To avoid losing markets to international competitors that are under no such restraint, U.S. companies set up operations abroad, with a consequent loss of American jobs.

--American liability law allows U.S. companies to be sued for the alleged shortcomings of goods sold or even licensed and manufactured abroad. Since American juries place a higher value on human life, pain and suffering than do courts in other countries, it is not surprising that foreign plaintiffs, egged on by ambulance-chasing American lawyers, are tempted to sue here rather than at home.

Unfortunately, the United States can’t make its international competitors adhere to the same standards, and that again leaves American exporters at a disadvantage because the cost of liability insurance is cranked into prices they must charge.

Even in the unlikely event that we could persuade our competitors to adopt our standards, most Third World countries wouldn’t be happy about it because they place a higher priority on economic growth--the ability to feed, clothe and provide gainful employment to their people--than on product and worker safety.

--Perhaps most important, in terms of the money involved, are the restraints imposed on exports for political reasons. These include sanctions imposed on South Africa in reprisal for its racist policies. But sanctions are mostly directed against the Soviet Union and other Communist countries in order to restrict the flow of items of military importance.

Allied countries impose similar political restrictions on their exports--but only up to a point. To quote Business Week, the allied list of restricted goods “is radically shorter than America’s 700-page, fine-print list of 200,000 sensitive items.” The result is that U.S. firms find themselves prohibited from signing one or another big contract with the Soviets, only to find the business going to companies from West Germany, Japan, France or Britain.

--As part of the U.S. policy of trying to prevent the spread of nuclear weapons, the American nuclear manufacturing industry is under tight restraints as to what kinds of equipment and technology it can sell to what countries. Although other nuclear exporting countries have agreed to restrict commerce in sensitive nuclear technologies, nobody else interprets the rules as strictly as does Washington.

A current case in point: China is expected to buy several billion dollars worth of nuclear equipment and technology in the next few years and would like buy a lot of it here. But congressional approval of a nuclear cooperation agreement has been held up because of suspicions that the Chinese helped Pakistan with its nuclear weapons program. Meanwhile, prospective suppliers from allied countries are lining up to get the business in our stead.

--In many countries, especially in the Third World, it is next to impossible to get business permits or lucrative contracts without greasing the palms of public officials or well-connected middlemen. Frequently such practices are deeply embedded in the culture and economic structure of the host country, and within reason are not considered reprehensible.

Japanese, Korean and European companies have no qualms about playing the game by local rules. But in a fit of self-righteousness Congress in 1977 enacted the Foreign Corrupt Practices Act, which prohibits bribery and other such practices by U.S. businessmen overseas.

The law has done nothing to end bribery in the big, bad world outside our borders, but almost any American overseas sales representative can cite chapter and verse on business that went to less inhibited foreign competitors.

Most of the export-hobbling restraints outlined above reflect an admirable moral commitment to make American companies behave as well abroad as we require them to behave at home.

Taken individually, the case for each is strong. But the collective effect is to deprive ourselves of billions of dollars in trade each year--all without accomplishing the moral purpose that we seek.

Surely it is time to recognize that our competitors are not exactly scrambling to go by the same rules, nor are the intended beneficiaries in the Third World overwhelming us with gratitude.

Most of the morally based, well-intentioned restraints on U.S. exporters have no effect whatsoever except to deny our own businessmen--and their employes--the opportunity to compete for foreign sales on an equal footing.