A Test of Free Trade Will

The latest government figures show the United States compiling another record trade deficit. The shortfall--$21.3 billion in May alone--testifies to the vibrancy of the U.S. economy. But it also poses a growing political risk for the Clinton administration in fending off protectionist pressures from industries that feel threatened by cheap imports. Some economists also are worried that the consumer spending spree, which is driving the surge in imports, will hurt the economy down the road. Perhaps, but the answer to either the political or economic problems generated by the lopsided trade is not shutting U.S. markets to imports.

The test of the U.S. free trade policy may come as early as next week when the House of Representatives is scheduled to vote on an extension of so-called normal trading relations with China for another year. The mounting trade deficit with Beijing is raising opposition from many quarters, including North and South Carolina, whose representatives see Chinese textile imports as a threat to the dwindling local textile industry. They will likely not mention that free trade is giving rise to a new $1.7-billion textile industry in Southern California. As reported on the front page of Wednesday’s Times, hundreds of small, nimble enterprises are taking advantage of the much-maligned North American Free Trade Agreement to make and dye cloth for garment factories in Mexico. Already, nearly 17,000 jobs have been created by these companies in and around Los Angeles.

California, America’s No. 1 exporting state, reaps huge benefits from open trade. One-quarter of the state’s $1-trillion economy depends on foreign exports, imports and investment. For the last three years, California’s exports--made up mostly of electronics, transportation equipment and other manufactured goods--have exceeded $100 billion.

What worries economists, in some measure justifiably, is that the rising imports are driven by America’s spending binge. Consumers lay out more than they earn, borrowing and dipping into savings to pay for it. That’s unsustainable over the long run. In today’s economy, however, this engine is driving U.S. prosperity and helping to lift Asia and Europe out of their slumps. Foreigners, encouraged by the growth in the United States, are pumping billions of dollars into the American economy, providing the capital that helps finance further growth. They will continue to do so as long as they believe America’s economy is sound.

U.S. companies do have a legitimate gripe on the trade front. Many foreign markets remain closed to their goods and services. The government should do all it can through negotiations to pry those markets open. But closing U.S. markets to get even would only hurt the vast chunk of the economy depending on free trade.