The Economy: World Trade: A Clash of Wills

A MONTH ago, the initial response in foreign countries to President Nixon's economic blockbuster was a curious mixture of shock and sympathy. Although bankers, businessmen and government officials were stunned by the President's decisions, many said that Nixon was justified in taking drastic action to buttress the dollar. Last week quite a few of those leaders began to express a very different set of feelings. In Europe and Japan, they were muttering that the U.S. is refusing to compromise in solving major international problems that are largely of its own making.

Foreign nations have been injured by three parts of the President's program. The 10% surtax has obviously made many foreign-produced goods less competitive in the U.S. market. On top of that, the proposed investment tax credit for business does not apply to the purchase of imported tools and machines; U.S. businessmen must "buy American" to take advantage of the boon. Finally, some foreign leaders —particularly in France and Germany —are upset because the U.S. has refused to devalue the dollar by raising the price of gold. Instead, Washington is holding out for them to revalue their currencies upward, which would make their goods still costlier—and less competitive—in some world markets. Last week the Common Market's executive commission formally demanded an outright dollar devaluation.

Foreign critics frequently ignore their own protectionism. U.S. businessmen face enormous tangles of restrictions on trade and investment, notably in Japan (see following story). For years, U.S. trade negotiators have tried in vain to persuade their counterparts abroad to bargain seriously on these inequities. Nixon's program is designed to jolt them into much-needed negotiations. What disturbs foreign leaders is the possibility that the President might become so enthused by the domestic popularity of his program that he will push them too hard, demand too much, and retain the surtax too long.

Countermeasures from Tokyo. Japan, which stands to lose more than any other nation under the Nixon program, showed a deepening resistance toward it. Last week five Japanese ministers traveled to Washington for an annual meeting with U.S. Cabinet members, which concentrated heavily on problems of the "Nixon shocker," as it is called in Japan. Nixon and Secretary of State William Rogers made elaborate personal gestures aimed at underscoring the basic Japanese-U.S. friendship. Rogers took the delegation of visiting Japanese and their wives to a performance of Leonard Bernstein's Mass at the Kennedy Center for the Performing Arts. Nixon invited them to a White House dinner later in the week.