THE ECONOMY: Struggle to Stay Competitive

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At the highest levels in Washington, the nation's policymakers are increasingly wondering whether the U.S. can stay competitive in major world markets. The rising ability of foreign manufacturers to outproduce and undersell the U.S. in many industries has become a prime source of worry to the men closest to President Nixon. They are particularly shocked by several portents, including the fact that imported cars account for 33% of all new-auto sales in California and the expectation that Japan will turn out more steel than the U.S. in 1974. They are upset by the demise of the U.S. supersonic transport (aircraft exports added $2.5 billion to the plus side of the nation's balance of payments last year) and by the stiffening trade barriers in the Common Market (American farm exports, largely to the Market, added $7.2 billion to the balance of payments last year). Said Treasury Secretary John Connally last week: "The simple fact is that in many areas others are outproducing us, outthinking us, outworking us and outtrading us."

In the White House, a new program is being readied to make the U.S. more competitive. The details are still being worked out, but the broad outlines are clear. They could very well call for some basic changes in U.S. policy. Last week high Administration officials sketched three areas in which they will seek sweeping change:

ANTITRUST. The feeling is growing in the Administration that bigness is not badness but may well be a virtue in helping the U.S. to sell to the world. According to the current thinking, only one or two companies may be necessary in some industries. In others, mergers would help smaller producers grow bigger—and better able to meet the foreign challenge. Some men in Nixon's inner circle argue that the Sherman and Clayton antitrust acts were written for a different, simpler age. There may soon be a high-level call for a relaxation of antitrust rules and procedures, though that is certain to run into furious resistance in Congress.

WORK RULES. White House policymakers are more and more convinced that the time has come to try to change ancient, union-imposed work rules, which impede gains in productivity. Nixon's advisers believe that even the construction industry could meet the egregious wage demands made upon it if the unions would only agree to modernize the spread-the-work rules. Similar rules are largely to blame for the fact that there have been virtually no productivity gains in the steel industry during the past five years, although steel companies have invested $11 billion in new plants and improved processes. The trouble is that the President's advisers are divided and uncertain about just how to attack the work-rules problem because they are afraid to further antagonize organized labor with the presidential election less than 18 months away. But no officials would be surprised if Nixon called for reform of work rules, perhaps during the current steel-labor negotiations.