Courtesy Reuters

The New Economics and U.S. Foreign Policy

In the summer of 1971, President Nixon and Secretary Connally revolutionized U.S. foreign economic policy. In so doing, they promoted a protectionist trend which raises questions about the future of the U.S. economy at least as fundamental as those raised by the abrupt adoption of wage-price controls. In so doing, they have also encouraged a disastrous isolationist trend which raises questions about the future of U.S. foreign policy at least as fundamental as those raised by the President's essentially positive and decidedly non-isolationist China initiative, Vietnam policy and negotiations with the Soviet Union. Both the U.S. economy and U.S. foreign policy for the relevant future hang in the balance.

The President decided to seek a massive improvement in the U.S. balance of payments-substituting aggressive concern for our largely "benign neglect" posture toward the deficits of the last decade. He terminated the convertibility of the dollar, shattering the linchpin of the entire international monetary system-on whose smooth functioning the world economy depends. He imposed an import surcharge, proposed both the most sweeping U.S. export subsidy in history and discrimination against foreign machinery by making it ineligible for the Job Development Credit, bludgeoned East Asia into a "voluntary" restraint agreement on textiles, and sought to extend and tighten the existing "voluntary" agreement on steel-completely reversing the traditional position of U.S. administrations in resisting protectionism and leading the world toward ever freer trade. He abandoned the essential Executive role as protector of foreign aid and joined the competition to gain domestic political credit for cutting it, contributing directly to the near-scuttling of the entire aid program in the Senate just two months later. He violated the letter and the spirit of the reigning international law in both the monetary and trade fields, reversing the traditional American role of leading the effort to strengthen the rules governing global conduct

Most Americans, and many foreigners, can support the broad objectives enunciated by the Administration. The world economic roles of

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