Remarks and a Question-and-Answer Session During a United States Chamber of Commerce Teleconference
May 10, 1983 The President. Well, thank you, Mac Baldrige. I know how difficult it is to say ``au revoir'' to that beautiful city. But I wish you a safe journey home. And we look forward to seeing you soon.
May I also say ``thank you'' to some very special friends: President Dick Lesher and his dynamic U.S. Chamber. Today's program is a perfect example of what the Chamber provides so well -- business leadership to help push America forward toward new growth and more opportunity.
As you know, this is Small Business Week. I'm glad to be at the Chamber where so many small firms have become members and are working to keep America great by helping us to preserve our system of free enterprise.
I understand many thousands of small business people in some 42 sites will be watching this broadcast. Well, that's good news, because no group is more important to America's economic well-being than small business. No group does more to create human progress and receives less recognition than you, the risktakers of America.
We're asking you to address the great challenge of trade with your vision, courage, and leadership. I'm convinced the United States can begin the first leg of a new voyage into the future, a future in which commerce will be king. The eagle will soar, and America will be the mightiest trading nation on Earth.
Every citizen has a role and stake in helping the United States meet her trade challenge in the eighties. And the potential for growth is enormous -- a nearly $2 trillion market abroad, a chance to create hundreds of thousands of jobs, more income security for our people, and greater security for our freedom and democracy. Ninety percent of American manufacturers do not export at all. We believe tens of thousands of them could. And many of these are small- and medium- sized firms like yours.
We're trying to meet the trade challenge in several ways. First, we're taking long overdue steps to get this economy back on a sound footing. We're encouraging lasting, noninflationary growth through economic reforms based on time-tested principles, spending restraint, and sound monetary policy to bring down inflation and interest rates; less regulatory interference to stimulate greater competition and growth of enterprise and employment through tax incentives to encourage work, thrift, investment, and productivity.
I believe our economic program is delivering a recovery, and without returning us to the misery we inherited in 1980 -- double-digit inflation and 21\1/2\-percent interest rates. Each month brings fresh evidence that the recovery is building and that we can look forward to more growth, more jobs, and more opportunities.
America is on a new road now, and it's a far better road than before. I'm digging in my heels against those who would put us back on a dead-end path of raising taxes for bigger and bigger government. We cannot make America stronger by making the small businesses [business men] and women of America weaker.
Entrepreneurs and working people must not be burdened with new tax increases. The Congress must work with us to control the growth of spending. I will also oppose the quick fix of trade protectionism, because we saw the nightmare that helped create in the 1930's.
We and our trading partners are in the same boat. If one partner shoots a hole in the boat, it makes no sense for the other partner to shoot another hole in the boat. That's not getting tough. It's getting wet. And eventually it means sinking the boat that's headed for greater growth and prosperity.
The same holds true for dead-end policies like the local content rule -- legislation that would force those who sell cars in the United States, including domestic manufacturers, to build their cars with a rising share of U.S. labor and parts. As the Congressional Budget Office pointed out, this would destroy more jobs than it would create. It would add significantly to the cost of new cars and these costs of protecting one group of workers would be passed on to another group down the line whose jobs would then be jeopardized. It would violate our international commitment to the GATT.
Protectionism only opens the door to retaliation. We would buy less from our partners, they would buy less from us. The world economic pie would shrink and political tensions would multiply. The local content rule is a cruel hoax. We propose a positive approach. We want to enhance the ability of U.S. producers and workers to compete on a fair and equitable basis in the world marketplace.
We're very enthusiastic about landmark legislation I signed last year -- the Export Trading Company Act. The idea is teamwork and is designed to encourage joint efforts by manufacturers, export management companies, banks, freight forwarders, and others to enter foreign markets.
Mac Baldrige's team has been holding seminars across the country to promote export trading companies. They're helping businesspeople learn how to use the legislation to expand our markets, become exporters, or to sell to export trading firms who can do it for them. This will mean more exports, higher growth, lower deficits, and a surge in jobs and opportunities.
We want Uncle Sam to be your partner, not your foe. So, we're also moving on many other fronts. We've eased taxation of foreign-earned income, introduced a tax credit for research and development, and eliminated export controls on low technology items that don't threaten our national security.
We're working to reform the Foreign Corrupt Practices Act so we can remove barriers to legitimate business transactions, and we're moving much more aggressively to promote American products.
I have endorsed plans to reorganize the executive branch trade functions with a single, Cabinet-level Department of International Trade and Industry. This way, U.S. business and the world will know we speak with one voice in both negotiations and implementation of trade policy.
In 2 weeks we'll host the annual economic summit of the major industrial countries in Williamsburg, Virginia. The leaders of the great democracies will have an opportunity to discuss issues of domestic and international economic policy and reflect on their collective responsibilities to free peoples throughout the world. I can assure you that expanding international trade will be a priority topic. The United States will carry the banner of free trade and open markets. You could help us greatly if you would let the Congress know you stand behind us.
And now I think I've gone on enough, so I'll be more than happy to answer your questions.
Ms. Comer. Thank you, Mr. President. We now go to our first caller. We're on the line from Detroit. Please go ahead with your question.
Q. This is Joseph G. Conway. I am vice-chairman of the National Bank of Detroit. Mr. President, the recession has certainly increased the calls for economic protectionism. We in Detroit are particularly conscious of the local content legislation which you mentioned. Quotas on Japanese cars and European steel and the recent tariff decision on imported motorcycles would seem to contradict your administration's commitment to free trade. Would you comment, please?
The President. Yes, Mr. Conway, I'd be very happy to. I think there could be a perception of just what you suggested there. However, everything we've done is within existing laws.
The quotas on Japanese automobiles are voluntary quotas. They, themselves, adopted them and without us requesting such a thing. They were very conscious of the tendency toward protectionism in our Congress, and so the Japanese -- well, much more than a year ago -- themselves imposed those quotas.
With regard to steel, there again within existing laws, we have been negotiating with our trading partners in the world because some of them were dumping. And that single word, ``dumping,'' means they were invading our market and selling at lower than production cost by government subsidies being provided to the producers of steel in those countries. And our law provides that when that takes place, we can fight back. And that we've been doing. And I think we've had a better relationship established with some of our trading partners as a result.
With regard to the motorcycle incident, that is a single thing that has come up with regard to one type of motorcycle. And again, under existing laws, we can temporarily offer a protection to enable an American company to readjust in order to meet the foreign competition. And that's what we have done with regard to the motorcycle action. This is a temporary thing under existing law.
But I agree with you, that protectionism -- and as I said in my remarks -- that's a one-way -- or a two-way street I should say, and you can't practice that without having retaliation. And so we are dedicated to anything that will increase free trade. And I'm sure that this will be one of the items that will be discussed at the summit conference in Williamsburg, Virginia.
Ms. Comer. Thank you, Mr. President.
We move down from Detroit, Michigan, down to Albuquerque, New Mexico. Please go ahead with your question.
Q. Mr. President, I am Roy Bidwell, president of the Albuquerque Chamber and president of Rio Grande Title Company. There are great opportunities in overseas markets for our small business exporters, especially those in the high technology companies. However, they seem to be the hardest hit by the various government regulations that act as a disincentive to exporting. What proposals do you have, sir, for making small business more competitive in the world market?
The President. Well, for one thing, we are very well aware of the problem of overregulation by the Federal Government. And we've had a task force under the Vice President working on that ever since we've been here. Many regulations have been changed. But we have now identified 20 specific regulations that are, according to small business in America, the most -- well, they hinder small business the most, interfere the most. And we're going to work on those 20 regulations.
We have done other things that I mentioned, however. We've obtained some waivers on the antitrust laws to enable small businesses to work through -- well, to sell directly themselves or to work through export trading companies. That's what the legislation was all about, so that groups of businesses could come in together and through an export trading company do business abroad.
We're doing other things that -- well, we hope that under our economic program that we have helped small business with regard to taxing policies, investment policies. And we're going to continue along that line.
As a matter of fact, I will be making some awards tomorrow in the Rose Garden to some people in small business for their achievements. And, as you know, this is Small Business Week.
Ms. Comer. Mr. President, let's move south to Mobile, Alabama. Please go ahead. You're on the line.
Q. Mr. President, my name is Robert M. Hope. I am president of the Mobile Area Chamber of Commerce and director of the Port of Mobile. Mr. President, statistics indicate that our main overseas competitors invest at double our per capita rate in new plants and equipment. In your opinion, how should the United States Government create tax conditions which will encourage investment over consumption in order to help expand the U.S. export market?
The President. Well, I think our economic program, Mr. Hope -- and, you know, it's an awful temptation right now for me to start calling you Bob. But the -- our economic program and our tax program recognize the fact that about 80 percent of small business pays in the personal income tax, not in the corporate tax. And as of July 1st, there will be a full 25-percent cut, as you know, in that tax. And I have -- and am resisting every suggestion here in Washington that that final 10 percent on July 1st should be delayed or in some way interfered with. I will veto any attempt to take that tax cut away from the people. That is one thing.
There are other features of the overall tax program that we adopted in 1981 that are directed toward breaks for business and opportunities for them to accumulate the capital needed. I think it has been the taxing policy plus inflation in our country over a number of years that has made it difficult for American business to modernize, to bring plant and equipment up to date, and thus keep pace with our overseas competitors. We continue to seek new ways in the taxing structure. We've done things with regard to the inheritance tax for the protection of family businesses and so forth. We're going to continue with that. We're going to continue with looking at the regulations that we can change to make it more possible.
We have also in taxing, that I think should be of help to anyone doing exporting overseas, made some changes with regard to the inducements that you can offer for Americans who have to serve at least 11 out of 12 months of the year as employees of yours overseas. The tax exemption now is up to 75,000, and it is phased so that by 1986 that exemption will be $95,000, which I think will be an incentive for direct work by your own employees in the overseas markets.
The other thing that we've done with our economic plan is the matter of inflation, which has been so penalizing to so many of you and the high interest rates. They've come down from 21\1/2\ to 10\1/2\, and I have a hunch they're going to come a little lower in the near future.
As to inflation -- and that's what's brought about the change in interest rates -- it was double-digit, 12.4 when we started. For the last 6 months inflation in our country has been running at less then one-half of 1 percent, and we're going to keep battling on that front.
Ms. Comer. Mr. President, your next question comes from Cleveland, Ohio. Please go ahead.
Q. Good morning, Mr. President. I'm Stephen Wall, president of the Cleveland World Trade Association. Mr. President, my question concerns export finance. Capital goods represent some of our most important exports to lesser developed countries, many of whom have significant credit needs. The U.S. Export-Import Bank is often crucial to these export efforts. What Eximbank programs will be expanded to make sure that U.S. exporters can offer foreign buyers to the credit that they need?
The President. Well, right at the moment, the Exim -- Export Bank has funding available, because the world recession has reduced the demand from so many of the developing countries. But in addition to about $3.8 billion that is on hand for direct loans, I have asked for 1984, 10 billion additional dollars in guarantees and insurance to help in this. And I have expressed a willingness to the Congress to augment or add additional -- almost $3 billion to that bank. So, I think that the funds are there and that, yes, they can be used for this very purpose -- to offer credit and to enable our customers to buy.
Ms. Comer. Mr. President, do you have time for one more question?
The President. All right.
Ms. Comer. Let's go to New York City for your next question. Please go ahead.
Q. Mr. President, I'm Wayne Anderson, vice president, governmental relations, Nabisco Brands, Incorporated. Mr. President, for a number of years, we've seen proposals advanced that would create a single department of international trade, one that would pull together all of the international trade responsibilities of the various Federal agencies. Could you tell us why you have decided to support this proposal?
The President. Well, because foreign trade is so important. Ten percent of our whole gross national product is foreign trade. A billion dollars of export can add 25,000 jobs and play a factor in solving the unemployment problem.
And we have found, and I have found here, in our Cabinet meetings and all, that policy is actually distributed among a number of different agencies in our government and legitimately so. They have a stake in it -- the Department of Agriculture, with regard to foreign trade, Defense Department, and national security, and things of this kind.
And we have just decided that, with this great importance to business and industry in America, that it makes sense to have a single government agency where policy for foreign trade is concentrated and our trading partners in the world know that there is one agency in government that can provide the answers to any questions that they might have or that our export businesses might have.
So, Mr. Anderson, we think that it just makes good, common sense to finally, once and for all, bring under one roof this whole matter of policy in foreign trade.
Ms. Comer. Thank you, Mr. President. As the Nation's number one advocate for U.S. exports, you set the can-do theme that we intended for this conference. Thank you for joining us.
The President. Well, thank you very much. It's been a great pleasure to be here.
Note: The President spoke at 11:38 a.m. from the Washington, D.C., studios of the U.S. Chamber of Commerce. The international satellite teleconference, which also included remarks by Secretary of Commerce Malcolm Baldrige from Paris, France, was hosted by Meryl Comer and broadcast over the American Business Network.