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Commerce's front-line cannon.

In the wake of the Cold War, commerce is king. Thus, Barbara Franklin brings to her job an ambitious agenda. The new commerce secretary aims to revive exports, cut the trade deficit with Japan, champion fair trade, and kickstart small businesses. Can she succeed where her predecessors have failed?

During the U.S.-Russian business summit in Washington last spring, U.S. Secretary of Commerce Barbara Hackman Franklin was a central figure in cutting the many business deals that emerged. After the numerous and sometimes intense meetings with Presidents Bush and Yeltsin, and top trade negotiators on both sides, she thought it time to unwind. She threw on hot pink tights and a T-shirt that read, "You Should Look So Good At 50," and went for a jog. But upon returning to the Commerce building, Franklin was forced to identify herself to the security guards and explain that she forgot to tuck her access card into her jogging gear. (She was let right in.) Nominated in January and confirmed in February, Franklin hasn't had an easy time finding her footing in an election year. A former management consultant and commissioner to the U.S. Product Safety Commission, who served in a variety of appointed positions with the Bush administration, she succeeds Robert Mosbacher, an old Bush friend from the Texas oil patch. (Mosbacher left to run the president's campaign.)

Long-time observers offer varying assessments of Franklin. CEOs on whose company boards she has served give her high marks for her contributions to their audit or ethics committees. In total, Franklin has made stops at seven corporations: Aetna Life, Armstrong World Industries, ADP, Black and Decker, Dow Chemical, Nordstrom, and Westinghouse Electric. "She was verbal and vociferous on HR matters, and she knew what she was talking about," says ADP Chief Executive Josh Weston. In contrast, Bear Stearns' chief economist, Lawrence Kudlow, former OMB associate director for Economic Planning in the first Reagan-Bush administration, sees Lancaster County, PA-born Franklin as no more than "a GOP fundraiser"--albeit a good one--who will remain overshadowed by U.S. Trade Representative Carla Hills.

The third woman to join the Bush cabinet (Juanita Kreps was the first woman to be secretary of the Commerce Department), Franklin has not been idle. CE obtained an internal document outlining the Commerce Department's new "front-line" strategy. The paper set forth nine areas--since consolidated to seven--that Franklin deems priorities:

* Exports

* Free and fair trade

* Innovation

* Quality

* Entrepreneurship

* Deregulation

* Environmental forecasts, warnings and information

* Domestic business and economic development

Franklin allows that the Department of Commerce can directly influence only the first two areas of the strategy, but it's her ambition to use her office as a pulpit to encourage government and business to join forces to accomplish the rest. The last three items have been replaced by "sustainable development," purportedly a conservation-minded approach to business and economic growth.

CE editor J.P. Donlon caught up with the nation's 29th commerce chief recently in Washington.


Let's start with the big picture. How would you characterize the GATT process in terms of U.S. goals?

I think we will reap incredible gains from the Uruguay Round of GATT. Agriculture and services will come under GATT's aegis for the first time. Both will make a huge difference in world trade. We have 100 countries in the trading system today; the U.S. has recognized 18 new countries this year alone. These and other additions strengthen the multilateral trading system that is fostered by GATT. On the agricultural subsidy side, we have even started to see a little movement from the European Community.

You've been quoted as supporting "free and fair trade." Is that another way of saying managed trade?

No. Free trade is open markets with an unrestricted flow of goods, services and capital around the world.

"Fair" refers to the need for other measures to govern countries that aren't being as open as the U.S. and, are, therefore, putting our products and services at a disadvantage. For example, Europeans subsidize agriculture and agricultural exports, a practice that caused dissension among GATT participants. We think subsidies are a trade distortion, and we'd like to eliminate them. Also, dumping subsidized products in the market isn't fair.

America is not without sin--we subsidize agriculture, too--but not to the same degree. There are times when our trade laws can be activated and used if other countries are engaging in unfair practices.

These laws do not manage trade. They just level the playing field and keep markets free.


Despite Japan's signing agreements in 1986 and 1991, recognizing the U.S. semiconductor industry's expectations to gain a more than 20 percent share of the Japanese semiconductor market by the end of 1992, the foreign market share remains stagnant at about 14.6 percent as of the first quarter of 1992. Will there be a showdown--a "put-up-or-shut-up confrontation"--because there's no way to attain that 20 percent target?

In some respects the U.S. is doing well in the Japanese market. I believe we have a 40 percent share of the market for some video movies. And in tourism, we ran a $9.8 billion surplus with Japan in 1991. But we need to have a better balance.

Japan is a world economic leader and it needs to act like one. That means it has to open its markets. I think a dialogue is going on there about how quickly that will happen.

Aside from that, the semiconductor "quota" is an arrangement, not an agreement. The rules aren't hard and fast. We should be in a better position than we are, but we're attempting to watch the situation carefully.

We've heard promises of vigilance before. Particularly in terms of Japan, what makes you think you can succeed where your predecessors have failed?

Commerce has more of a priority. President Bush himself is involved, and he will carry the free-trade message wherever he goes.

Your department has a new mission statement. Will you attempt to take Commerce in a different direction?

Commerce's generic mission is to promote U.S. industry and trade. But it has a much broader mission than negotiating trade agreements. We are focused on exports and export promotion. We have an incredible opportunity to export, and that ups the ante to ensure that the Uruguay Round keeps the trading system strong and makes the world economic pie grow.

Our export performance has been very good over the last few years, and exports have been the bulk of our economic growth. Last year, our exports totaled $422 billion.

But things could improve even more. In 1991, merchandise exports comprised 7.4 percent of our gross domestic product. Add in services, and the percent climbs to 10.5. But our Western trading partners, including Germany, have percentages close to 30.

Closer to home, we need to encourage entrepreneurship. One of my goals is to see small business start-ups increase. We need small businesses in this country, so we have to reverse the tide of risk-wary investors.

In addition, I think we're going to see a much closer linkage between government and business here. Not industrial policy, but partnership.

In other areas, the Commerce Department's priorities involve research and development, technology, quality, and deregulation.


It's ironic that you advocate deregulation at a time when the Bush administration has reversed the downtrend in regulatory costs that took place during the Reagan years. I'd like your reaction to this chart on such costs, complied by the Washington University Center for the Study of American Business. (Examining chart, reprinted in this story) I would have thought the trend to be slightly different, but that's why the president, in his State of the Union Address, decreed a 90-day regulatory moratorium, which he's now extended to 120 days.

Perhaps we should look more carefully at the myriad regulatory statutes from agencies such as the Product Safety Commission and the Environmental Protection Agency to see if they are really necessary.

Sometimes regulations just multiply. I think you have to give the president credit for recognizing the problem and saying, "OK, stop." But sometimes these things happen while nobody is paying attention. On the international scene, what are the obstacles to trade with Russia and the former Soviet republics? Laws and regulations seem to change overnight on a whim. People think they have a contract, but then it disappears. There's no banking system or legal framework. There are problems with liquidity and convertibility. And we have to deal with a morass of bureaucratic red tape.

But longer term, I think we have a limitless potential. Our objective is to be Russia's No. 1 trading partner, possibly in the next four or five years. But for now, a frontier mentality prevails.


Although American, Canadian and Mexican negotiators seem to be close to an agreement on NAFTA, the U.S. International Trade Commission slapped import duties on Canadian lumber. Also, some members of Congress are voicing their disdain for further trade links with Mexico. Are you worried that NAFTA may be derailed? No. I think the benefits of the pact are irresistible, and it will create jobs here in the U.S. Based on historical trade patterns, Texas is one of the states that stands to gain the most. Do you forsee trading blocs such as those in South America or the Economic Cooperation Organization with Iran, Pakistan and Turkey, as precursors to global economic warfare? I think we are going to see more regional trading activity. That's why the Uruguay Round, which we mentioned at the beginning of this conversation, is so important. The world is changing, and commerce has replaced cannons as America's front line. But to maximize commerce, we have to have free markets.
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Title Annotation:U.S. Department of Commerce Secretary Barbara H. Franklin
Author:Donlon, J.P.
Publication:Chief Executive (U.S.)
Article Type:Cover Story
Date:Sep 1, 1992
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