Facing New Slump, US Toughens Its Trade Position

AS the nation's prospects for a strong recovery from recession fade and its trade deficit widens, Washington is getting tougher against trade partners who compete unfairly against United States producers.

According to Commerce Department data released last week, growth in the nation's output of goods and services fell to 1.8 percent in the first quarter of this year, a figure less than half that from the last three months of 1992.

Washington policymakers worry that recession abroad will further dampen demand for US exports - a major contributor to US economic growth - and make foreign suppliers even more aggressive in their drive for US market share.

Defending the Clinton administration's trade policy as a way to "open markets ... grow this economy ... and build jobs," US Trade Representative (USTR) Mickey Kantor took a broad swipe at major US trade partners on Friday.

He cited dozens of countries for ignoring US patent and copyright laws on US products. "You're literally stealing someone's property and you're taking American jobs," he said of the violations, which he claimed cost US manufacturers billions of dollars in lost sales.

Mr. Kantor also took particular aim at Japan, which accounts for over 60 percent of the US trade deficit, for discriminating against US contractors in its multibillion-dollar public works market. The USTR pledged to retaliate against Tokyo if it fails to lower trade barriers within 60 days, just as he recently vowed to take action against the European Community for its closed telecommunications-equipment market.

At a Monitor breakfast on Friday, Commerce Secretary Ron Brown said "we're trying to send some very clear signals that we need a new trade policy [and] we will use whatever tools that are at our disposal to ensure changes come."

On the books for years, many US trade laws are now likely to have their most rigorous application. Laura Tyson, chairwoman of President Clinton's Council of Economic Advisers, stresses the importance of "aggressive unilateralism," or the use of US trade laws "to deter or compensate for foreign practices that are not adequately regulated by existing multilateral trade rules."

But America's trade partners worry the US is arming itself with weapons that make all-out trade wars distinctly possible.

The European Commission's vice president, Henning Christophersen, who handles economic and monetary affairs for the European Community (EC), warns that if US consumer and business credit remains constrained, US lawmakers fail to slash the federal budget deficit, and demand for US exports in European and Japanese markets - crucial outlets for US exporters - continues to slacken, "we will see a renationalization along economic policy lines."

More-intense bilateral competition, he says, runs the risk that "the cold war will be followed by trade wars."

WHEN the EC issued its annual report on US trade barriers in mid-April, it criticized US protectionist trade measures legislated by Congress, such as "Buy America" national and state laws designed to close out foreign suppliers. "I don't think the US should believe that sanctions will lead to a softening of the European Community position," asserts Mr. Christophersen. "On the contrary," he says.

The US has elicited Japanese government pledges to help redress the trade imbalance by spending more and working out specific industrial problems on a sector-by-sector basis. But much of Japan's current trade surplus is due to its recession: Japanese businesses and consumers are buying less and Japanese manufacturers are anxious to unload their growing inventories on overseas markets. Japanese Embassy officials here said Tokyo "will retaliate" if the US imposes sanctions.

Sen. Max Baucus (D) of Montana, chairman of the Senate Finance Subcommittee on International Trade, is pushing to ressurect the so-called Super 301 law that expired in 1990.

This is "aimed at countries who resort to protectionism to exclude US exports ... and initiates trade negotiations under the threat of retaliation to eliminate trade barriers," says Mr. Baucus."Super 301 helps us stand up for our rights," he says.

A senior White House official strongly supports Baucus' initiative. "Super 301 should be used," he says. "But typically, we try to seek agreement on trade barriers within the General Agreement on Tariffs and Trade [now in its seventh year of unresolved negotiations]. The preferred method is to do it multilaterally, but the framework doesn't exist."

A former Bush Administration trade official says Baucus believes "it's not whether you win or lose, it's how you play the game." But, he says, "like all retaliatory measures - whether they're nuclear weapons or trade instruments - they have to be used with some finesse. You can't go around bludgeoning people. It doesn't open markets, it closes doors, and you lose the market you're seeking."