Shultz to get an earful from Europe on protectionism. As trade links with US waver, EC does more business with China

The warlike drum beat of protectionist talk now being heard in the United States is seriously souring transatlantic trade relations and spawning threats of retaliation in Western Europe. That message will be strongly conveyed by European Community leaders to key members of the US Cabinet, including Secretary of State George Shultz, at annual trade talks here today, according to EC sources.

Fears of growing protectionism in the US are also forcing many European businessmen to look elsewhere for new sales opportunities.

Only last week, in one of the most vivid examples of the Old World's new-found determination to boost business ties with countries as trade links with the US waver, more than a thousand European bankers and industrialists converged on Brussels to sign export deals worth more than $120 million with trade officials from China.

Some 26 letters of intent for joint ventures and direct investments in China were also initialed in the talks, officials said. Trade between the two sides nearly doubled between 1980 and 1984 (to about $5.8 billion) and is expected to double again this year, officials added.

``The development of trade with China is a long-term proposition,'' said EC External Relations Commissioner Willy de Clercq, who will meet with the US delegation on Friday. ``But the volume of business done here last week suggests that great possibilities do exist.''

But that does not appear to be the case in the EC's trade relations with the US -- at least for the moment.

``The administration's new, more-aggressive trade posture seems to be based more on instilling fear than on stimulating cooperation,'' one EC official says.

Last September, President Reagan announced plans to combat ``unfair'' trading practices of other countries, including members of the EC. That, combined with the sharp fall in the value of the dollar which has made foreign goods more expensive, has temporarily blunted protectionist pressures in the US Congress, where more than 200 trade bills (many of them protectionist in nature) await action. But it has also put off many of America's principal trading partners.

Many EC officials, for example, concede that concern over possible US retaliation figured heavily in the community's negotiating posture in several trade disputes with the US this month, including limiting European steel exports to the US over the next four years.

``That's no way to do business over the long term,'' one EC official said, adding that serious differences remain between the two sides, particularly in the agriculture sector. ``We've got to reestablish an atmosphere of cooperation and mutual trust.''

In their talks with US Cabinet members here later this week, EC officials will be seeking reassurances from them that the administration is determined to resist protectionist pressures back home.

President Reagan provided some comfort to EC officials last week, saying in a speech that ``short-term protectionist measures will undermine the chances of economic growth . . . . Protecting an industry here [in the US] by imposing trade restrictions will inevitably result in countermeasures that will cost the jobs of Americans in other industries.'' But many EC trade officials wonder how long the administration will be able to hold back the protectionist tide in Congress.