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Resentment Rises Over Foreign Competition : Quest for Yankee Dollar--and Yankee Jobs--Is Emerging as Hottest Issue of Second Term

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Times Staff Writers

All summer long, Sen. John C. Danforth (R-Mo.) has been deluged with strange-looking mail from workers in Missouri’s shoe industry who were fearful of losing their jobs because of increasing competition from imported footwear. The letters were written on shoe leather, and their message was brief but compelling: “Save Our Soles.”

These epistles, part of a nationwide campaign by footwear companies and unions to curb domestic sales of foreign shoes, demonstrated that humor can be an effective weapon in the escalating controversy over foreign trade. But no one in the White House or on Capitol Hill believes for one moment that the trade issue is anything to laugh about.

Grass-roots resentment at foreign competition for Yankee dollars--and thus, Yankee jobs--is rapidly emerging as the hottest new issue of President Reagan’s second term. The resentment is a striking example of spontaneous political combustion, largely unheralded and unorchestrated by either Republicans or Democrats.

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“Of all the issues facing the members of the 99th Congress in this session, trade may be the most contentious,” Rep. Howard L. Berman (D-Studio City) said. “The trade deficit and what it says about the American economy is getting to be the great national issue of this time. There’s a growing sense we have lost our economic supremacy.”

Thus, as lawmakers swing into high gear this week after their midsummer recess, trade is not only commanding high priority on the legislative agenda, it is also looming as a major 1986 campaign issue. It threatens to drive a wedge between the President, who seems determined to stick to his free trade guns and resist protectionist pressures, and his party’s candidates. It also offers the Democrats potentially their best chance to embarrass Republicans since the econo my emerged from the 1982 recession.

Administration officials hoped that a flurry of actions announced Saturday by the President will mollify its critics. In addition to threatening to retaliate against trade practices by Japan and the European Common Market, the Administration initiated investigations into whether unfair barriers had been raised against exports of U.S. information technology to Brazil, tobacco in Japan and insurance services in South Korea.

But the reaction on Capitol Hill Sunday was not enthusiastic.

Senate Majority Leader Bob Dole (R-Kan.), appearing Sunday on the CBS News program “Face the Nation,” called the decisions that Reagan announced “a step in the right direction” but said he believes that the President “is going to have to do more.”

‘Mostly Cosmetic’ Steps

Danforth, who is chairman of the Senate Finance subcommittee on international trade, said the announcement “does not make a policy,” and Sen. Lloyd Bentsen (D-Tex.), ranking Democrat on the same subcommittee, called the steps “mostly cosmetic.” Both senators were interviewed Sunday on ABC’s “This Week With David Brinkley.”

Issue Could Hurt GOP

Dole said the trade issue could hurt Republicans during the 1986 elections. “I saw a statistic yesterday that we’ve lost about 300,000 manufacturing jobs in the last several months. Those people don’t want to hear the free trade speech,” he said.

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It is a point the Democrats have not missed. “This can become the dominant Democratic theme in the 1986 campaign,” said Mark Johnson, Democratic House Campaign Committee staffer. Particularly in appealing to Southern whites, Johnson said, “we can thump our chests and be pro-American and pro-jobs.”

Fundamental Causes

Economists caution that the symptoms of the nation’s economic problems, such as the expected $150-billion trade deficit this year, are easier to glimpse than the fundamental causes. Many experts contend that the problems are rooted in Reagan Administration economic policies and in a long-term U.S. tendency to lag behind overseas competitors in technology and productivity. But even if effective legislative remedies for such complex questions are hard to devise, Congress--driven by the imperative of constituent discontent--seems determined to try.

Some congressional free traders, though swimming against the tide, continue to warn that protectionist measures would merely result in destructive retaliation, severely constricting American markets abroad. Rep. William E. Dannemeyer (R-Fullerton) said protectionist measures could help bring on a depression, just as, he declares, passage of the highly restrictive Smoot-Hawley bill--which protected farm products from foreign competition--did in 1930.

Hoppers Overflowing

The legislative hoppers are overflowing with measures dealing with trade, about 180 in the House and about 300 in the Senate. The number and variety is so great that leafing through the trade docket, one Senate Finance Committee aide observed, is “like looking through the pages of the Manhattan telephone book.”

Some are broad-gauge proposals attempting to reach across the trade spectrum such as the measure sponsored by Bentsen, Illinois Rep. Dan Rostenkowski and other Democrats. It would boost tariffs 25% on goods from countries runing large trade surpluses with the United States due to unfair trade practices, unless the surpluses were reduced.

Other proposals are aimed at aiding individual industries, such as the proposal backed by Bentsen and Missouri’s Danforth authorizing the President to raise tariffs on telecommunications exports to this country if negotiations to remove trade barriers failed, or the quota bill introduced by Sen. William S. Cohen (R-Me.) to limit shoe imports to 55% of the U.S. market, compared to the current 77%.

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Concern in Congress

Another indication of the concern aroused in Congress over the trade issue, apart from the sheer number of bills, is the breadth of support for some proposals. For example, legislation introduced by Sen. Strom Thurmond (R-S.C) and Rep. Ed Jenkins (D-Ga) to establish a tough new quota system on textile imports, which the Administration says would cut shipments of textiles to this country by 27%, has 54 Senate sponsors and 292 in the House.

Calls for action come from both sides of the aisle. “The public is demanding that something be done to halt this hemorrhaging of jobs,” said Democratic Rep. Jim Wright of Texas, House majority leader. And Dole said: “I have never seen stronger congressional sentiment for acting on the trade front.”

Dole described the Thurmond-Jenkins textiles bill as “a strong possibility “ for congressional action, and some Senate sources think the shoe bill might be tagged on as an amendment. Dole also cites another measure, which mandates U.S. retaliation against the Japanese unless they agree to remove barriers to U.S. products, as “a major contender.”

25% Tariff Boost

Some Republicans regard the Bentsen-Rostenkowski 25% tariff boost legislation as too sweeping in approach. But they concede it may get Republican support because of Bentsen’s prestige on the trade issue, and because of frustration over the Administration’s handling of the topic.

Indeed, although the Democrats hope to gain partisan advantage on the trade issue, any major action Congress takes is likely to have bipartisan backing, said Rufus Yerxa, staff director of the House Ways and Means Committee’s trade subcommittee. “A lot of Republicans are eager to jump on this issue too,” he said.

“There’s been a drastic mood change (on trade) in just a year’s time,” said Sen. Pete Wilson (R-Calif.). Last year, Wilson recalls, he had to “fight like hell” to get through the wine equity act, aimed at helping U.S. wine makers deal with foreign competition. Now Wilson sees what he calls a “protectionist wave” on Capitol Hill.

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Tough Rhetoric Welcomed

The Administration attitude toward the mood in Congress tends to be ambivalent. To some extent Administration officials privately concede that they welcome the tough rhetoric and threats of tough action, because it could help them bargain with the Japanese and other foreign competitors.

“We’ve got to have some kind of leverage in order to sit down at the table and tell some guy, ‘I’m serious about this,’ ” said one Administration official involved in the trade issue. But on the other hand the Administration is leery of any drastic congressional action that could wrest control of the trade issue away from the executive branch. And Administration officials have hinted that the President would veto any legislation that imposed significant new import quotas or raised tariffs substantially.

On Sunday, U.S. Trade Representative Clayton Yeutter said Reagan would almost certainly veto the Thurmond-Jenkins textile quota bill in its current form. When asked on the Brinkley program if Reagan could accept any of the protectionist legislation now before Congress, Yeutter said: “Very, very little, if any.”

Emphasis on Free Trade

International trade is an arena that in modern times Congress has yielded to the President, who has broad powers to deal with the issue. In many cases legislators are saying that they have only attempted to respond to trade problems because the President, reluctant to take any steps that might undercut his emphasis on free trade, has failed to act.

The most recent such example cited by critics of Administration policy was the President’s decision to reject import quotas aimed at aiding the beleaguered shoe industry. The International Trade Commission, the federal agency responsible for investigating complaints of unfair trade, had recommended that quotas be imposed.

Missouri’s Danforth, whose home state is the second-largest producer of shoes in the nation after Maine, had “lobbied everybody in sight at the White House,” said press secretary Stephen Hilton, to persuade the President to agree to the recommended quotas. When this effort failed, Danforth signed on as a co-sponsor of the Cohen shoe import bill, the first time he has ever backed quotas on imports.

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Important Argument Undercut

“The footwear decision undercut a very important argument in favor of systematic and reasoned action on import problems,” said Hilton. The footwear industry, faced with what it saw as unfair foreign competition, followed the legally established procedures for seeking redress, he noted. But when the International Trade Commission urged relief for the industry, Reagan rejected the recommendation. Said Hilton: “You try to make that argument (for relying on existing mechanisms) and you’d be hooted out of Congress.”

In the wake of the President’s decision to reject shoe quotas--which he contended would have represented “a dangerous step down the road to a trade war”--many congressional Republicans found themselves in a quandary, reluctant to break with the Administration on trade policy but at least as unwilling to face the political heat from their own constituents on the issue.

‘The Hill Is Nervous’

Some Republicans contended that the White House still has an opportunity to mend the intra-party rift over trade policy before the 1986 congressional campaign gets under way. “The signal has been sent that the Hill is nervous about the trade issue,” said Tom Griscom, executive director of the Senate Republican Campaign Committee. “And the Administration has a window to send a signal that they are going to do something. But it’s not a window that’s going to stay open indefinitely.”

However, the White House, which is concentrating on tax reform in the domestic arena and the November summit conference with Soviet Premier Mikhail S. Gorbachev in foreign affairs, has yet to develop a broad and consistent approach to trade problems. “Trade is the one area that this Administration has had a difficult time in corralling,” concedes one high White House official.

Moreover, he acknowledges, as the issue heats up the Administration is encountering “more and more difficulties in trying to address a solution.”

‘A Political Need’

This official recognizes “there is a political need to have a strategy out there.” But he says Administration officials must choose between a sweeping strategy on one hand, and a rifle-shot approach to the problem on the other, and “quite frankly, that decision has not been made.”

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Reagan’s handling of the trade issue has irritated even some Republicans who share his beliefs but feel he has not served the free trade cause well. “He has neither made a strong case for free trade, nor utilized the power the President has to preempt congressional action in the field,” said David Keene, a Republican political consultant.

“If you take the position the President has taken, you have to champion it two ways: by presenting the dangers of runaway protectionism and by presenting the benefits to consumers of free trade.”

Some Republicans complain that the Administration has been more concerned about diplomacy than about the welfare of the domestic economy. “I wonder if the State Department has too much influence in this matter,” said Republican Sen. Warren B. Rudman of New Hampshire. “They prize good relations with our trading partners a hell of a lot more than they value American jobs.”

An Alternative Package

While the White House ponders the trade issue, congressional Republicans are taking no chances. House Republicans have had a task force working during the recess on developing their own alternative package to present on the issue, according to Mike Johnson, an aide to House Minority Leader Robert H. Michel (R-Ill.). And Johnson predicted that unless the White House comes up with a politically attractive approach to trade, a good many Republicans may leave their President “high and dry” on the issue.

Already, many Republican candidates are trying “to put some some distance between themselves and the White House” on the trade issue, said Dan Kalinger, a GOP consultant involved in half a dozen 1986 House races around the country. “There’s a lot of talk about ‘fair trade’ which is a code word for tariffs and quotas and which translates into distancing themselves from the President,” he said.

Times Staff Writers Lee May and Bob Secter contributed to this story.

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