U.S. Acts to Halt Unfair Foreign Trade Practices

Continuing its new “get-tough” trade policy, the Reagan Administration on Wednesday charged the European Common Market with subsidizing its grain exports and South Korea with failing to protect U.S. patents and copyrights from infringement.

At the same time, White House spokesman Larry Speakes declared a successful conclusion to a two-year negotiation to open Taiwan for the first time to U.S. imports of beer, wine and cigarettes. Speakes and trade officials attributed that success to President Reagan’s effort, begun Sept. 7, to head off protectionist legislation in Congress.

Long-Building Grievance

The action against the Common Market, whose member governments make direct payments to farmers so they can afford to sell their grain abroad at artificially low prices, could bring to a head within months a long-building U.S. grievance against European farmers.

With government subsidies, Western Europe’s farmers have captured 16% of the $14.5-billion world wheat export market, double their share of the early 1970s, the White House said. And increased supplies from Europe have pushed down world grain prices, it said, thus adding to the woes of U.S. farmers.

The Administration will press its case against European farmers under the international General Agreement on Tariffs and Trade, which prohibits export subsidies designed to obtain “more than an equitable share” of the world market.

U.S. Special Trade Representative Clayton K. Yeutter, who will argue the Administration’s case, may request a formal GATT hearing if 30 days of negotiations with the Common Market yield no results. After the hearing, he could turn to a dispute settlement panel, established under the GATT, whose recommendations must be accepted by all affected countries.

If the United States remained dissatisfied, it could then initiate a unilateral process leading to trade retaliation under the 1974 Trade Act.

In the action against South Korea, Reagan invoked Section 301 of the Trade Act, which empowers the President to take retaliatory action if a complaint of unfair trade practices cannot be resolved through negotiation.

The case focuses on Korea’s failure to enact copyright laws that would protect U.S. authors and patent laws that would prevent the copying of pharmaceuticals, chemicals and processed foods. Officials were unable to estimate the cost of exports lost to the threat of patent infringement, but the publishing industry estimates losses of $170 million a year from lost exports to South Korea and countries in which U.S. and South Korean publishers compete.

Retaliatory Penalties

Reagan directed Yeutter to investigate the complaint, consult with the Koreans and, if no satisfactory solution is reached within a year, to impose retaliatory penalties on Korean exports.

Reagan became the first President to invoke Section 301 of the Trade Act on Sept. 7, when he announced similar actions against Japan for excluding U.S. tobacco, against Brazil for blocking U.S. computers and against South Korea for excluding American life and fire insurance.

Speakes termed the new actions “a clear signal, both to Congress . . . and to other nations who are engaging in unfair trade practices against the United States, that we mean business.” He told reporters that the Administration’s “strike force” on unfair trade practices is preparing still more cases.

“There are a dozen that are under study,” Speakes said, but a Yeutter aide later declined to put a precise number on it. Trade officials said the cases announced Wednesday had been selected from a number of candidates at a Cabinet meeting last week, then approved by Reagan over the weekend.

Talks Move Quickly

In the settlement with Taiwan, which has excluded U.S. beer imports, severely curtailed wine imports and permitted U.S. cigarettes to capture less than 1% of an $840-million market, Speakes said Reagan’s new activist stance produced a breakthrough in negotiations early this month. The two-year-old talks with Taiwan “moved very quickly” after Sept. 7, Speakes said.

Under the agreement, Taiwan will permit U.S. beer, wine and cigarettes to be sold in the 70,000 retail outlets on the island. The deadline for full implementation is October, 1986, but Yeutter is to monitor progress and report to Reagan by the end of the year.

Despite the Taiwan agreement, Yeutter conceded Wednesday that even if all trade barriers and tariffs worldwide were removed, the massive U.S. trade deficit--projected to run nearly $150 billion this year--still would not be reduced substantially.

“Clearly, unfair trade practices are important,” Yeutter told the Senate Foreign Relations Committee. “It is important to confront them aggressively. But we must recognize that in the overall picture economic factors dominate.”