Yeutter Warns 3rd World on Trade : Reagan Urged to Protest Japan’s ‘Dumping’ of 256K Chips

Third World countries blocking a new round of international trade talks sought by the United States and its main trading partners are “torpedoing the world trading system,” and the Administration will cut its own deals if they don’t yield, President Reagan’s special trade representative warned Thursday.

On another trade issue, Administration officials said Thursday that the interagency “strike force” on unfair trade practices has recommended that President Reagan authorize a formal trade complaint against Japanese for “dumping”--or selling at below cost--256-kilobyte computer memory chips.

A Commerce Department official, reporting that the recommendation is now on Reagan’s desk, said the strike force is conducting a separate review of copyright and patent violations of U.S. “intellectual property.” The official said the review is not currently targeted on Taiwan, a prime suspect in cases of industrial piracy of U.S.-origin technology.

In an appearance before the Senate Finance Committee, U.S. Trade Representative Clayton K. Yeutter blasted the refusal by Brazil and India, backed by Argentina, Egypt, Nigeria and Yugoslavia, to agree to extend international trading rules to govern services, patents and international investing.

Using bristling rhetoric to underline what he called the Administration’s “much more aggressive trade policy,” Yeutter said continued intransigence would force a major rupture in the General Agreement on Tariffs and Trade, whose annual meeting begins Nov. 25 in Geneva.

“We can’t afford to have a handful of nations representing 5% of world trade dictating the trade destiny of nations that conduct 95% of the world’s commerce,” he said.

The refusal to discuss trading rules for services--industries that now account for nearly half of the U.S. gross national product--is particularly unacceptable, he said.

“They are saying they will not discuss an issue vital to the United States, but they want us to make concessions regarding their goods exports,” he said. “That is not negotiable: Either services are in, or there won’t be a GATT round.”

At the heart of the Third World objections are fears that U.S. services would compete with their own, that foreign investment would infringe on their sovereignty and that patent rules would blunt that competitiveness.

Yeutter warned that, if new talks are not convened, the United States could call a separate meeting of industrial countries and refuse to extend the benefits of any new agreements to non-participants. And he suggested negotiating bilateral agreements with the largest U.S. trading partners.

Yeutter is a member of the panel that has recommended to the President that he act against Japanese “dumping” of semiconductors. The U.S. semiconductor industry has been battered by imports and has already sought government relief from the U.S. International Trade Commission, which issued a preliminary finding last week upholding their claim of severe financial damage from Japanese imports.

The President could either combine these cases already under way, or initiate new ones of his own, under the strike force recommendation. In either event, heavy tariffs or import fees against Japanese semiconductor imports could result.

One U.S. manufacturer that says it is a victim of the dumping is Motorola, which joined in the criticism of Japanese semiconductor firms Thursday when it announced that it was dropping plans to produce one type of 256K memory chip. Motorola said Japan’s “predatory pricing” on the chip has dropped prices so low that it couldn’t recover its development costs.

The 256K is the current state-of-the-art memory chip, capable of holding about 256,000 “bits” of information. Motorola said it would proceed with production of a second type of 256K memory chip on which Japanese imports have had less impact.