House Panel OKs Measure to Place Quotas on Nations That Don’t Cut Trade Gap

Voting unanimously, Democrats on the House Ways and Means Committee pushed through a major trade protection amendment Wednesday that could prove embarrassing for President Reagan when he arrives Friday for the economic summit in Tokyo.

The measure, inserted as the centerpiece of a comprehensive trade bill, would slap import quotas on Japan, West Germany and Taiwan if they fail to reduce huge trade surpluses with the United States. (On Wednesday, the government announced that the U.S. trade deficit widened to $14.5 billion in March.)

The Democratic-sponsored amendment, adopted on a 24-11 roll call vote with the support of only one Republican, was strongly opposed by Administration officials and GOP lawmakers, who charged that it would violate international trade agreements and trigger costly retaliation.

May Be Vetoed by Reagan

The trade bill, headed for expected House approval in two weeks, likely faces a roadblock in the Republican-controlled Senate--or, failing that, a presidential veto. However, the legislation could provide an election-year boost for Democrats and, more immediately, a complication for Reagan at the Tokyo summit.

“I think it will create problems for him in Japan,” said California Rep. Robert T. Matsui (D-Sacramento), a member of the Ways and Means Committee who voted for the amendment. “It is somewhat anti-Japanese, and he will undoubtedly have to explain it. It’s embarrassing, but frankly he does not deserve much sympathy. He’s going there to talk about monetary reform and terrorism, but trade should have been a major item on the agenda.”

The import quota amendment, offered by Rep. Richard A. Gephardt (D-Mo.), is a less sweeping version of a proposal made last year by Gephardt, Ways and Means Chairman Dan Rostenkowski (D-Ill.) and Sen. Lloyd Bentsen (D-Tex.) as the U.S. trade deficit soared to a record $148.5 billion.

Countries With Largest Surpluses

That proposal called for imposing mandatory 25% surcharges on goods from countries running large trade surpluses with the United States. The new version would impose quotas on the three countries with the largest trade surpluses if the surplus is not reduced by 10% in each of the next four years.

Until Wednesday, support had seemed to be fading for protectionist measures aimed at limiting imports from specific countries or industries, such as shoes and textiles. In recent months, the Administration and Congress had been emphasizing a more moderate strategy, one that would seek to expand U.S. exports by persuading other nations to lower their trade barriers.

Comprehensive trade legislation being developed by the Ways and Means Committee and four other House panels had focused on toughening retaliatory weapons that could be used against countries that engage in unfair trading practices, such as subsidizing exports.

Under the bill, the President in some cases would be required to retaliate unless the offending countries took steps to solve the problem. The legislation also would expand the types of foreign trading practices that could trigger U.S. retaliation.

These and similar provisions remain in the pending bill, but Gephardt’s import quota amendment has been made the new centerpiece.

Rep. Bill Archer (R-Tex.), acknowledging that the amendment has “seductive appeal,” protested that it “would clearly violate” the General Agreement on Tariffs and Trade. “It could very well produce retaliation against the United States and jeopardize multilateral trade negotiations that would be helpful in remedying a lot of our problems,” he said.

The criticism was echoed by Alan Holmer, general counsel to U.S. Trade Representative Clayton Yeutter.

Gephardt rejoined: “Some want to stick with the status quo. We’ve stuck with the status quo for the last three years and have the worst trade deficit in history. Some suggest there will be massive retaliation. The retaliation has already occurred.”