Backing Fades for Trade Bill Protectionism

In 1930, President Herbert Hoover signed into law the highest tariff wall in U.S. history over the strong protests of 1,200 of the nation’s leading economists, setting off a global trade war that seriously worsened the Great Depression and helped foster the economic climate leading to World War II.

More than 50 years later, that specter still haunts Congress as it considers another major trade bill.

“God help us if Congress tries to micro-manage trade policy,” said a top-level Republican Senate staff member on trade. “We did that in 1930, and nobody wants to go through that again. In some subliminal way, they recognize how dangerous this issue can become.”

Rigid Quotas Not Likely

So despite record-breaking trade deficits and pervasive anger in hard-hit industrial and agricultural regions, the Democratic-controlled Congress is backing away from legislation that would protect U.S. industry with rigid quotas or tariffs against foreign goods. Instead, it appears likely to approve only a relatively mild new trade measure.

“The mood among Democrats has changed dramatically,” said Rep. Robert T. Matsui (D-Sacramento). “The sentiment for protectionist legislation is not as strong as it was one or two years ago. I think members are a lot more sophisticated about the trade deficit. They finally realize they can’t just pass a law and make it go away.”

Congress is a long way from reaching agreement on the myriad details of trade legislation, and the political maneuvering among various factions could still produce a bill that President Reagan, a steadfast opponent of protectionism, might veto.

But the general outlines of the measure that is likely to emerge from Congress this summer now appear far more modest than what lawmakers overwhelmingly accepted last year.

Last year, Reagan vetoed a blatantly protectionist bill that would have established rigid quotas for the textile and shoe industries. The House also passed a measure that would have come close to mandating automatic 25% surcharges on imports from Japan and other nations that ran large trade surpluses with the United States. It died in the Senate.

By contrast, lawmakers this year are preparing to begin work on legislation that would do little more than prod the White House to retaliate more forcefully against countries that close their markets to U.S. goods, curb the Administration’s authority to ignore industry pleas for temporary protection and require firms to restructure to meet tougher international competition.

At the same time, Congress appears willing to grant the White House what it most wants--more time to negotiate with other nations to remove trade barriers against U.S. exports.

Bill Rejects Surcharge

“We must do everything we can to spur growth in world trade and to dismantle the growing worldwide system of protectionism that does so much to retard trade,” Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) said in introducing a bill earlier this month that rejects the 25% import surcharge he advocated last year.

The White House, which stayed on the sidelines last year as Congress initiated trade legislation, is preparing its own package this year as part of its effort to blunt harsher trade measures.

The package, which is scheduled to be introduced next week, will stress worker retraining, increased research and development and export promotion. It is already leading to sparring between Administration officials and congressmen over specific provisions.

But the most remarkable feature of the intensely political trade debate since last November’s elections, when Democrats won control of the Senate and immediately promised to pass a trade bill, is how rapidly key lawmakers have rejected protectionism in an effort to forge a package that stands a good chance of becoming law.

“The chances of responsible legislation emerging are substantially higher than they were a year ago,” said Clayton K. Yeutter, President Reagan’s special trade representative. “Many members of Congress concluded they had gone too far . . . . Their objectives have become more modest in terms of trade legislation.”

Seek White House Action

Trade rhetoric in Congress has always been dominated by pleas for protection for specific industries and harsh attacks on the Japanese and other nations that maintain barriers to U.S. exports. But in reality, lawmakers want little more than aggressive enforcement by the White House of existing trade laws, which mandate retaliation when foreign countries engage in unfair trade practices.

“A lot of people say we have to get the attention of the Japanese, but that’s wasting our breath,” Sen. John C. Danforth (R-Mo.), the leading Republican on trade issues, said recently. “I want to get the attention of the President, who is the only one who can protect the interests of the United States properly.”

For several years, these congressional pleas for attention fell on deaf ears in the White House, and the Administration’s inaction spawned proposals for fiercely protectionist legislation.

But on Sept. 22, 1985, Treasury Secretary James A. Baker III reached agreement with finance officials from four other leading industrial nations to help bring down the overvalued dollar, which had had the effect of leaving U.S. goods overpriced in competition with foreign products. And Reagan vowed the next day to be more active in combatting unfair foreign trade practices.

Helped Ease Demands

Together, those measures gradually helped ease the demands for blunt legislative solutions to the trade deficit.

“Given the chance, Congress would much prefer to channel pressures for trade restrictions away from themselves and onto the White House, where they know they can be more easily managed,” explained I. M. Destler, a senior fellow at the Institute for International Economics and a leading analyst of trade politics.

“What most members want,” he added, “is a system that allows them to win plaudits from their constituents by threatening protectionist measures but that ensures they don’t actually have to deliver on them.”

As both the House and Senate slog through the long, tedious process of preparing trade legislation, however, several factors could alter the current outlook.

If the U.S. merchandise trade deficit, which hit a record $170 billion in 1986, does not shrink as expected this year by at least $20 billion, the key legislative architects of the trade bill--Bentsen in the Senate and Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) in the House--may find it politically impossible to block amendments to help specific industries.

Key to Prospects

It is more likely that the complex maneuvering among various congressional barons is going to be the key to the legislation’s prospects.

Some top-level Democrats, seeing trade as a politically potent issue, hint that they want to ensure that any bill that passes Congress is so unpalatable to Reagan that he will be forced to veto it, helping keep the issue alive for the 1988 presidential election.

“The real battle that is shaping up is not between Congress and the White House,” a Senate Democratic staff member said, “but between the Democratic leadership--Jim Wright and Bobby Byrd--who might prefer a White House veto, and the guys like Rostenkowski and Bentsen who really want a bill that can become law.”

Both House Speaker Jim Wright of Texas and Senate Majority Leader Robert C. Byrd of West Virginia are continuing to press for trade measures similar to last year’s House-approved bill. Among them is a provision sponsored by Rep. Richard A. Gephardt (D-Mo.), a presidential hopeful, that would slap an import surcharge on Japan, Korea, Taiwan, Brazil and other countries with large trade surpluses with the United States.

Some Democratic political operatives have been actively promoting trade as an election issue.

Assails GOP Policy

“Democrats this fall will fight for American jobs and American pride, not some philosophical free trade fantasy,” Rep. Tony Coelho (D-Merced) said shortly before the November elections, when he was head of the Democratic Congressional Campaign Committee. “America can’t stand tall in the world as long as we have a Republican trade policy that blames America first.”

Most political analysts, however, dismiss the electoral impact of protectionist sentiment, which they say played a negligible role in last year’s 435 House and 34 Senate elections. That helps explain why Democrats have moderated their demands for harsh trade legislation.

“Last year, on the trade bill, I’ve almost never seen so many colleagues complain, ‘This bill stinks, but I’m voting for it anyway,’ ” one House Democrat said. “But this year I really think members want to vote for something they can be proud of.”