Don’t Force Protectionism, Baker Urges Senate Panel

Treasury Secretary James A. Baker III, delivering the Administration’s trade and competitiveness proposals to a Democratic Congress with which he has pledged to cooperate, Thursday faced a Senate Finance Committee sharply divided between a few unyielding protectionists and a more moderate committee leadership.

“We have the tools, if we use them,” Baker said of existing trade legislation that the Administration has used in the last two years to retaliate against unfair trade practices by Japan and other trading partners. “But don’t mandate it because it cuts down significantly on our flexibility” to negotiate more open markets.

The Administration is proposing a 1,600-page legislative package to sharpen some of those retaliatory powers and enhance U.S. competitiveness in industry, education, research, development and several other fields. Details of the package were made public at the time of President Reagan’s State of the Union message last month.

Seek Retaliation

Congress, through two rival bills in both houses, wants to force the Administration to retaliate or impose protective quotas in any case where injury from imports or unfair trade practices can be proved. Baker made it clear Thursday that Reagan will oppose any new trade bill that limits his discretion in such cases.

But the Senate bill, primarily the bipartisan work of committee Chairman Lloyd Bentsen (D-Tex.) and John C. Danforth (R-Mo.), is lacking in some of the more blatantly protectionist features contained in similar legislative proposals last year, such as an automatic surcharge on certain imports or retaliatory tariffs and quotas against Japan and other countries that carry big trade surpluses with the United States.

Thus Baker, joined later at the hearing by Special Trade Representative Clayton K. Yeutter, for the most part found himself at least moving in the same direction as Bentsen, most committee Republicans and a few centrist Democrats, such as New Jersey’s Bill Bradley and Hawaii’s Spark M. Matsunaga.

$170-Billion Deficit

Bentsen called for a bipartisan national policy to deal with the nation’s trade deficit, which amounted to $170 billion in goods and commodities last year.

Danforth still wants to mandate retaliation in unfair trade practices cases and he later lectured Yeutter on the futility of negotiating with Japan without the certainty of mandatory retaliation. Yeutter conceded that he had been “frustrated” by Japan’s continued reluctance to open markets to American products.

The committee’s ranking Republican, Bob Packwood of Oregon, as chairman last year joined Danforth in a revolt by GOP senators against the Administration’s free-trade doctrine. But Packwood has backed away from that stand, warning Thursday against “a large group in Congress that wants to use the trade bill as a smoke screen for outright protectionism.”

Harder to Negotiate

However, he declined to put his name on the more moderate Bentsen-Danforth bill. Packwood, in leading Baker through a series of soft questions and easy answers, put forward the view that congressional micromanagement of trade policy would only make it harder to negotiate better trade results with Japan and other trading partners.

Some of the junior Democrats on the committee indicated strongly that the dream of eliminating the trade deficit by collapsing imports and protecting decaying industries dies hard.

Sen. Donald W. Riegle Jr. of Michigan, displaying graphs laying out the deep trade deficit and the growing U.S. net debtor position with the rest of the world, demanded that Baker set specific dollar goals to limit the bilateral deficits with Japan, Taiwan and South Korea.

In addition, Sen. George J. Mitchell of Maine cited a recently closed textile plant in his state and challenged Baker to “tell the families of those thousand lost jobs who may be watching on television” why the Administration continues to oppose protectionist legislation to keep foreign textiles, apparel and shoes from entering the country.