Democrats on Key House Panel Offer Trade Bill : Package Would Trim Protectionist Measures From 1986 Proposal

The Democratic leadership of the House Ways and Means Committee proposed an omnibus trade bill Tuesday that would remove from last year’s bill many of the features regarded by the Reagan Administration and most economists as rabidly protectionist.

The new bill represents a giant step toward bipartisan trade legislation that congressional Democrats could point to as a step toward reducing the nation’s record trade deficit--and that President Reagan would be willing to sign.

The massive trade package, unveiled by committee Chairman Dan Rostenkowski (D-Ill.) and trade subcommittee Chairman Sam Gibbons (D-Fla.), is notable for the flexibility it would leave the President in responding to unfair trade practices of U.S. trading partners.

Last year’s bill, which was passed by the House but died in the Senate, would have mandated retaliation, including automatic fees on imports from nations with large trade surpluses with the United States.

Clayton K. Yeutter, Reagan’s trade representative, came close to giving the Rostenkowski-Gibbons package the Administration’s endorsement. After a two-hour closed-door session with the subcommittee, he described his initial reaction to the proposal as “overall, very positive.”

House Action in May

“Certainly, we have a long way to go on individual issues . . . ,” he said, “but we have advanced a very long way from a year ago.” He added that he was “cautiously optimistic” about the prospects of producing a trade bill that would be acceptable to Reagan.

The package now goes to the trade subcommittee, which will transform it into precise legislative language and modify it as it sees fit. House Speaker Jim Wright (D-Tex.) wants to move the bill through the subcommittee and the full committee in time for action by the full House in early May.

Wright has suggested that he would prefer a bill more like last year’s, which gave Democrats a potent issue in November’s congressional elections. But Rostenkowski and Gibbons, rejecting Wright’s strategy, said they prefer a viable bill to a political campaign issue.

At the same time, they carefully preserved the outward form of last year’s bill, including an amendment by Rep. Richard A. Gephardt (D-Mo.) that, as written last year, would have forced countries with the largest trade surpluses with the United States to reduce their surpluses by 10% a year or face 25% import fees.

Gibbons, while branding trade surpluses such as those enjoyed by Japan as “obscene, unwise and unsustainable,” made it clear that he does not support such automatic retaliation, which he said would be illegal under existing international trade agreements.

In the Rostenkowski-Gibbons package, a mathematical formula would designate countries with large trade surpluses--Japan, West Germany, Italy, South Korea, Brazil, Switzerland, Taiwan and Hong Kong in 1986.

But instead of the automatic response proposed by Gephardt, the new bill would authorize an investigation of these nations’ trade practices and, in the event of a finding of unfairness, mandate six months of negotiations.

Only then would retaliatory action be required, and even then the President could waive retaliation if harm to U.S. interests might result. That harm would include damage to debtor countries like Brazil, which needs huge trade surpluses to service its $108-billion debt.

Yeutter, in his meeting with the trade subcommittee, expressed certain misgivings about the revised Gephardt amendment, sources said, because it still would limit the Administration’s discretion to negotiate trade disputes. Asked after the meeting what he thought of the revised Gephardt proposal, Yeutter replied, “Not very much.”

In addition, the compromise specifies that infractions that do not violate international trade agreements but are merely “unreasonable” or “discriminatory” remain entirely within the President’s discretion to remedy.

Early signs on the committee Tuesday suggested that some kind of bipartisan trade consensus may be within reach. For the most part, subcommittee Republicans, swallowing hard to accept some of the proposed restrictions on Administration trade actions, gave the Rostenkowski-Gibbons compromise qualified support.

On the Democratic side, Donald J. Pease (D-Ohio) advanced an amendment to impose U.S.-style labor policy on other countries and Frank J. Guarini (D-N.J.) offered one designed to make it easier for companies to prevail with charges that foreign competitors “dumped” their products in the United States at prices lower than cost. But both seemed to accept the changes made by the Rostenkowski-Gibbons package in last year’s bill.

The new bill will remain open to amendments in the subcommittee and the full committee. Members are expected to propose amendments slapping quotas or tariffs on foreign textiles, shoes, apparel and other products.