Baker Vows to Resist Further Fall of the Dollar

Treasury Secretary James A. Baker III, in his most unequivocal statement on the dollar in recent weeks, vowed Wednesday to resist any further fall in the U.S. currency.

“Let me make one point clear,” Baker told a gathering in New York Wednesday night. “A further decline of the dollar against the other main non-dollar currencies could very well be counterproductive to our goal of higher growth in these countries. Thus, we fully intend to continue to cooperate closely to foster stability of exchange rates.”

It wasn’t immediately clear whether Baker would be able to halt the greenback’s slide. Baker’s recent statements have failed to convince currency traders that the Reagan Administration is now firmly committed to opposing the erosion of the dollar that it had earlier encouraged.

While Treasury officials insist that Baker abandoned his efforts to hasten the dollar’s slide several months ago, many currency traders have said that Baker’s stance recently has been too ambiguous to prevent continued downward pressure on the U.S. currency.

Moreover, some analysts are skeptical whether any such public statements can convince traders that top finance officials of the leading industrial nations are capable of effectively stabilizing the dollar.

They say the only step that can prevent the dollar from falling further against the Japanese yen in particular is firm evidence that global trade imbalances are narrowing and that the governments can actually implement their efforts to coordinate economic policies.

U.S. attempts to reduce the dollar’s value were intended to help shrink the nation’s trade deficit by making American goods cheaper in world markets. However, the downward trend runs the risk of weakening the economies in trade partner nations, making them less able to absorb a greater share of exports from the U.S. and other trade partners.

Baker’s speech to the annual dinner of the Japan Society, an advance text of which was released here, appears intended to signal his intention to follow through more strongly on an agreement reached in Paris in February in which six leading industrial nations vowed to work together to stabilize their currencies.

Last week, when top finance officials reaffirmed their commitment to the Paris accord but failed to take any additional steps to counter the dollar’s earlier slide against the yen, the value of the U.S. currency dropped to record lows.

Baker, focusing on the need for Japan to dramatically change its economic policies, used the high-level forum in New York primarily to urge Tokyo to stimulate its own domestic economy to avoid a protectionist backlash in the United States and elsewhere.

“We have reached a watershed in U.S.-Japan relations. We have reached a period when change is essential if good relations and economic growth are to continue,” Baker said. “If our two nations fail to lead, no one else will take our place. . . . It is not overstating things to say that if we fail to lead, we also fail the free world.”

Meanwhile, the Cabinet-level Economic Policy Council, which is headed by Baker, cleared the way Wednesday for retaliatory tariffs on $300 million in Japanese goods until the Reagan Administration is satisfied that Japan is living up to last year’s trade pact on semiconductor sales.

Rejecting last-minute Japanese appeals that the Reagan Administration has not presented solid evidence of Japanese violations of the accord, the EPC’s approval removed the last hurdle to President Reagan’s formal proclamation on Friday to impose 100% duties on selected Japanese products, Administration sources said.

The Administration is scheduled to announce on Friday which specific products will be singled out for the punitive tariffs.