Reagan Aides Warn House of Trade Bill Veto

A dozen top Administration officials warned the House Democratic leadership Tuesday that they will recommend that President Reagan veto the trade legislation now before the House unless it is substantially modified.

“Our trade laws are fundamentally sound,” the Administration officials wrote in a letter to House Speaker Jim Wright (D-Tex.). “Our responsibility is to ensure they are well maintained and well implemented without undermining the principle of trade expansion on which they are based. Regrettably, many of the provisions of (the House bill) do not meet that test.”

Later Tuesday, the House began three days of debate on the bill, which House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) has championed as “bipartisan,” but which several key Democrats want to toughen.

Difficulty Ahead

The officials’ warning and the escalating rhetoric on the issue illustrate the difficult straits that remain ahead for trade legislation this congressional session, despite the progress the compromise measure has made so far. A House vote is expected Thursday.

The House bill, the product of several committees, was crafted as a moderate middle ground that mandates retaliation against countries using unfair trading practices with the United States, orders currency intervention by the Treasury Department under certain circumstances and limits foreign investment in the United States.

Administration officials, however, have warned that it unduly limits the President’s flexibility on trade matters or includes measures that might provoke retaliation against American exports by U.S. trading partners.

In their letter, the officials particularly warned the House against adopting an amendment that Rep. Richard A. Gephardt (D-Mo.) has adopted as the main issue of his fledgling presidential campaign.

The amendment, which Wright supports, would single out for special mandatory trade retaliation countries such as Japan and South Korea that carry large trade surpluses with the United States. It would target nations that restrict U.S. products from their markets and that refuse to reduce their surpluses by 10% a year over a period of four years. The amendment is chief among a long list of amendments to be acted on beginning today.

Cabinet Officers

Officials signing the warning letter included Secretary of the Treasury James A. Baker III, U.S. Trade Representative Clayton K. Yeutter, Secretary of State George P. Shultz, Commerce Secretary Malcolm Baldrige, Agriculture Secretary Richard E. Lyng, Labor Secretary William E. Brock III, Defense Secretary Caspar W. Weinberger, Transportation Secretary Elizabeth Hanford Dole, Energy Secretary John S. Herrington, Education Secretary William J. Bennett, Office of Management and Budget Director James A. Miller III and Council of Economic Advisers Chairman Beryl W. Sprinkel.

As debate began on the bill Tuesday afternoon, there were some early signs that Rostenkowski, who has been fighting vigorously to forge trade legislation that can become law, has been marshaling his forces to limit support for the controversial Gephardt amendment.

Back Moderate Bill

Key Democratic allies from the Ways and Means Committee, such as Donald J. Pease (D-Ohio) and Robert T. Matsui (D-Sacramento), urged their colleagues to pass the measure in the more moderate form.

The bill “opens up foreign markets,” Matsui said, and needs no tougher Gephardt provision because it already “mandates retaliation on a dollar-for-dollar basis.”

Farm state Republicans such as Virginia Smith and Hal Daub, both of Nebraska, warned that the harsher trade sanctions in the Gephardt amendment would “have a disastrous impact on agricultural exports.”

Said Smith: “We do not need barbed wire on our shores.” Added Daub: “The bill would put trade policy on automatic pilot,” and would make farm exports “cannon fodder for the protection of non-farm industries.”

Lobbying by Brown

Earlier, speaking to reporters at a breakfast meeting, California Assembly Speaker Willie Brown said he was actively lobbying members of the state’s congressional delegation to vote against the Gephardt amendment.

California “can’t afford trade barriers at all,” he said, adding that protectionist moves would bring foreign retaliation that would be “devastating to farmers” and others in the state. “Ronald Reagan is really representing California when he talks” about trade, Brown said, noting that the state is unique because of its size as an exporter.

The pleas were countered by calls for stronger action by Democrats from industrial states where manufacturing industries have suffered severely from foreign competition.

Loss of Jobs Cited

“While the Administration talks, the American people lose jobs to foreign imports,” said Rep. Brian J. Donnelly (D-Mass.). “It’s essential to get our country moving again,” declared Lane Evans (D-Ill.). “My district has been devastated by trade. The American middle class is being eaten away by unfair trade practices.”

Meanwhile, on the Senate side, Democratic leader Robert C. Byrd of West Virginia applauded the House plan to debate trade reform while Japanese Prime Minister Yasuhiro Nakasone is in Washington to confer with President Reagan on trade issues.

Referring to the recent U.S. sanctions directed at Japan’s semiconductor industry, Byrd said: “Japan needs to get (a message), and they are if the President will stick on the semiconductors.” However, earlier Tuesday, Yeutter said that Japan apparently has taken action to curb the below-cost dumping of computer chips and that the punitive 100% tariffs imposed two weeks ago might soon be lifted. It most likely would be just “a matter of time until the compliance is fully demonstrated to us,” Yeutter said.