Senate Votes to Penalize Unfair Trade Partners

The Senate, moving to combat unfair foreign trade practices, overwhelmingly approved a key amendment to the trade bill Friday that would penalize nations with large, persistent surpluses with the United States if they refuse to remove barriers to American goods within three years.

The vote was 87 to 7 for the compromise measure, with only Republicans voting no. Final Senate passage of the trade bill is now expected early next week, but the legislation will then probably be revised substantially in a conference that will work out differences between House and Senate versions.

The Senate amendment is far less rigid than a comparable provision approved by the House last May that is aimed at reducing the exports of such countries as Japan, South Korea and West Germany. But the Administration still opposed the Senate measure, contending that it would reduce President Reagan’s flexibility to prevent retaliation.

Byrd, Dole Back Plan

Nevertheless, the chief sponsors of the proposal, Sens. Donald W. Riegle Jr. (D-Mich.) and John C. Danforth (R-Mo.), noted the broad political, sectoral and geographic support reflected in the 87 yes votes and said: “This will become the law of the land.” Their plan attracted the support of Majority Leader Robert C. Byrd (D-W.Va.), Minority Leader Bob Dole (R-Kan.) and about 25 middle-of-the-road senators from both parties.

For the first time, Riegle and Danforth told reporters, the measure sets up a system that could be made to apply across-the-board to countries that persistently bar U.S. products from their markets and pile up huge trade surpluses.

Their compromise measure would continue to single out surplus countries suspected of unfair trading but would set no numerical target for trade surplus reduction and would instead focus on expanded exports to that country from the United States.

Under the proposal, the U.S. trade representative would draw up a list of countries with a “consistent pattern of trade barriers and market distorting practices,” pinpoint the major barriers and total the cost to Americans in lost export sales.

He would then be required to force specified countries to drop unfair practices or face U.S. retaliation. Failure to reach agreement would require retaliation, which under existing trade laws means tariffs or quotas on the other country’s products, within 19 months.

If agreement were reached on an end to the barriers, compliance would be measured in increased U.S. exports over three years, during which the trade representative would have to report regularly to Congress. The President would be able to waive retaliation if the trade barriers in question were legal under the 93-nation General Agreement on Tariffs and Trade but not if they represented violations of existing bilateral trade agreements.

Panels Empowered

If Congress disagreed with the waivers, the House Ways and Means and the Senate Finance committees would be empowered to start their own unfair trading cases against any or all of the target countries.

After weeks of intense negotiation among Senate Finance Committee members, the omnibus trade bill is a much-compromised measure. It would give the President far more discretionary authority than the House measure on determining how much protection U.S. industries are allowed, and it is far less rigidly dedicated to reducing the exports of target countries.

However, White House spokesman Marlin Fitzwater sharply criticized the Senate’s work this week on the bill. Referring to the vote Thursday to approve an amendment requiring that manufacturers give 60 days’ notice of plant closings or substantial layoffs, he said: “The Senate voted for a short-sighted injection of government regulation into the private sector.

“It is anti-competitive and would result in even more plant closings. The whole purpose of this legislation is to improve U.S. competitiveness, and these provisions move in the wrong direction,” he said. “It is clear the President may have to veto this bill if there are not improvements.”

Eases Veto Threat

But Kevin Mulvey, a member of the Administration’s lobbying team, stopped short of repeating the veto threat, which has also been provoked by the House version. “We want to see what the whole package looks like after conference,” Mulvey, an assistant to U.S. Trade Representative Clayton K. Yeutter, said cautiously after Friday’s Senate action.

Riegle and Danforth, calling their approach “reciprocity” to distinguish it from the protectionism inherent in the House version, said that their proposal was a “breakthrough.”

Their objective from early on was to develop an approach that would be strikingly different from the version in the counterpart House trade bill, known as a “killer” amendment that would guarantee a veto.

The House provision to penalize trading surplus countries, the handiwork of presidential aspirant Rep. Richard A. Gephardt (D-Mo.), would require countries to reduce their surpluses by 10% a year or face tariff or quota retaliation equal to the amount of U.S. import injury caused by their alleged “unfair trading practices.”