Protectionism vs. Hands-Off Stand : Candidates Differ Sharply on Answers to Trade Woes

A few days after the Oct. 19 stock market crash, House Minority Leader Robert H. Michel (R-Ill.) emerged from a hurried meeting with President Reagan and paused in the White House driveway to chat with reporters about how to reassure investors.

The bulls who hope for a market rebound “don’t want any protectionism or any restraints on trade,” Michel said.

If that’s true, all the presidential candidates in both parties are self-proclaimed bulls, devoted to the ideal of increased trade between nations. But they differ drastically on the best way to get there.

Rep. Richard A. Gephardt (D-Mo.), who has made a tough trade stance the centerpiece of his campaign, is not backing away from a plan that could slap quotas on goods from Japan and West Germany if those countries do not dismantle trade barriers that keep out American products. In fact, Gephardt insists, the recent market plunge shows that he is right.

Rep. Jack Kemp (R-N. Y.), in sharp contrast, says the Gephardt plan could trigger a trade war and a worldwide economic slump.

Between these extremes, responses to a Times questionnaire demonstrate, the candidates offer several formulas for solving the trade problem. Democrats generally are more willing to give help to industries threatened by imports than the Republicans, who typically take a hands-off approach to trade.

Sen. Albert Gore Jr. (D-Tenn.) and Sen. Paul Simon (D-Ill.) both backed unsuccessful efforts in Congress to restrict textile imports. The Rev. Jesse Jackson wants to regulate multinational corporations as a way to protect workers’ rights.

The most fervent free traders among the Democrats are Massachusetts Gov. Michael S. Dukakis and former Arizona Gov. Bruce Babbitt, although Dukakis says he would give temporary import relief to some companies as they modernized.

Among the Republicans, Vice President George Bush says U.S. allies should boost their economies to absorb more American goods. Kemp likewise blames a stagnant world economy for U.S. trade problems.

Focus on Budget Deficit

Senate Minority Leader Bob Dole of Kansas and former Secretary of State Alexander M. Haig Jr. argue that a lower budget deficit can strengthen the United States as a trading power. And former Delaware Gov. Pierre S. (Pete) du Pont IV wants to boost export earnings by selling Alaskan oil and natural gas and timber from federal lands to Japan.

The wave of fear and trembling in the financial markets gives the trade issue a new urgency just as a House-Senate conference is considering a massively detailed 1,200-page trade bill. By far the most controversy will focus on Gephardt’s amendment, which is an integral part of the House bill.

“If standing up for American workers and insisting on prying open foreign markets is protectionism, then I want to be a protectionist,” Gephardt said at a recent forum of Democratic candidates, where he insisted on talking about trade, although the official subject was social issues.

‘Turning Up Volume’

His amendment would require the President to negotiate with countries that have big trade surpluses and unfair barriers against U.S. goods, then to take retaliatory action if the barriers do not come down. Gephardt said he is “turning up the volume” on the trade issue.

Because of his amendment, Gephardt said in a recent speech: “I’m confident that a tough new trade policy will become law--either when Reagan signs it, or when President Gephardt does.”

In a direct counterattack, Dole organized his colleagues in a letter to Reagan asking the President to stand fast against protectionism. The 38 signatures gathered by Dole give Reagan a political ace, a guarantee that a veto of the trade bill would be sustained. The Gephardt amendment, Dole said, “is an irrational solution to America’s trade problems, which would only compound them greatly.”

The new President, whether Republican or Democrat, will inherit a huge trade deficit--the gap between imports and exports will be about $170 billion this year--and will be following an Administration with an unpredictable behavior pattern.

The general inclination has been to avoid any interference with imports. The Reagan Administration in early October reached an open border pact on virtually all goods with Canada, a free trade agreement between the United States and its biggest trading partner.

Appeals Rejected

And the White House rejected appeals for help from a variety of industries, including textiles, shoes and copper. But, responding to heavier political pressure, the Administration provided a respite from imports for the automobile and steel industries and pressured the Japanese into agreeing to keep semiconductor prices up as a sop to hard-pressed American producers.

The cries for help ebb and flow, depending on the general health of the U.S. economy and the specific ailments of individual industries. This leaves potential presidents with two issues: how to handle foreign competition generally and aggrieved industries in particular.

The dollar has declined for the last 30 months in relation to other currencies, making American products cheaper for foreign customers while increasing the cost of imports in this country. However, the long-expected drop in the huge trade deficit has not materialized. Foreign competitors, entrenched in the lucrative market for the long run, are willing to slash profit margins rather than lose market share.

This has been a serious disappointment for U.S. policy-makers and businesses.

The solution, Bush said, is a determined effort to keep the heat on big exporting countries like West Germany and Japan to help their citizens buy more U.S. goods. “We need to continue to encourage our trading partners to increase their economic growth,” he said. “As their growth increases, we can reduce our trade deficit without slowing our economic engine.

‘Fountain of Youth’

“America’s economic fountain of youth” is technology, added Bush, who advocates making the temporary 5% tax credit for research and development into a permanent part of the law.

Other Republicans also focus on broad policy concerns rather than the tribulations of specific sectors of the economy. All the candidates offered prescriptions except Pat Robertson, who did not respond to the Times questionnaire.

“I think American management and labor are readier than ever to take on international competition,” Haig said. “But no one can compete if burdened by an overvalued dollar and high interest rates.”

He called for a balanced policy that cuts the budget deficit and reduces interest rates. Washington also should revamp antitrust laws that hamper innovation and rewrite tax laws and regulations that deter investment, he said.

Meanwhile, Haig is loath to move against other countries. “We can’t ascribe our trading problems strictly to unfair trade practices,” he said. “Nor will a policy of ‘Japan-bashing’ fix these economic imbalances.”

Kemp said the trade barriers by foreign countries, so often cited by Gephardt and other Democrats, are comparatively insignificant. The big problem, he said, is “a stagnant world economy which . . . is demanding fewer U.S. exports of goods and services, especially in Latin America and Europe.”

Export Champions

Kemp believes U.S. firms can become export champions with the help of government policies to give tax incentives for immediate write-offs of factories and equipment, and for the opening of businesses in poor neighborhoods. And he wants international cooperation to stabilize currency exchange rates.

For Dole, broad financial issues are the key. “We are fooling ourselves if we don’t recognize that the trade deficit has mainly to do with other factors, especially our federal budget deficit,” he said.

Any relief for injured industries should be strictly temporary, getting the business “back on its feet as soon as possible so that it does not require further government protection,” Dole said. Du Pont favors a push to open markets, both here and abroad. “We won’t solve America’s trade deficit by putting up protectionist walls,” Du Pont said.

He offered some controversial suggestions for opening up new categories of imports. He wants to repeal laws barring the export of Alaskan oil and natural gas, and the export of timber cut from government lands. The United States could market large volumes of these commodities to Japan and other nations, gaining $20 billion in new exports, Du Pont claimed.

Willing to Offer Solace

The Democrats are more willing to offer government solace to industries feeling injured by imports.

Gore, for example, backed unsuccessful legislation to provide import relief for the textile and shoe industries.

Devotion to free trade, Gore said, “must not become an excuse for inaction in the face of extreme adversity. . . . “ The industries deserving help “have invested heavily in modernization, yet not only have they not been helped by this Administration, but they have been victimized by the overvalued dollar and other damaging Reagan policies,” he said. “To recognize these realities is not to be protectionist. It is to be an economic realist.”

Simon sought to restrict textile imports. He also backed an unsuccessful “domestic content” measure that would have forced foreign companies to increase automobile production in this country or be excluded from the American market.

The United States “can no longer afford to be the world’s only free-trade zone, and I will fight for fair as well as free trade,” Simon said. He backed the textile bill to impose a “moderate restraint” on “unfair” foreign manufacturers “in order to save vital domestic industry and consequently protect jobs.”

Sees Boost to Pay Scales

Jackson believes the international development of unions could strengthen wage scales everywhere and slow the leakage of American jobs overseas. “It is not accurate to say that Taiwanese workers are ‘taking’ American jobs; we must understand that American-based multinational corporations are taking jobs to Taiwan,” he said.

The President should push for “recognition of workers’ rights around the world, including the right to organize in their own behalf,” Jackson added.

He wants to shift federal funds for military research to the civilian sector to enhance competitiveness. “Our economy is distorted by the amount of money and highly skilled people devoted to military R&D; (research and development), while our competitors use their resources to enhance their ability to compete in the world marketplace,” he said.

Dukakis scorns the idea of new powers offered to the President by the Gephardt amendment.

The President already “has all the authority he needs to get tough with countries that engage in unfair trade practices; or that violate human or workers’ rights,” Dukakis said. Even if all of the barriers came down, he believes, the trade deficit still would be more than $125 billion. The budget deficit must come down, he argues, to make the country more competitive.

Assigns Time Limit

Dukakis would help some basic industries, “provided those companies make a binding commitment to use that time to invest and modernize and become more competitive.” He said five years is the limit.

Babbitt opposes direct U.S. retaliation against other nations in trade disputes. Instead, he wants to summon a general trade conference to build an ambitious new system, in which countries with a big trade surplus must reduce the balances by a third each year, or face tariffs on all of their export goods. Japan and West Germany, which enjoy big surpluses with the rest of the world, would be obvious targets for such a plan.

Meanwhile, Babbitt is loath to help particular businesses, saying “industry-specific protectionist shields will do nothing to improve our trade position and could start a disastrous trade war.”

CANDIDATES AND THE ISSUES: TRADE REPUBLICANS Vice President George Bush Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Veto, because the Gephardt amendment is “protectionist pure and simple.” Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: Protectionist measures “drive up costs to consumers and misallocate our economic resources.” However, “our trading partners must respect our right to compete in their marketplace and they must act fairly in ours.” Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: “Technology is America’s economic fountain of youth.” Government and business must spend more for research and development, and federal tax credit for research should be made permanent. Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: The Reagan Administration has proposed a $1-billion program for worker adjustment. Kansas Sen. Bob Dole Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Veto, because the amendment is an “irrational solution to America’s trade problems.” Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: “In general, I oppose quotas and tariffs which raise prices and restrict consumer choice. At the same time, we must not hesitate to take strong action against imports which are the result of unfair foreign trade practices.” Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: “The U.S. is losing ground in the high-tech area.” Tax and regulatory policies should be changed to stimulate investment. Government should improve scientific education and research. Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: “My concern is not about the principle of worker training, but the particulars of the programs.” Too often, programs offer supplemental income without any incentive for learning new skills. Former Delaware Gov. Pierre S. (Pete) du Pont IV Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Veto, because it would “cause our economy to self-destruct.” Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: “The solution does not lie in imposing mandatory tariffs or quotas that are automatically triggered.” Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: The federal government “needs to work to help make all areas of U.S. industry more competitive.” U.S. should eliminate farm price support program and improve education. Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: “Every American should be able to get a loan from private banking institutions at market interest rates” to pay for job retraining or advanced education. Former Secretary of State Alexander M. Haig Jr. Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Veto. Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: “Yes, if the injury comes from unfair trade as provided under both GATT (General Agreement on Tariffs and Trade) and American law. No, if the industries are unwilling to help themselves to become more competitive.” Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: Government’s task is to restore a balanced fiscal-monetary policy that cuts the federal deficit and lowers interest rates. Antitrust laws, taxes and regulations should be changed if they inhibit innovation. Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: “We need more effective training, not more money spent for training.” New York Rep. Jack Kemp Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Veto, to “prevent a chain-reaction of worldwide” retaliation against U.S. goods. Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: Recent “U.S. experience with tariffs and quotas on specific imports proves beyond a doubt that trade retaliation is counterproductive.” Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: Manufacturers can compete if government removes barriers to growth through strategy to “promote free trade and provide tax incentives for immediate expensing of plant and equipment.” Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: “I am a strong supporter of the Job Training Partnership Act, which trains displaced workers for real jobs in the private sector.” Pat Robertson did not respond to questionnaire. DEMOCRATS Former Arizona Gov. Bruce Babbitt Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Veto, because “we need to expand trade, not enact protectionist amendments.” Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: “Industry-specific protectionist shields will do nothing to improve our trade position and could start a disastrous trade war.” Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: Should develop a “more democratic workplace, designed to create an explosion of growth and productivity by giving every American worker a stake in our economic success.” Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: Favors an “individualized training entitlement” to “create a lifetime guarantee that no worker need become obsolete.” Massachusetts Gov. Michael S. Dukakis Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Says Gephardt amendment is effectively “dead,” because Senate won’t accept it. Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: Favors trade policy “that would give protection for a limited period of time to some companies, especially in our basic industries.” Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: Need enhanced investment in highways, bridges and transit systems; better school systems; and investment in new technology. Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: Government must “invest in training and retraining our workers, so that they can cope with changes in technology...” Missouri Rep. Richard A. Gephardt Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Would sign bill, because amendment is a “necessary first step “ toward effective U.S. trade policy for the rest of century. Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: “Temporary relief might be merited” if an industry can once again become competitive. Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: Government “must provide incentives for research and development...must enhance our education systems and stimulate math, science and language education.” Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: Would fully fund and expand current programs to help workers meet the needs of the marketplace. Tennessee Sen. Albert Gore Jr. Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Veto, because Gephardt amendment “would be highly counterproductive.” Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: Supports legislation to streamline procedures “for providing temporary relief and assistance” to industries hit hard by imports. Has backed import relief for textile and shoe industries. Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: Decline in competitiveness comes from Reagan Administration’s “enormous budget deficits” and from military programs such as “Star Wars” “draining” money and personnel from the commercial sector. Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: Worker training programs should be expanded and improved, and financed by an import fee. Rev. Jesse Jackson Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Did not answer directly, but says protectionist legislation “will ultimately erode our national economy...” Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: No direct answer. Says United States must support workers’ rights around the world. Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: “We must significantly increase the amount of money allocated to industrial research and development.” Too much money and too many skilled people are working on military research. Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: Favors a national investment plan, using pension fund assets to retrain workers and rebuild industry. Illinois Sen. Paul Simon Q: If you were president, would you sign or veto a bill containing the Gephardt amendment? (The measure would allow the United States to restrict imports from nations that fail to correct big trade imbalances with the United States.) A: Agrees with goals of Gephardt amendment, but says trade policy must go beyond retaliation. Sponsored bill requiring mandatory negotiations to bring down trade barriers. Q: Do you favor temporary quotas or tariffs to help such industries as steel, autos, textiles and copper, which are being hit hard by foreign compet ition? A: Backed legislation to restrict textile imports, and to set minimum “domestic content” levels for automobiles. Q: Is the United States losing its ability to compete in the manufacturing of high-technology goods? If so, does the government have a role in restoring U.S. competitiveness? A: “While we are spending more and more money researching more powerful and more accurate missiles and tanks, the Japanese are using their research money to build better television sets, cars and refrigerators.” Q: Should the government spend more to retrain workers displaced by imports, or is the current program sufficient? A: “To continue America’s world leadership in manufacturing, we must not allow our workers to stumble and fall when they most need help to be productive.” Favors increased spending for worker training.