Playing Politics Is Bad Policy on Trade

The Reagan Administration, while trying to be for free trade, has often ignored U.S. trade laws and its international obligations. By disdaining laws and remedies developed by successive Administrations and Congresses, it has undermined the domestic and international systems for managing trade protection.

The Administration’s approach to trade has been neither predictable nor consistent. It has relied on so-called voluntary restraint agreements “negotiated” with our trading partners outside the traditional system of checks and safeguards on abuses by protected industries.

The omnibus trade bill that is pending on Capitol Hill reflects years of congressional frustration on both sides of the aisle with the Reagan Administration’s ad hoc application of the trade laws. Excessive media fixation with the amendment sponsored by Rep. Richard A. Gephardt (D-Mo.) notwithstanding, some of the most important provisions in the measure are prompted by bipartisan congressional displeasure with how--not how much--protection has been imposed by the Reagan Administration against fair--not unfair--imports.

The lawmakers have a number of examples to point to:

--In 1981 the International Trade Commission recommended that the President not protect the U.S. auto industry, following the procedures and guidelines laid out in Section 201 of the trade law. But, keeping a campaign promise, the Reagan Administration ignored the commission, went outside the law and the procedures of the General Agreement on Tariffs and Trade and negotiated voluntary restraint agreements with Japan that remain in place.

--In October, 1984, the President’s trade representative announced to the press that the President had decided not to grant steel-import relief under Section 201. At the same time, however, the President was telling steel executives that he had authorized negotiations on bilateral “voluntary” restrictions with nations supplying “unfair” steel. The United States is now in the fourth year of voluntary restraint agreements with at least 27 countries.

--The Administration’s refusal to use trade-adjustment assistance for laid-off footwear workers left the International Trade Commission with import restrictions as the only remedy recommendation available for the footwear industry in 1985. Had the Administration shown any willingness to fund the existing program for workers, the commission probably would have recommended adjustment assistance instead of quotas. The President then rejected quotas, leaving the situation to fester.

If a President refuses to use the laws and then grants protection through voluntary restraint agreements when politically expedient, the country is confused about policy; industries come to rely on political muscle rather than on making necessary adjustments to merit public investment in protection, and the consumer pays the bill.

The underlying policy of the trade laws is to bolster America’s ability to compete in the world marketplace. But the Reagan Administration’s trade activity is better understood not so much as policy but as politics. Trade policy is an arena in which Congress has given the President significant power--much more than in the areas of budget and monetary policy--that is relatively unconstrained by Congress. The debate between Congress and the White House is ironic in 1988 because Reagan has said so often that he is opposed to using the discretion that he possesses under existing law, even as he has increased the range of goods that are subject to import relief. Present U.S. law--adhering to the principles of GATT--provides for very specific, limited protection for import-sensitive industries to adjust to foreign competition. The trade bill pending in Congress would legislate changes in this “safeguard” or “escape clause” provision in Section 201. The Administration’s trade activity has already reaped the wind; now it is sowing the whirlwind. The Administration correctly fears that some in Congress want to legislate constraints on the discretion that the President has used with such disregard of established practice.

No President should limit his options to either no action or protectionist action. But, by going outside the law to protect,the Administration has undermined congressional support for a steady trade policy and risked losing traditional presidential discretion in trade. It has also missed the opportunity to insist that protected firms and workers help reduce record-breaking trade deficits by reducing costs, improving marketing and/or going for market share rather than profits.

Ad hoc protectionism forgoes the affirmative role that government must play if protection is to boost performance, not prices. It abdicates the government’s responsibility to enhance American competitiveness and to equip workers and firms for new international competition. Changes pending in the trade bill would reinforce the adjustment requirements in the law. Some may call this reemphasis on adjustment “back-door industrial policy.” Others may call it “getting a return on the public’s investment.” In any case, if it’s the law of the land it should not be thwarted.