Testimony by Hills Signals Tougher U.S. Trade Policy

President Bush’s nominee for U.S. trade representative, Carla A. Hills, signaled Friday that she will pursue a visibly more aggressive policy, including a greater readiness to retaliate against countries that refuse to eliminate their trade barriers.

In testimony before the Senate Finance Committee, Hills asserted that “we must use the retaliatory tools that we have” because “they are the levers” that can help pry U.S. trading partners into opening their markets to more U.S. goods.

And she pledged that she will “aggressively implement” the recently enacted Omnibus Trade Act, which is aimed at pushing the United States into taking a tougher stance in combating other countries’ “unfair” trade practices.

She also bluntly warned Japan that “we must have results” in opening the way for U.S. firms to sell more goods in that country, even though most of the obstacles they now face stem from Japanese cultural practices rather than government-imposed restraints.

Hills’ testimony came at a time when the new Bush Administration has taken pains to make conciliatory gestures toward the Democratic-controlled Congress, where protectionist sentiment runs high. The Finance Committee plans a series of hearings to make sure the Administration is aggressively implementing the 1988 trade act.

Hills’ hard-line stance won the immediate approval of committee members, who voted unanimously to send her nomination to the Senate. Final confirmation is expected next week. Hills, 54, will replace Clayton K. Yeutter, who will become agriculture secretary.

In her testimony, which came a week before the visit here of Japanese Prime Minister Noboru Takeshita, she indicated she sees no reason to grant Tokyo’s request that Washington remove trade sanctions it imposed in 1987 on $165 million in Japanese imports after Japan violated a pact on semiconductor trade.

If anything, Hills said, she would go along with increasing the sanctions if the Japanese did not live up to the agreement. “Absolutely,” she said when asked whether she would favor more sanctions in such a case. “We have to have our agreements enforced.”

At the same time, however, Hills hinted that she may be willing to compromise on a Reagan Administration demand that other countries agree to eliminate all agricultural subsidies and other trade barriers as part of the Uruguay Round of global trade negotiations now under way.

Rather than insisting that other countries agree to set a firm date for ending such subsidies, she said she would press “to establish a satisfactory discipline” in farm trade. The debate, which has snagged the Uruguay Round talks, comes up again in talks next April.

Sever Business Ties

Hills also resolved concerns by some panel members that she might face possible conflicts of interest in the trade representative’s job because both she and her husband, Roderick M. Hills, have served as lawyers and lobbyists for foreign firms in recent years.

Hills told the panel that both she and her husband will sever all business ties and investments “that could conceivably present a conflict” with the decisions she will have to make as trade chief, and said she will recuse herself from such issues when they come up.

In an unusual move, she said her husband also had pledged not to become involved in any activity that either the Office of Government Ethics or her own agency believes might pose a potential conflict. She said he will submit all of his proposed business transactions for review.

Later Friday, the Office of Government Ethics made public a file containing letters from Hills and her husband in which they outlined these pledges in detail. Josh Bolton, Hills’ nominee to be the agency’s general counsel, reiterated those commitments.

Hills, a prominent Washington lawyer before she was named to the trade representative’s post, and her husband both were registered in 1985 as foreign agents for Daewoo Industrial Ltd., the South Korean manufacturing conglomerate, and have done work for Canadian firms.

A native of Los Angeles, Hills was secretary of housing and urban development during the Ford Administration, and her husband was chairman of the Securities and Exchange Commission then. Government files show both have substantial amounts of stock in large corporations.

For all of her tough talk Friday, Hills stopped well short of advocating a full turn toward further protectionism. She said retaliatory moves should be used only to pry foreign markets open. And she blamed the nation’s $135-billion trade deficit mainly on broad economic factors.

If America wants to reduce its trade imbalance, “the United States must save more and consume less,” she said. “Retaliation cannot be the goal of our policy. . . . Our strategic goal is to open markets, not close them.”

At the same time, Hills asserted that where negotiations fail, “I will not hesitate to act” by using retaliatory measures “to fight unfair trade practices. . . . The credible threat of retaliation provides essential leverage in our market-opening efforts,” she said.

Although most major decisions involving trade retaliation require presidential approval, the new Trade Act gives the U.S. trade representative’s office broad new powers to decide many such issues on its own.

Moreover, Hills told the panel Friday she had firm assurances from President Bush “that I will have the lead role in dealing with trade issues.” Hills will have a seat on the 10-member Economic Policy Council, which sets broad economic policy.

On other issues, Hills said she supports Bush’s promise to back extension of the global steel import-quotas that the United States imposed in 1984, but hopes to attempt worldwide talks first seeking to persuade other countries to reduce their subsidies to domestic steel industries.

She also rejected suggestions that the United States should pare back its restrictions on textile imports. And she said Washington will not be ready to explore the possibility of negotiating a broad free-trade agreement with Japan until current disputes are settled.