Advertisement

Free Trade Needs Help

The Bush Administration needs to put some precision behind its promise of pursuing a policy of free trade. The risks of misunderstandings about intentions of the new American government have already been demonstrated in the reaction to the recent Senate Finance Committee testimony of Mrs. Carla Hills, the new U.S. trade representative.

First impressions of that testimony led to reports that the Administration was moving toward managed trade, at least in addressing Japan’s mountainous surplus in bilateral trade with the United States. There was a hint of requiring fixed goals for specific American exports to the Japanese market. Mrs. Hills has said that she regards Japan bound by its 1986 semiconductor agreement to assure an eventual 20% share of the Japanese market for American-made semiconductors. Some also have interpreted the omnibus trade law adopted by Congress last year as opening the door to other market-share demands in trade talks.

Mrs. Hills’ staff in Washington has been quick to deny that there has been any weakening of the commitment to free trade pursued by President Reagan and promised in the campaign by President Bush. That is reassuring.

But there are already unwelcome compromises in the Bush trade agenda. He is committed, for example, to a campaign pledge to renew import quotas on steel when the existing restrictions expire Sept. 30. Furthermore, Bush’s secretary of agriculture, Clayton K. Yeutter, seems to be pursuing the same confrontational approach with the European Community that he followed when he was Reagan’s trade representative, a tactic that has placed the entire new round of negotiations on an up-dated General Agreement on Tariffs in Trade in peril because of the fight over farm subsidies.

Advertisement

The initiative by Reagan to negotiate an end to farm subsidies that impact on global farm trade was important and remains important, but Yeutter has clouded the American effort once again by pushing for an expansion of the already disruptive U.S. farm export subsidies. Yeutter has argued that lifting the ceiling on these subsidies would strengthen his hand in negotiations with the Europeans. That certainly did not prove to be the case in the round of talks that ended in deadlock in Montreal last December. And it exposes the Americans to the charge of a European Community leader that these proposals “appear to suggest that the U.S. is not committed to serious reform of its agriculture policy.”

What has become clear in the GATT negotiations is a willingness of the Europeans to reduce their farm subsidies. Some significant steps already have been taken. But they fall far short of the commitment to a phased-out termination of trade-distorting subsidies, as proposed by Reagan. That difference, however substantial, should not be allowed to jeopardize the other significant GATT agreements that are pending April 5 and 6 in Geneva. Furthermore, there is good reason to think that the European process of removing subsidies will gain a momentum of its own if removed from trans-Atlantic politics.

The United States has demeaned its own vigorous leadership in world trade by silly diversions, like its fight with the Europeans over their limitations on imports of beef treated with growth hormones. Mrs. Hills can rise above those issues, however, if she can demonstrate promptly the President’s real and sure commitment to free trade--free trade that is free and not a mask for special-interest protections, managed markets and regressive subsidies.


Advertisement