Bush Says Japan, India, Brazil Trade Unfairly

President Bush began formal proceedings against Japan, Brazil and India on Thursday for allegedly unfair trade practices, raising the threat that the United States ultimately may retaliate if those countries do not reduce their trade barriers.

The decision launched a new, more aggressive era of trade relations that some of America’s economic allies have warned could risk a backlash if the United States goes too far.

The list of allegedly “unfair” trade practices by Japan includes refusal by the Japanese government to buy U.S.-made satellites and supercomputers and Japan’s stringent lumber standards, which officials say help keep out some U.S. forest products.

Also cited by Bush were two trade barriers maintained by India--restrictions on foreign investment and a ban on foreign insurance services--and Brazil’s import quotas and longtime practice of requiring licenses for exporting and importing.

Thursday’s action by the President does not mandate sanctions against these countries. It merely initiates efforts by the Administration to negotiate reductions in the alleged trade barriers.

If the Administration declares the negotiations successful, the matter ends there. If it does not, Bush retains discretion to reject retaliation.

“I want our trading partners to understand that all this does is identify some priorities, and we want to talk with them,” Carla Anderson Hills, Bush’s trade representative, told reporters. She conceded that Bush’s action “will not have any dramatic effect on the trade deficit.”

In a gesture to Congress, Bush also decided to propose a separate round of high-level U.S.-Japanese talks aimed at removing a broad range of “structural impediments” in each country that contribute to the massive trade imbalance between the two.

These could include specific individual trade barriers, the tightly knit Japanese product-distribution system and the seeming inability of the United States to save enough to finance its needed new investment, U.S. officials said. In 1988, Japan accounted for $52 billion of the $119-billion U.S. trade deficit.

U.S. strategists said they have not formally proposed the idea to Japan but are confident that Tokyo will go along with the new plan. The idea has been discussed by officials of both countries for several months.

Omnibus Trade Act

The action announced by Bush was authorized by a provision of last year’s Omnibus Trade Act known as Super 301. The President has until June 16 to complete a preliminary investigation and decide whether to go any further.

Bush’s decision represented a victory for trade and political advisers who wanted to get tough over other aides who emphasized the diplomatic ramifications of citing Japan for trade violations.

The State Department, White House National Security Council and Office of Management and Budget had told Bush that the United States could alienate its major political ally in Asia if it cited Japan for unfair trade practices, Administration officials said.

Michael J. Boskin, the chief White House economist, warned that the United States could trigger a trade war and a recession if it acted too harshly. And the Treasury Department is counting on Japanese investment to help finance the U.S. budget deficit and provide capital for industrial expansion in the United States.

But Hills and Commerce Secretary Robert A. Mosbacher favored the more stringent action, officials said. And White House political advisers argued that failure to cite Japan would have sparked a backlash in Congress, where lawmakers are especially incensed this year over perceptions that Japan closes its markets to U.S. goods.

As expected, however, Thursday’s list of allegedly unfair U.S. trading partners excluded South Korea, Taiwan and the European Community, which had been mentioned as potential candidates. Policy-makers said all three had made significant trade concessions.

Counterfeit Goods an Issue

However, the Administration listed as a high-level U.S. negotiating priority--without threat of U.S. retaliation--the failure of 25 countries to block counterfeiting of U.S. goods by providing adequate protection for intellectual property such as patents, trademarks and copyrights.

Eight of these--Brazil, India, Mexico, China, South Korea, Saudi Arabia, Taiwan and Thailand--will be placed on a “priority watch list.” They will be reviewed no later than Nov. 1 to decide whether the United States should take new action.

Members of Congress praised the Administration’s action as laudably tough. Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) called it “a first step, but an important one in establishing an effective trade policy for America.”

And former Senate Majority Leader Robert C. Byrd (D-W.Va.), a key figure in drafting the 1988 trade bill, praised the Administration for “implementing the law faithfully.”

But Japanese Ambassador Nobuo Matsunaga termed the U.S. action “extremely regrettable.” He argued that broad economic actions, not trade complaints, would be needed to reduce the massive U.S. trade deficit with Japan.

Warning From Ambassador

Matsunaga also predicted that there “may well be some domestic backlash in Japan which will make resolution of various problems even more difficult.” And he warned that, if the United States ultimately imposes sanctions on Japan, that would represent “a unilateral action.”

Nevertheless, some U.S. industries seemed likely to be disappointed. Several--semiconductor makers among them--had lobbied vigorously for the Administration to include their specific trade complaints on the list of grievances against Japan. Initially, the White House had a list of about 25 potential candidates for citations.

The selection of the countries on Thursday’s list reflected a complex strategy. The Administration managed to name Japan specifically without having to threaten broad-scale U.S. retaliation. And it hit Brazil and India, which have opposed U.S. efforts in global trade liberalization talks.

The President’s decision was made public in a Keystone Kops-style series of on-again, off-again announcements and briefings that the White House and the U.S. trade representative’s office several times scheduled and then abruptly canceled.

Reporters were called to the White House in early afternoon, ostensibly to be issued a presidential proclamation. Instead, they were handed a notice saying that the decision would be announced Friday. The White House trade office then scheduled a mid-afternoon briefing but said it could not be publicized until after this morning.

Finally, Hills scheduled her own briefing for immediate use late Thursday evening--too late for most of the network news shows.

BUSH’S LIST OF ‘UNFAIR’ TRADING PRACTICES Countries that were cited:

Japan:

For refusal to buy U.S.-made supercomputers.

For refusal to buy U.S.-made satellites.

For stringent standards on lumber imports.

Brazil:

For import quotas.

For requirement that exporters and importers obtain licenses.

India:

For restrictions against foreign investment.

For prohibitions against foreigners in the insurance business.

Countries excluded from list:

South Korea:

Made last-minute concessions lowering trade barriers on a variety of items, from agricultural products to advertising and travel services.

Taiwan:

Rewarded for lowering trade barriers and allowing the value of the new Taiwanese dollar to rise, making U.S. exports more attractive.

European Community: Writing rules governing the integration of the European economy into a single, integrated market in 1992, making this a bad time for the United States to pick a fight.

Countries cited for failure to provide protection for intellectual property:

Priority Watch List Brazil India Mexico China South Korea Saudi Arabia Taiwan Thailand Ordinary Watch List Argentina Canada Chile Colombia Egypt Greece Indonesia Italy Japan Malaysia Pakistan Philippines Portugal Spain Turkey Venezuela Yugoslavia