Major Trading Partners Rebuke U.S. for Stance

The major industrial nations, warning of a serious threat to the international trading system, formally rebuked the United States on Thursday for acting unilaterally to prosecute its disputes under the 1988 U.S. trade law.

Although the communique from the 24-country Organization for Economic Cooperation and Development, which met here Wednesday and Thursday, was couched in diplomatic language, it marked the first time in recent memory that the United States has been accused of imperiling free-trade objectives.

The warning reflected widespread resentment among virtually all of America’s major trading partners that the United States had taken the law into its own hands last week when it cited Japan, India and Brazil for alleged unfair trade practices.

Moreover, participants said the OECD communique was watered down substantially after American officials said they would not sign it. Earlier drafts had taken the United States to task specifically on several counts.

18 Months for Negotiation

Officials of other delegations were quick to play down the vague wording in the document, however.

“The communique isn’t the important thing,” said a Japanese negotiator who helped lead the drive to chastise the United States over its new trade policies. “The fact is, everyone here spoke against the U.S. stance.”

The thinly veiled criticism constituted the first formal reaction from other countries to last week’s U.S. trade actions, which were required under the 1988 Omnibus Trade Act. The law gave the Bush Administration until May 28 to name the countries and trade practices that might be candidates for retaliatory trade measures.

The White House cited Japan’s barriers to foreign supercomputers, satellites and lumber, Brazil’s import quotas and India’s bars to foreign investment and insurance.

Notice of ‘Priorities’

The U.S. law gives the so-called target countries up to 18 months to negotiate settlement of the complaints with the United States. If the offending governments balk, the President can retaliate by imposing high tariffs on their countries’ exports.

U.S. Trade Representative Carla A. Hills, at a press conference following issuance of the communique, denied that the United States had circumvented standard procedures for settling trade disputes under the Geneva-based General Agreement on Tariffs and Trade.

“All we have done, so far, is to post a notice of what we regard as priorities for negotiations,” she said. Asked whether she believed the United States was the target of criticism in the communique, she insisted: “Not in my mind.”

But Jon Sigurdson, Iceland’s trade minister who chaired the OECD meeting, left no doubt that the language was intended to rebuke the United States.

Both he and senior U.S. officials indicated that the United States had no intention of altering the new trade law, although Washington had endorsed a pledge to avoid autonomous actions in the future. “I do not expect any direct action,” Sigurdson said.

Nevertheless, it was clear that the resentment expressed by the other governments had an impact on top U.S. policy-makers. Hills told reporters that the Bush Administration would use the new trade law only to “open markets and expand trade” worldwide.

Inflation Dispute

“I can only assure you that it is not our intent to do anything that would damage the multilateral trading system,” she said. She also mentioned several times that retaliation under the law was optional, not mandatory, but she would not rule out the possibility of some sanctions being imposed.

Along with the warnings about “unilateralism” in pursuing trade complaints against other countries, the communique also called for a speedup in the pace of global trade-liberalization talks now going on in Geneva.

Noting that the talks are scheduled to end in late 1990, the document called on all trading nations to unveil specific proposals for new trade rules quickly so that the hard bargaining can begin later this year.

The OECD ministers, representing officials of the finance, trade and foreign ministries of each of the 24 countries, also papered over a dispute about how rapidly West Germany and Japan should raise interest rates at home to curb inflation.

U.S. officials fear that higher interest rates in those countries will bring on a small recession and force them to cut back on purchases of U.S. goods, but West Germany and Japan are worried about inflation pressures. The communique Thursday emphasized both points.

At the same time, the major powers apparently put off any resolution of a dispute over how to stem the rise of the dollar’s value, which is also beginning to stand in the way of narrowing the U.S. trade deficit.

West Germany’s central bank, the Bundesbank, did not follow the Bank of Japan’s action of last Tuesday and raise domestic interest rates. The U.S. Federal Reserve Board was reported to have postponed deciding whether to reduce interest rates.

Each of the three actions could help blunt the dollar’s rise, but U.S. officials said the Fed was not convinced that inflation pressures in the United States had abated sufficiently to permit the luxury of a rate reduction. The Fed is expected to consider rates again early next week.