Protectionist Tide Engulfing Trade Issues

The Clinton Administration, still struggling to prepare a national economic strategy, is being tugged toward a protectionist agenda by a variety of U.S. industries as foreign leaders complain that an emerging American hard line on trade threatens the global economic order.

Steel and telecommunications equipment manufacturers already have won favorable rulings on unfair-trade complaints, while other industries from automobiles to textiles have lined up behind them to seek protection from overseas competition.

The unfolding events have elicited expressions of alarm from foreign leaders, who argue that a lack of clear direction in Washington is encouraging a tide of protectionist pleadings that may define the new Administration’s trade policy before it has a chance to formulate one itself.

And one leading U.S. trade expert warns of the “privatization of trade policy” as American industries move into the vacuum caused by the change of administrations to try to limit competition on their own.

The Japanese and Europeans are particularly concerned that a lack of strong direction on trade from President Clinton could spark a three-way trade war, one industry at a time.

“I am worried that (the United States) is moving in the direction of restricting imports item by item,” Japan’s chief Cabinet secretary, Yohei Kono, said last week.

Other senior Japanese officials said they detected an increasingly protectionist mood in Washington and were bracing for a series of adverse moves from government and industry.

Speaking before Parliament recently, Japanese Prime Minister Kiichi Miyazawa said that he thought the Clinton Administration could “make stronger demands on Japan.” He urged Parliament to find ways to recycle Japan’s $100-billion trade surplus to aid the developing world as a means of defusing international economic friction.

Leon Brittan, the top European Community trade official, said last week that while the U.S. position on trade policy has not yet been fully formulated, he fears that vociferous industries, organized labor and trade hawks in Congress are pushing the new Administration toward an overly aggressive trade stance.

“I understand the temptation to flex one’s muscles when you are new and need to cater to a domestic audience as well,” Brittan said.

Niels Helveg Petersen, Denmark’s foreign minister, said the January announcement of steep tariffs on European steel and last week’s decision by the Clinton Administration to bar European companies from bidding on some U.S. government contracts seemed to be elements of an emerging protectionist pattern.

“After this second example, it is difficult to believe we are talking about accidents,” he said.

Petersen warned that the United States is sending “the absolutely wrong signal to the world economy” at a time when economic growth is weak throughout the industrial world. “Trade wars and the threat of trade wars are absolutely detrimental to the world economy,” he said.

Overwrought language and apocalyptic warnings of global commercial warfare are nothing new in the trade arena. Every retaliatory action, however warranted and limited, is portrayed as a new offensive in a “trade war” that is going to drive the world into a permanent depression.

Clinton, U.S. Trade Representative Mickey Kantor and other members of the new Administration’s economic team have barely begun to draw up the principles that will guide U.S. trade policy over the next four years. While candidate Clinton promised a more aggressive effort to tear down foreign trade barriers, President Clinton has been virtually silent on the subject, except to offer a qualified endorsement of a broad trade pact with Mexico and Canada.

As the Administration debates these matters internally, a variety of industries with real or perceived grievances against foreign trading practices are planning moves to use the law or the substantial protectionist bloc in Congress to push their own agendas.

The auto industry is preparing a huge anti-dumping case accusing the Japanese auto industry of dumping millions of cars, trucks and minivans here at cut-rate prices. The semiconductor industry, impatient with bilateral talks with Tokyo to open the Japanese market to U.S. computer chips, is considering similar action.

The textile and entertainment industries are trying to block agreement on a new round of global trade talks, which they contend does not adequately protect them from unfair trading practices in other countries.

“Trade policy increasingly will be taken into the hands of the companies themselves through their exercise of existing trade remedies,” said author and trade specialist Pat Choate. “The Administration might just get used to this; this is what their future looks like. Trade policy is going to be privatized.”

Unless the Administration moves to head off these initiatives, U.S. trade policy will be made by “inertia and inadvertence,” according to one well-connected Washington trade lobbyist who asked not to be named. He said that if the Administration does not seize the reins of the trade debate, Congress will move into the void.

Evidence of that was seen last week as Sen. Max Baucus (D-Mont.) introduced legislation to revive the so-called Super 301 provision that gives the government power to retaliate against foreign protectionism.

Baucus, chairman of the international trade panel of the Senate Finance Committee, also introduced a Trade Agreements Compliance Act, which would force the U.S. trade representative to retaliate against countries that violate existing trade deals.

To foreign observers, the Administration’s actions appear reactive and poorly coordinated, a result, perhaps, of having newcomers in key economic policy-making jobs, said Patrick Paradiso, vice president of Deutsche Bank Capital Corp., the big German bank’s U.S. investment house.

Kantor doesn’t seem fully up to speed, Paradiso said. “I would think they would have wanted an experienced person instead of a novice in that position,” he said.

Times staff writers Joel Havemann in Brussels, Leslie Helm in Tokyo and Juanita Darling in Mexico City contributed to this article.