Grain, pipeline, steel sear US trade deals
Beset by recession, straining to stay competitive in a fast-changing world economy, the United States and some of its closest business partners are rattling swords and exchanging bitter recriminations over international trade policy.Skip to next paragraph
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US Special Trade Representative William Brock has called 1982 the most crucial year in international trade since World War II. The carefully crafted multilateral trade agreements represented by GATT -the General Agreement on Tariffs and Trade - face critical tests in the coming months.
''At no time during GATT's existence have relations between dominant trading nations been more strained and menacing than they are now,'' GATT director general Arthur Dunkel told a Washington audience July 15.
The United States' most troubled relationship is with Europe. The Commerce Department has, in a preliminary decision, ruled that European Community (EC) countries unfairly subsidize steel exports. Both sides are upset over the other's agricultural trade practices. Against this background, President Reagan's decision to further restrict use of American technology in the Soviet-European gas pipeline has infuriated EC countries.
The sanctions are already being battered. On July 13, a consortium of West German banks agreed to supply the Soviets with $1.1 billion to $1.6 billion in credit needed to purchase pipeline equipment.
''The pipeline embargo is not doing any serious damage to the US economy,'' says Edward A. Hewitt, a senior fellow at the Brookings Institution. ''But it is certainly wreaking havoc in Europe.''
In the near term, the course of US-European relations will be greatly affected by these events:
* President Reagan's decision on the fate of the US-Soviet grain pact. The agreement expires Sept. 30. In light of the pipeline sanctions, Europeans would likely consider continued US grain sales to the Soviets an act of blatant hypocrisy, trade experts say.
''Grain has all along been symbolic,'' says Harald Malmgren, a Washington trade consultant. ''Just talking about it infuriates the Europeans.''
* Whether a negotiated settlement of the steel dispute can be reached by July 24. So far, discussions between Commerce Secretary Malcolm Baldrige and EC officials have stuck on whether to include seamless pipe and tube - used in oil drilling - in any voluntary steel export restraint by EC countries.
On July 24, the Commerce Department must begin setting final countervailing duties against European steel. Any compromise reached after that date would be much more difficult to abide by, say trade experts.
* A GATT decision on a European charge that the US provides unfair tax subsidies for exporting companies. For a decade, EC countries have complained about DISC - the Domestic International Sales Corporation - a US program allowing companies to postpone paying taxes on export earnings.
The GATT council, next week, will consider yet another formal European charge that DISC constitutes an illegal subsidy.
''We'll fight it head to head like we always have,'' says Deputy US Trade Representative David Macdonald.
The EC is not the only close trading partner America is at odds with. Canada, by offering government-subsidized credit to help sell a batch of subway cars to New York City, has also strained relations with the US.
On July 13, Treasury Secretary Donald Regan ruled that the US-based Budd Company could not offer low-cost Export-Import Bank financing in an effort to wrest the $633 million contract away from Montreal's Bombardier Inc. But the US government may yet retaliate against the Canadians. The Commerce Department, at Budd's request, is investigating the deal, and will decide by Sept. 17 whether to slap Bombardier with countervailing duties.
Trade experts say it is no coincidence that many of the industries involved in these disputes need to restructure to absorb changing technology. The Europeans, for instance, are trying to cut down on subsidies to their steel companies, Mr. Malmgren says, but face an aging and uncompetitive industry.
And many trade officials fear trade disputes could pull apart the postwar system of structuring international trade through such multilateral agreements as GATT.
''Even the US would find that a trading system based on economic and political power would yield far less than a system based on (multilaterally established) rules,'' says the GATT's Mr. Dunkel.