White House gaining ground in trade war with Capitol Hill

The war against protectionist legislation in Congress has not been won, but the battle is going better than it was two months ago. That's the assessment of US Trade Representative Clayton Yeutter, the Reagan administration's top trade official.

While protectionist sentiment has cooled in Congress, several thorny trade talks will reach crucial stages by year's end, Mr. Yeutter said in an interview Tuesday. The outcome of these negotiations with Japan and with the European Community will help determine how long protectionist fires in the United States remain banked, he said.

Dr. Yeutter admitted that he was not terribly optimistic about one set of talks aimed at opening four specific sectors of the Japanese economy to US products. He questioned whether the results would justify the heavy investment of staff and time.

Meanwhile, the impact of recent government tinkering in the currency market ``has been oversold'' in the press, Yeutter says. The dollar's recent decline in value of about 15 percent against major foreign currencies will not show up in significantly better US trade figures until well into 1986 and might not have a major effect even then, he said.

The latest figures show how far the dollar's decline and current talks are from solving the trade imbalance between the US and Japan. Japan's Finance Ministry announced earlier this week that, in October, Japan sold $3.71 billion more to the US than it purchased. That was its second largest surplus with the US on record. During the same month Japanese car exports to the US climbed 36.4 percent above October 1984.

Despite the lack of improvement in trade statistics, the Reagan administration has ``blunted the enormous protectionist drive which surfaced immediately after the [congressional] Labor Day recess,'' Yeutter said.

Progress against protectionism can be seen ``not only in the failure of any of the protectionist bills to move very far in the intervening weeks, but also and more importantly by the introduction of positive legislative packages on both sides of the aisle,'' he said. These packages tend to focus on broad solutions to US trade problems rather than offering import protection to specific industries.

Still, Ambassador Yeutter says he expects the Senate to pass one industry-specific bill, the textile bill, which would slash textile imports. The bulk of the import reductions would be targeted at South Korea, Taiwan, and Hong Kong.

At this writing, the measure was scheduled to come to the Senate floor Wednesday and be voted on by Thursday noon.

But supporters of the textile bill are given little chance of overriding a promised presidential veto. The textile bill, which cleared the House in October, passed with too small a margin to override a veto. A similar outcome is expected in the Senate.

``If we can win that one, it should make it a lot easier to overcome the other flagrantly protectionist legislation,'' Yeutter said.

He admits that protectionist sentiment in Congress ``will rise again after the first of the year, perhaps significantly so, depending on the election-year picture and how the economy is doing and what happens to import-export numbers.''

The outcome of various trade talks will also affect the amount of protectionist sentiment on Capitol Hill. Items coming down to the wire in the next two months include ``some of the diciest trade issues that this country has faced in the last decade,'' he said.

``Congress will obviously observe with much interest what transpires or fails to transpire on all these bilateral disputes,'' he said.

By Dec. 1 the administration is slated to wrap up talks with the European Community on its alleged subsidies for canned fruit and negotiations with Japan on alleged protection of its leather industry.

By late December the administration is scheduled to decide an unfair-trade complaint against Japan by the US semiconductor industry. And by year's end, talks aimed at opening four key Japanese markets to US goods are slated for completion. These so-called sector-specific talks cover forest products, telecommunications equipment, medical and pharmaceutical products, and electronic goods.

While there will be ``some productive and rewarding elements'' flowing from the sector-specific talks, the question is ``whether they will be rewarding enough to pursue further,'' Yeutter said. He noted that from the Japanese viewpoint, it ``gets the Americans off their backs in 444 areas while we concentrate on four.''

Congress and the public are unlikley to see any major near-term improvement in US trade as a result of government intervention in currency markets, he said.

In September five major industrial nations, including the US, agreed to take steps to bring down the value of the dollar, including intervening in foreign-currency markets. When a nation intervenes, it buys or sells its own or another nation's currency to affect the target currency's price.

``Intervention is a transitory remedy at best,'' he said. ``My judgement is that intervention has been oversold in terms of the impact'' of the September agreement. -- 30 --

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