US and allies try to untangle touchy questions of trade

Trade disputes continue to pile up storm clouds over the transatlantic alliance, much to the dismay of Washington and its closest European allies.

Dismay or not, no clear solution is yet in sight for the two major disputes - steel trade and the Soviet natural gas pipeline.

Both issues have come to a head when unemployment in the United States and the European Community (EC) stands at the highest point since World War II, posing potentially dangerous political and social problems.

The steel problem, primarily an internal matter between the US and the EC, boils around the question of how much steel the United States is willing to allow European producers to dump below cost in the US, at a time when American steel plants are operating at 40 percent of capacity.

Foreign steel now supplies nearly 25 percent of the US market. Hard-hit American steelmakers have laid off more than 100,000 blue-collar steelworkers.

Steelmakers in the US and Europe tick off a litany of similar problems. Their plants are old-fashioned. Labor is expensive. World demand for steel stagnates. More modern steel plants in Japan, Taiwan, South Korea, and advanced developing countries can undersell American and European producers.

Wages paid to US steelworkers, says Robert W. Crandall of the Brookings Institution, ''are 70 to 75 percent above the average US manufacturing wage'' and $10 an hour higher than similar pay in Japan.

Hundreds of thousands of European steelworkers also are out of work. ''For a small industrial power like Luxembourg,'' says Mr. Crandall, ''where one out of every six workers is in steel, it is a terrible problem.''

Throughout the EC the cry goes up: What do we do with surplus workers, while obsolete steel mills are phased out?

One expedient has been the use of subsidy. In various ways several EC governments subsidize the export of steel, often selling below cost in the United States.

Negotiations on the problem were preempted early in 1982 when seven major American steel firms filed formal dumping and subsidy complaints with the US Commerce Department against some European and other foreign producers.

Under US law, the Commerce Department had no alternative but to investigate the complaints - even as Commerce Secretary Malcolm Baldrige was successfully negotiating import limitations on European steel.

US steel firms rejected the limitations as insufficient. Next month the International Trade Commission, a domestic US agency, will determine the extent of injury to American steel producers. Countervailing duties then will be levied against offending European imports.

Mr. Baldrige argues that US firms would have done better to accept the quotas. American steelmakers claim they need protection against cheap foreign imports while they undertake the expensive task of making their industry leaner and more modern.

Basic to the allied dispute over the Soviet natural gas pipeline, destined to carry Siberian gas to Western Europe beginning in the mid-1980s, is the conviction of key Reagan administration officials that hard currency earnings from gas sales will bolster Moscow's warmaking potential.

For more than a decade the Soviets have earned billions of dollars from the sale to the West of oil and gold. Gold continues to be a major hard-currency earner. But sales of oil to Western countries are expected to dwindle and end, as Soviet domestic consumption grows and production levels off or declines.

Shorn of billions of dollars worth of oil sales, the argument runs, Moscow would have to cut back on military spending - unless another source of foreign currency earnings opens up. That source would be earnings from Siberian gas, estimated to bring a yearly flow of $5 billion to $10 billion to the USSR when deliveries to Western Europe are fully on-stream.

This served as background to President Reagan's ban on sales of pipeline equipment or technology to the Soviets by American firms. Later these sanctions were extended to European firms selling equipment either made in the US or in Europe under American license.

European governments denounced this White House intrusion into their domains and ordered their companies to fulfill pipeline contracts already signed - signed, in fact, before the Reagan ban went into effect.

So far the US has applied sanctions against two French, one British, and one Italian company, with others due to follow as future deliveries to the Soviets are made.

A search now is on for a compromise that would keep some pressure on the Soviet economy, while allowing Mr. Reagan to back off gracefully from at least the European aspect of his sanctions.

Central to that compromise, key officials say, would be US-European agreement on eliminating all credit and price subsidies to the Soviet Union in major fields of trade, plus a tighter allied ban on sales of strategic goods to the Eastern bloc.

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.