In Search of a Trade Policy

Hard-liners vs. soft-liners vs. just about everyone else

Modern international trade floats on a sea of dilemmas, steered by contradictions. Official U.S. policy has been to encourage free trade since the first Reciprocal Trade Agreements Act in 1934. But in practice trade has never been totally without restriction. It has been fettered by quotas, tariffs and political considerations. That is the reality the Reagan Administration is confronting as it searches for a trade policy that combines consistency and fairness.

The vague outlines of the policy are now beginning to take shape. In a 15-page "white paper" on trade, drafted by the Cabinet-level Trade Policy Committee and scheduled for release next month, the Administration reaffirms its commitment to free trade as the goal of international commerce. But the study admits that certain unspecified industries may need time and Government prodding on investment and labor policies before they are ready to compete in world trade. The main message of the paper is that the U.S. must export more or suffer grave consequences because of apparently unstoppable outflows of money to pay for imported oil.

That urgency seems undercut, however, by some Administration proposals. As part of its budget reductions, the White House wants to slash $600 million out of the $5 billion lending authority for the Export-Import Bank, which provides low-interest loans to foreign buyers of U.S. goods. Such credits are often a key factor in determining which company will win an export contract. Countries like France and Japan offer attractive loans if a foreign company agrees to buy their products. American firms may now be at a disadvantage in competing with those exporters.

Such ragged edges abound in the Reagan trade policy. There is, for example, what is becoming known as the "Brock Doctrine." William Brock, the chairman of the Trade Policy Committee and U.S. Trade Representative, calls for linking trade policy with other foreign policy considerations. The U.S. hypothetically might agree to forgo any restrictions on auto imports from Japan in exchange for larger Japanese spending on Western defense. Says Brock: "I'm not saying we should cut off exports or trade to pursue foreign policy objectives alone. But you cannot ignore the leverage that trade offers to our overall diplomatic posture."

The U.S. has always used trade to further political ends; the most recent example of this was the partial embargo on grain shipments to the Soviet Union after its invasion of Afghanistan. But there has never been a blanket declaration in advance of such a policy on so broad a scale. President Reagan and Secretary of State Alexander Haig support the concept of linkage. But trade veterans decry it as naive. Says one former Carter trade official: "Brock wouldn't advocate such a policy if he had more time on the job." The "anti-linkage" argument is that trade cannot be turned on and off because of a shift in foreign policy. If the U.S. becomes known as an "unreliable supplier," countries will take their business elsewhere. Adds the official: "What would have happened during Viet Nam if we had threatened to cut off trade with Canada unless they returned our draft evaders?"