Government
Nixon, Congress face host of trade problems President's rejection of voluntary Japanese textile quotas sets stage for Congressional battle over mandatory import controls Last year, the U.S. exported $2.4 billion more chemicals than it imported. This chemical trade surplus accounted for 88% of the total U.S. favorable trade balance. Obviously, chemicals are important to the U.S. trade picture and trade is important to the U.S. chemical industry. That is why the industry will be watching closely this year's developments in international trade, particularly those relating to a new U.S. trade bill. C&EN senior editor Earl Anderson has been following U.S. progress toward a trade bill, and offers the following commentary:
Earlier this month, when the White House sternly rejected the Japan Textile Federation's proposal to limit textile exports to the U.S., it threw mud on the crystal balls of everyone who is trying to determine whether there will be a new trade bill this year. The U.S. has operated without a trade bill since the Kennedy round of international trade talks ended in 1967. No major trade legislation has been passed since 1962, even though Presidents Johnson and Nixon have sent bills to Congress. Presumably, President Nixon intends to try again this year, but the picture is more confused now than ever. Last year, after two years of unsuccessful negotiations with Japan, President Nixon "reluctantly" gave his support to a trade bill that included mandatory quotas on textile imports, but emphasized that he would accept quotas on nothing else. Rep. Wilbur Mills (D.-Ark.), chairman of the House Ways and Means Committee and a pivotal figure in any trade legislation, engineered through the House a bill that slapped quotas not only on textiles, but on shoes, mink, and glycine. In addition, the Mills bill contained an omnibus "orderly marketing" provision that would trigger quotas if im28
C&EN MARCH 29, 1971
ports of any other product rose above a set portion of the domestic market. This year, when the Japanese disclosed their voluntary plan to restrict textile exports, Mr. Mills was one of the first to endorse it. This wasn't unexpected; he generally is credited with suggesting the idea in the first place. President Nixon, however, rejected the Japanese proposal and said that he "strongly supports" textile import quotas. But Rep. Mills said that he never did want quotas. Where does this leave trade legislation this year? Even the experts are not certain, but this is what they see. Despite the President's strong endorsement of textile quotas, he still basically favors a liberal trade policy and doesn't want to see quotas go beyond textiles. But protectionist sentiment is still strong in Congress. Consequently, he may not want to risk sending any trade bill to Congress, knowing that it may become a magnet for a horde of restrictive amendments. On the other hand, the Administration may feel that Rep. Mills' recent disclaimer on quotas may be enough to lower the risk. Nobody is more skilled than the Ways and Means Committee chairman at bottling up legislation that isn't to his liking, and he may well be able to ward off additional quota proposals. Stronger sentiment. In the Senate, protectionist sentiment is even stronger than in the House. Last year, for instance, the Senate Finance Committee's version of the trade bill differed from the House's in that it did not call for the repeal of American Selling Price (ASP) sought by the Administration. Only desperation stalling tactics by a liberal bloc of Senators allowed time to run out before the bill could be passed. In any event, the betting is that the President will wait until he receives the Williams Commission report before he sends any major trade bill to Congress. This commission on trade and investment policy, headed by IBM's Albert Williams, was originally expected to make its recommendations by April. Now it looks as if the report may not be filed before June. Meanwhile, Congress has been busy
on its own. More than 120 trade-related bills were submitted during the first two months of the 92nd Congress. At least 50 of them are quota bills and most are similar to bills introduced during the last session. Rep. Mills reintroduced his bill from last year on the very first day that the 92nd Congress met. Sen. Strom Thurmond (R.-S.C), a champion of textile quotas, introduced a trade bill that is exactly the same as the Senate Finance Committee version of last year. These two moves put trade legislation right back where it was when time ran out on Congress last year. However, a group of liberal Senators led by Sen. Fred Harris (D.-Okla.), Sen. Walter Mondale (D.-Minn.), Sen. Charles Percy (R.-I1L), and Sen. Jacob Javits (R.-N.Y.) hopes to take the initiative away from the protectionists. Last month, the Senators introduced a trade bill (S. 834) of their own. This bill contains no provisions for quotas. It would implement the Kennedy round agreement to repeal ASP and authorize the President to negotiate tariff reductions up to 50% and to negotiate on nontariff barriers. In addition, it would provide protection against unfair import competition and expand the President's authority to retaliate against nations that restrict U.S. exports unfairly. This bill has one thing in common with the protectionist bills, however: It would make it much easier for workers and companies hurt by imports to obtain government aid (adjustment assistance). This is one area in which there is no argument. No assistance. Trade adjustment assistance was first introduced in the Trade Expansion Act of 1962. Because of the wording of the law and the rigid interpretation of these words by the Tariff Commission, however, not one worker or company obtained assistance until November 1969. So discouraging was the record that only 27 petitions for assistance were sent to the commission in those seven years. Since a new group of commissioners began to interpret the rules differently, however, the Tariff Commission has been swamped with requests. Since December 1969, the commission has re-
U.S. trade balance is recovering . (Billions of dollars)
45 Ψ+
40
^2 ^
35
^T 7—.K
Total ex ports
30' 25|
Total imports
%
20
-^**
.
^
"
15
... chemical trade balance remains strong Chemical exports
^^^
Chemical ir iports
1 0 1964
1965
1966
1967
1968
. — — — •••
1969
1970
Source: U.S. Bureau of the Census
ceived 93 petitions for assistance, 28 of which have been granted. The Administration still must face a host of other trade problems, how ever. Among them: • The web of preferential trade ar rangements that the European Eco nomic Community (EEC) has spun with many Mediterranean and African countries, a web that may prove detri mental to U.S. exports. • The highly protective EEC import levies on agricultural products. These levies threaten to reduce U.S. agricul tural exports even further. • The problem of providing prefer ential tariffs to less-developed coun tries without disrupting domestic in dustries. • The potential enlargement of EEC, making it an even stronger and more powerful trade bloc, and the possible consequences for U.S. exports and in vestments. • The desire to take advantage of the ever-increasing East-West trade, and the legislation necessary to do so. The paramount issue, however, is the basic problem of the trade bal ance. Last year, the U.S. trade sur
plus rebounded to $2.7 billion, after several ho-hum years. But last year's trade surplus won't be matched this year and even the most optimistic officials know that it will never reach the $4 to $6 billion heights of the mid-1960's. Future perspective. Secretary of Commerce Maurice H. S tans put the future in perspective when he testified before the Senate-House Joint Economic Committee last month. He said that achieving a satisfactory balance of trade in the years ahead will be a difficult task and will require more tools than the country now has. Those who blame the recent unsatisfactory trade sur pluses on inflation alone, he adds, are oversimplifying the problem. Secretary Stans divides U.S. trade into four product categories and, af ter analyzing the trends, says that he is "unable to avoid the conclusion that the outlook . . . is far from satis factory unless we do much more than we are doing to build exports." He doesn't expect the agricultural trade balance to improve much—in fact, it could deteriorate—because
many countries are expanding their own farm output and erecting higher barriers to U.S. exports. The longterm trend for minerals and fuels is toward a continuous trade deficit as this country uses up its own re sources. For manufactured products that don't have a high input of tech nology, Mr. Stans says that the trade deficit is certain to increase because low-wage countries with technology comparable to the U.S. can undersell U.S. producers in many product lines. Only in technology-intensive, man ufactured products has the U.S. been able to maintain leadership. But its position hasn't been strong enough recently to compensate for the defi cits in other product lines. The trade surplus in technology-intensive prod ucts has remained at $9 to $10 billion for five years, which indicates to Mr. Stans that our technical superiority is slipping. Since 1962, he points out, imports of these products have grown twice as fast as exports. He says that it may be just a matter of time before even this trade surplus dwindles. Export promotion. Mr. Stans thinks that the Government's main effort must come in export promotion, and the Commerce Department is ac tively pursuing this course. Export promotion schemes have been tried before, however, without producing the results expected of them. Perhaps, as Brookings Institution's Lawrence Krause suggests, American industry is becoming more serviceoriented. As U.S. interest in this area increases, its interest in export ing products will diminish. If this is the case, the Government's best hope of solving its lingering balance of payments problem may lie in re patriated earnings from direct invest ments overseas. Yet, for several years, the Govern ment has clamped mandatory con trols on such direct investments, and any attempt to ease them will bring the wrath of the labor unions down upon Washington. The unions want more, not less, controls on overseas investments because they feel that American multinational companies are exporting jobs abroad. Sim ilarly, the unions will fight many ex port incentives, such as tax incen tives, in the belief that such pro grams transfer the tax burden from the corporation to the worker. Obviously, the Administration will have many trade-related problems to solve, regardless of how the trade bill fares this year. MARCH 29, 1971 C&EN
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