The US Issues a Trade Ultimatum
THE United States, after speaking softly, loudly, and every other way on trade, last week brandished a big stick. Washington fired shots across the bows of Japan, Brazil, and India by formally designating them unfair traders and beginning a process that could ultimate in retaliatory sanctions against the three countries. Some detractors of the US's tougher trade stance are calling it gunboat diplomacy, but supporters view it as defending national interests. In an amendment last year to Section 301 of the 1974 trade law, Congress obligated the administration to compile a list of ``priority'' countries that most run afoul of free-trade principles in their commerce with the US. As part of this ``Super 301'' Congress further laid out a timetable for negotiations with the offending nations and prescribed retaliatory measures to be taken if satisfactory relief is not achieved.
Now US Trade Representative Carla Hills has presented her most-wanted list to Congress. Japan was cited primarily for alleged unfair practices related to commercial satellites, supercomputers, and forest products; Brazil for restrictive licensing requirements on imports; and India for what an earlier study called a ``web'' of formidable trade barriers. In most of these cases, the Bush administration has 18 months to negotiate a resolution of the difficulty; if it fails, retaliation will begin.
Super 301 is under attack from several directions. The countries named say they're outraged. Other nations believe that Congress's unilateral procedures violate the rules of the General Agreement on Tariffs and Trade, and they assail the US for going outside the GATT framework. And at home, the process is condemned by free-traders and officials concerned about harmful foreign-policy fallout.
Super 301 does give one pause. The specter of tit-for-tat retaliation leading to a trade war can't be contemplated with a shrug. Washington doesn't want to be a party to raising the level of trade hostilities around the world, especially when it is eager to avoid a Fortress Europe in the wake of the 1992 trade reforms. And if the US does retaliate against the Super 301 scofflaws by raising its own trade barriers, among those to suffer will be American consumers.
Yet there can be no doubt that American producers are disadvantaged in many overseas markets, and the laissez faire approach of the Reagan years was not conspicuously successful in opening closed markets. As in the proverb of the mule and the two-by-four, Super 301 has gotten the attention of the US's trading partners. At least one country - South Korea - preemptively lowered agricultural tariffs to avoid being included on Mrs. Hills's hit list.
The test of Super 301 will be whether America's trade negotiators can eliminate the most egregious unfair trade practices without having to unlimber the sanction siege guns. If the law proves its effectiveness as a stern warning, well and good. If it turns out to have been a declaration of war, it will need to be rethought.
