Robert S. Strauss, President Carter's chief trade adviser, claimed yesterday at a Congressional committee hearing that the Administration has "dampened the raging fires of protectionism" by approving limited import quota arrangements for color television sets and shoes, and by seeking compromises in other areas.
The quota arrangements, known as "orderly marketing agreements" (OMAS), "do restrict trade," Strauss admitted. But he argued that they are preferable to more restrictive alternatives or doing nothing.
Strauss, who holds the rank of ambassador as Carter's Special Trade Representative, said his attention can now be concentrated on the round of trade and tariff negotiations now being held in Geneva, which he promised would provide a basis for "fair trade," as distinguished from "free trade."
In response to questions from members of the House Banking subcommittee on economic stabilization, the STR also:
Termed "counter-productive" policies of international lending agencies that encouraged poor countries "to build steel mills at a time when steel is running out of our ears." He said that "something we're going to have to look at."
Warned that a planned expansion of the Common Market to include certain Mediterranean countries "will bring in more problems for us." He revealed that he is trying to persuade Japan to remove restrictions against importation of citrus fruit.
Straus took issue with economist Barry Bosworth, who said at his confirmation hearing on Tuesday that OMAS will be a "significant inflationary factor" in the U.S. economy. Bosworth has been named by Carter to be head of the government's wage-price watch-dog agency, the Council on Wage and Price Stability.
Bosworth's observation was quoted to Strauss at the beginning of yesterday's hearing, called to elicit information on the impact of Carter's trade policies on consumers.
"Let me knock that down in a hurry," Strauss responded. "If Mr. Bosworth is that certain of the inflationary effects. I'm glad we have a man of that certainty in the government, because he is the only one who knows for certain what it does."
Coincidentally, a Congressional Budget Office study released yesterday cited OMAS as one cause of inflation, because they reduce the "aggregate supply" of goods. When supply is reduced, the CBO noted, "some real output is irretrievable lost."
Strauss said that against some estimates that the consumer cost of the OMA with Japan on TV sets would range up to $900 million a year, there will be "no additional cost" for a year, and perhaps none after that.
As for the shoe agreement with Taiwan and Korea, Strauss predicted the cost of $200-$300 million for the first year, compared with others' estimates of $1 billion.
Similar limited impact, he said, will result from a planned extension of the Multi Fiber Agreement (MFA) on textiles and U.S. participation in a new International Sugar agreement.
Strauss told reporters after the hearing that the U.S. would agree only to "a straight extension of the MFA. It will either be this one or none. We are not going to change it and that's that." The MFA provides for no more than a 6 per cent annual increase in imports of the affected textiles.
Strauss was optimistic about prospects for the successful conclusion of the stalled Geneva trade round some time early next year.
"I think we are going to strike at the heart of bad trade practices that will result in favorable [conditions] for the consumer in a more meaningful way in the long haul than anything we've done in the short run," he testified.
He acknowledged that unfavorable economic conditions in Europe have caused protectionist sentiment there to "outstrip" protectionist sentiment here. He promised that "I won't bring back" an agreement that fails to give U.S. industrial and agricultural products access to world wide markets.
"I'm not going to bring you an agreement that will get me egg on my face," Strauss said. "Given all the difficulties, nobody will give us an A, but I expect a B or B-plus."