The Reagan administration yesterday said that it is prepared to take strong action against the award of a $700 million subway contract by New York City's transit authority to a Canadian company, contending the Canadian government provided unfair export credit subsidies to win the deal.
If the contract becomes final, the administration promised to give rapid consideration to an unfair trade practices complaint expected to be filed next week against the Canadians by the Budd Co., the Michigan company that lost out on the bidding, said Donald deKieffer, U.S. Trade Representative general counsel. The administration will also consider other options, deKieffer said.
Officials of the AFL-CIO yesterday announced they would file an unfair trade practice complaint to block the subway car contract, on behalf of American workers at Budd, a wholly-owned subsidiary of a German firm.
The administration will discuss the matter with the Canadian government next week, deKieffer said. The export credit subsidy issue will also be raised at the Versailles economic summit next week, other administration officials said.
The subject of export credit subsidies has been festering for several months between the United States and its trading partners and seemed to come to a head last week when New York offered the lucrative deal to the Canadian firm. The Canadian subsidy would allow the transit authority to borrow 85 percent of the cost at a 9.7 percent interest rate, which is well below the 11.4 percent rate agreed upon as a minimum for such transactions by the major industrialized nations. The difference is to be provided by an agency of the Canadian government.
Budd will file a countervailing duty case charging the Canadian government with providing unfair subsidies to the Bombadier Co., deKieffer said. When that occurs, the administration will expedite the case, which normally would require months of investigations by the Commerce Department and the International Trade Commission. This could result in the levying of stiff duties against the importer of the cars--the U.S. subsidiary of Bombadier in Vermont, deKieffer said.
Transit authority Chairman Richard Ravitch said the purchase of subway cars from the Canadian company was in the public interest because it would save the state about $100 million by 1987 and "will save every New York City straphanger a nickel a day in commuting costs."
DeKieffer said the Canadians have consistently espoused discipline in providing export credit subsidies and blamed the Europeans for the Canadians' action. DeKieffer said Canada felt compelled to match a subsidized offer by the French to get the lucrative award.
"While it is indeed unfortunate that Canada felt compelled to match a subsidized offer by the French, we would have little alternative but to take appropriate remedial action if the Canadian offer as reported goes through and if damage to a domestic industry could be demonstrated," he said.
U.S. Trade Representative William E. Brock this week blasted the European Economic Community for holding up an agreement between the industrialized nations to further reduce export subsidies. Yesterday, Deputy Treasury Secretary Robert McNamar concurred, saying the administration is losing patience with its trading partners and threatened to fight subsidies with subsidies if an export credit trade war starts.
Meanwhile, The Labor-Industry Coalition for International Trade added to the fray yesterday by releasing a report claiming that at least $1.5 billion in exports and 46,000 jobs were lost in the United States because of unfair export credit subsidies offered by foreign firms to their companies.