A Reagan administration bill, increasing American authority to punish foreign-based companies trading with the Soviet Union, is a major cause of European concern about the prospects of another serious dispute with the United States about East-West trade.
West German Chancellor Helmut Kohl said in Washington last Friday that curbs on trade with the Soviets would be discussed only "marginally" at next month's summit of allied leaders in Williamsburg, Va. Nonetheless, President Reagan is pressing ahead with legislation that British officials, in particular, feel makes a clash over the issue inevitable.
Trade Minister Peter Rees said that Britain has the "most profound objections" to the measure, a revision of the Export Administration Act that would strengthen key provisions used by the United States to control exports of strategic goods to the Soviets. The law gives the United States authority to claim jurisdiction over companies that are incorporated abroad but are either a subsidiary of an American firm or a user of U.S. technology.
The export act was invoked by the administration last year when it applied sanctions against European-based companied providing equipment for the Soviet natural gas pipeline against the wishes of the White House. The Europeans protested that the United States has no right to dictate trade policies beyond its own borders. The procedures were complex and technical, but the impact was primarily political.
In an effort to stem the controversy -- the most serious in the alliance in many years -- the sanctions finally were lifted and a series of studies on East-West trade undertaken.
While the president may not move immediately to use results of those studies to justify new curbs on East-West trade, as Kohl suggested, the bill, which could have the same effect, remains under active consideration. The measure was submitted to Congress earlier this month; it is intended to replace the preesent law, which expires in September.
In going ahead, the administration rebuffed European appeals not to seek power over the actions of companies operating outside the United States and certainly not to add to those that already exist.
A senior British official said what he finds "so puzzling is that Americans who are so proud of their independence and strong on moral principles in international affairs can tolerate the inconsistency . . . of intruding into the affairs of their friends."
The British say they object more to the form of the American legislation than to its purpose of limiting strategic trade with the Soviet bloc. Rees told Parliament last week that "the worst feature" of the bill "would allow the president to impose import [bans] against a company which violates any U.S. export control applied for national security reasons."
He said this "takes things much further" than sanctions applied against British companies in the pipeline flap by broadening the punishments to include the right to sell goods in the United States.
Britian's partners in the European Economic Community strongly support this view. At a meeting in Brussels last week, the Europeans agreed to step up efforts to persuade the administration not to attempt to "impose its will," as Rees put it, on companies in other countries. The Europeans argue that, while the U.S. government may impose whatever controls it wishes inside the United States, attempting to do so elsewhere violates international laws.
As the British see it, the only positive change in the new legislation is that sanctions would not apply retroactively to all contracts with the Soviet bloc, as was the situation in the pipeline case. If the bill is adopted, in the future, once the United States imposed an export ban for political reasons, companies would have 270 days to complete their transactions before action could be taken against them.The British maintain, however, that this is a minor concession, because any significant sale would probably would take longer than the allotted time period.
Should the bill as proposed be passed by Congress, the British believe the Europeans would adopt retaliatory legislation, similar to that already existing here, ordering companies to ignore American embargoes.