The Reagan administration is considering changing its trade policy in the hope of heading off an explosive buildup of frustration in Congress over record trade deficits.
Commerce Undersecretary Bruce Smart said yesterday that scores of pieces of legislation introduced in Congress to curb imports are a clear attempt to "try to point up frustration" with what Capitol Hill considers the administration's lack of a trade policy. And, he said, it appears that the time has come for the administration to do something about it.
Smart was asked during a breakfast with reporters yesterday whether the administration would come out with a harder line against its trading partners. "There are many options, of which a harder line could be an option," Smart said. He also added that "continuing the way we're going is an option."
However, Smart's comments seemed pointed in the direction of a tougher stance on trade and retaliation or other coercive measures against unfair trading partners. Such measures might include using protectionist legislation as leverage to force other countries to open their markets to the United States.
However, a tougher approach may be difficult to adopt because of an apparent split within the administration between those who want to maintain as pure a free-trade policy as possible and those who feel that years of negotiation with trading partners have resulted in record trade deficits and loss of manufacturing competitiveness.
Administration officials have said that they are particularly concerned about proposed protectionist legislation that Congress has vowed to consider seriously when it returns from the August recess in a few weeks. Some of the legislation could pass, forcing the president to veto popular bills without presenting his own tangible plan, officials said.
The administration also is being blamed for doing nothing to stem record merchandise trade deficits that are expected to top last year's record of $123.3 billion and climb to $150 billion this year.
Smart said that the administration's policy of free trade based on comparative advantage "is an excellent concept." But based on actual trading conditions, "It is not a real-world phenomenon," he said.
Comparative advantage is the concept that each country trades in the goods it makes the best and at the lowest cost.
Smart said "it has seemed to a number of people in the administration that the time might have come to take a look at what we're doing. . . . "
Smart said that several factors argued for reconsideration:
*Congressional frustration with jobs lost from imports and Congress' perception that the administration has no trade policy.
*The record U.S. merchandise trade deficit with the world -- particularly with Japan.
*Uneven trading rules that allow some countries to trade goods in the United States with relative freedom compared with the manner in which U.S. goods are treated in those countries.
Smart said he doesn't see any way "this administration is going to back away from its basic position" of free trade based on comparative advantage. It is not going to reject its policy of seeking free access to foreign markets, "but we may change the method of doing that," Smart said.
He said that the administration must find ways to make other countries open their markets. For example, he said there a small number of trade bills "could be helpful" in forcing foreign governments to open their markets to U.S. products. Smart said such protectionist legislation has had a "salutary effect" on the progress of trade talks with Japan.
Smart said that another example of a new trade policy was the U.S. decision to retaliate against the European Community after it refused to open its markets to U.S. citrus products. The administration threatened to retaliate by raising tariffs on European pasta, and the Europeans eventually broke down.