Treasury Secretary James A. Baker III acknowledged yesterday that the Reagan administration was "a little late" in dealing with record trade deficits, but asserted the trade picture is improving despite last month's record deficit.
Baker's comments came as Congress was trying to reconcile massive House and Senate trade bills aimed at toughening U.S. laws against unfair trade practices without being vetoed by President Reagan. The House-Senate conference, one of the largest and most complex in congressional history, got off to a slow start last week with jurisdictional problems in the House complicating the process of drafting side-by-side comparisons of the two 1,000 page bills. In addition, the House leadership has yet to appoint all its conferees.
Major elements of the bills are aimed at the administration's hands-off attitude during the first term of the Reagan presidency to rising trade deficits and the soaring value of the U.S. dollar, which made American products too expensive to compete overseas and lowered the cost of foreign goods in this country. These sections of the bill, strongly opposed by the administration, would force government action in trade cases.
Baker was White House chief of staff during that period. But two years ago, when he switched jobs with Donald Regan and became Treasury secretary, Baker reversed administration policy on trade and the dollar. This led to a 50 percent drop in the dollar's value since 1985, and the more aggressive trade policy that Baker cited yesterday.
"For the last several years," Baker said yesterday at a conference on trade sponsored by the Institute for International Economics, "no administration has worker harder than we have against subsidized imports and trade barriers abroad.
"We may have been a little late in starting, but we have lacked nothing over the course of the past 2 1/2 years," he added.
He cited as "a little known fact" that President Reagan, despite his strong adherence to free trade, "has granted more import relief to United States industry than any of his predecessors in more than half a century" and was the first president to initiate unfair trade cases. Baker said these actions "rolled back barriers in Europe, Korea, Japan and Taiwan."
Baker said parts of the trade legislation "are reasonable and necessary," but the administration has recommended "major changes" to get rid of its objectionable parts. He listed as objectionable the $7 billion in "excessive spending" over five years, largely to help displaced workers; "protection" for "special interests;" a labor-backed provision that would force major companies to notify workers in advance of mass layoffs and plant closings; reporting requirements on foreign investments, and limits on presidential discretion to avoid acting in unfair trade cases.
Baker called this "procedural protectionism" because it is designed to make it easier for American companies to win import relief.
The president "will not sign a bill that throws up trade barriers, tramples the delicate weave of diplomatic harmony and wrecks our vast network of commercial relationships," he said in the closest he came to threaten a veto.
The administration has decided to try to cooperate with Congress in the hope of producing an acceptable trade bill rather than continuing its veto strategy of last year.
But Baker acknowledged that continued high trade deficits "make it a little tough" for the administration to deal with Congress on the trade bill. Despite administration predictions of a turnaround, the July figures released Friday set a new monthly record.
Baker played down the importance of the "nominal" figures, asserting that the trade deficit has actually declined when measured in volume instead dollar terms.
Later, Otto Lambsdorff, former West German economic minister, said he is "frightened" that parts of the trade bill "go directly to the heart of the free multilateral global trading system ... threatening waves of protectionism that could result in severe damage to the U.S. and its trading partners."
Lambsdorff, one of the most highly respected European economic figures, is visiting the United States to talk to influential lawmakers about the trade bill.
He emphasized that German imports amount to less than 7 percent of all foreign sales in the United States and said that Germany's trade surplus has declined by about $1.1 billion over the past year, from $7.7 billion to $6.6 billion.
"What worries us," he told the trade conference yesterday, "is that we might become the victims of U.S. trade policies that are actually directed at other nations -- for example Japan.