Score one for President Reagan: In his speech to the annual World Bank/International Monetary Fund meeting here, he put in a strong word for the multilateral trading system, and the GATT organization that runs it.
It was about time he did. The Geneva-based GATT is the acronym for the General Agreement on Tariffs and Trade, whose authority has been eroding, in large part, because Reagan has been bypassing it.
This administration, whose rhetoric is strongly free trade, has been so sensitized to the protectionist proclivities of the Democrats that it has taken more actions to protect imports than any administration since 1930.
Treasury Secretary James A. Baker III not only admits that this is so, but brags about it, hoping to pick up support in Congress against the highly restrictive legislation now in the conference committee.
At a meeting here two weeks ago sponsored by Fred Bergsten's Institute for International Economics, Baker said the Reagan administration had been "a little late" in moving to combat the trade deficit, but now is in full swing.
In the past 2 1/2 years, Baker went on, Reagan "has granted more import relief to United States industry than any of his predecessors in more than half a century." He was the first president to initiate unfair trade cases, Baker said. By these actions he rolled back trade barriers established by the Europeans, Koreans, Japanese and Taiwanese.
What Baker won't admit is that in the fight to blunt protectionist legislation, the Reagan administration has come dangerously close to joining up with its enemies. Former trade negotiator Harald Malmgren snorts that the administration has been "resorting to vigilante-style unilateral retaliation."
In the October-November issue of a new magazine, "The International Economy," Malmgren points out that with the administration's shift to bilateral deals (ostensibly to combat unfair trade practices), it has done incalculable harm to the mulilateral system under GATT.
Unilaterally, the administration has redefined "dumping" to make it easier to bring charges of unfair trade practices against certain competitors.When quotas are used, they establish a monetary value for those that split them up, making the established importers and exporters rich, while consumers foot the bill. And Reagan has countenanced quotas on a host of commodities and products -- steel, sugar, beef, motorcycles, machine tools, textiles and apparel, and semiconductors. In most cases, these quotas are blatantly protectionist measures that merely insulate poorly run businesses from competition, Malmgren charges.
A study by Bergsten's institute estimates that the United States discriminates against exports in this manner in about the same volume that Japan does. Another institute study, just done by William Cline, estimates that the new textile-quota bill being considered on Capitol Hill would cost consumers about $20 billion.
Thus, the Reagan speech to the IMF and World Bank -- largely a Baker creation -- is a hopeful sign that the administration may be recognizing that enough is enough.
There are hints that Baker, now the chief policymaker on trade issues, has decided that Reagan must veto the trade legislation unless there are dramatic changes. And Baker is convinced that Speaker Jim Wright (D-Tex.) and Senate Majority Leader Robert Byrd (D-W.Va.) do not intend to send Reagan a bill he can sign.
But America is not the only sinner taking the narrow road of bilateralism. In her lecture last weekend to honor the memory of former IMF head Per Jacobbson, Canada's premier economist, Sylvia Ostry, cites the worldwide drift from the multilateral approach through GATT as "the new protectionism."
Some of the worst offenders are the major European industrial countries that, confronted with the sharp decline of economic growth from the fast-moving 1960s, resorted to nontariff barriers when the competition from Japan and smaller Asian countries got too tough.
Perhaps the most charming description of what Ostry calls the new protectionism was the label "organized free trade," offered a few years back by former French prime minister (and future presidential hopeful) Raymond Barre.
According to Ostry, about 20 percent of the imports by the 24 industrial nations in the Organization for Economic Cooperation and Development (OECD) are saddled with one form or other of the new protectionism.
When quotas are used, they establish a monetary value for those that split them up, making the established importers and exporters rich, while consumers foot the bill. This cozy arrangement, as Ostry said, tends to be a self-perpetuating mechanism, with no built-in corrections.
To reverse the bilateral trend, GATT, now in bad repute, will have to be strengthened. Authority to negotiate the new Uruguay Round, which is contained in the new legislation, will have to be obtained without buying the protectionist remainder. And as Ostry suggests, the big powers need to add a system for surveillance of trade policy to the network of monitoring devices it is trying to set up for exchange and interest rates.
It's a tall order, one that will be a challenge not only for Reagan in the next 16 months if he wants to restore his reputation as an advocate of open trade, but also for his successors down the road