Key congressional Democrats yesterday introduced legislation to force Japan and three other countries to trim their large trade surpluses with the United States or face stiff new tariff penalties.
The legislation, submitted to the Senate yesterday and scheduled to be introduced in the House today, is expected to be the focus of a major battle this fall over the growing demand to protect U.S. jobs.
The Reagan administration denounced the legislative proposal as "protectionist" and threatened a veto if it passes Congress. Privately, however, administration officials expressed concern that some version of the bill would be approved and some wondered whether there might be enough votes to override a veto.
The legislation would require Japan, Brazil, Taiwan and South Korea to cut their trade surpluses with the United States by 5 percent immediately, or face a punitive 25 percent additional tariff on all exports here beginning Oct. 15, 1986.
The bill also would require the United States to charge both Japan and the Common Market with unfair trade practices in proceedings before international trade bodies; mandate action by the secretary of Treasury to lower the value of the dollar; and take away trade policy decision-making from President Reagan and centralize it in the Office of the U.S. Trade Representative.
The main authors of the bill include House Ways and Means Committee Chairman Dan Rostenkowski of Illinois, who pledged to give it a high-priority hearing in the fall; Rep. Richard Gephardt of Missouri, a key figure in the Democratic Leadership Council, and Sen. Lloyd Bentsen of Texas, ranking Democrat on the Senate trade subcommittee.
In statements yesterday, they stressed that they were responding to a deteriorating situation that they said is costing jobs in the United States at a time -- as Bentsen put it -- of "apparent paralysis of U.S. trade policy."
They insisted that the legislation is not protectionist, but represents the minimum Congress can do to block protectionist measures such as strict quotas. "This is a kind of last call from congressional moderates for a sensible, hard-hitting response to trading partners who have run up excessive surpluses," Rostenkowski said.
But the bill was denounced by Treasury Secretary James A. Baker III as "protectionist legislation of the rankest kind." U.S. Trade Representative Clayton Yeutter said, "It's the worst of all worlds: It is patently anticonsumer, undermines the international trading system, and invites retaliation that would cost jobs."
Yeutter and other administration officials also said that it is "GATT-illegal," meaning that it would take unilateral action and set up discriminatory tariffs barred by the General Agreement on Tariffs and Trade.
The proposed "Trade Emergency and Export Promotion Act" would set up a statistical definition of "excessive trade surpluses" that would mark the four countries as offenders liable to the new tariff, unless they purged themselves by accepting greater imports from the United States.
Japan and Brazil also would be required to trim their global trade surpluses to avoid the new U.S. duty. The global trigger was included to avoid the concern that Japan, for example, might settle its problems with the United States by importing more from this country but compensate by reducing its imports from Third World neighbors in Asia.
Although a section-by-section description of the bill claimed that the initial 5 percent reduction in surpluses it would require is a modest and feasible "turnaround target," other data supplied by the sponsors shows that the required reduction would be much more severe in the case of Japan.
Because Japan's $37 billion trade surplus with the United States in 1984 is projected to grow to $45 billion to $50 billion this year, the descriptive material said that Japan would have to cut its surplus by $14 billion to lower its deficit by 5 percent below the $37 billion standard. A $14 billion cut from $45 billion to $50 billion is 28 to 31 percent.
Sponsors of the bill made clear that their major goal was to prod the president to step up the administration's efforts to get greater advantages for American exporters -- especially in the Japanese market -- and to convince Japan that greater access to its market is the only way to avert a punitive tax.
Privately, administration officials concede that sentiment is growing on Capitol Hill for direct action to restrain imports, even though the main factor in generating the United States' $123 billion trade deficit last year was an overvalued dollar triggered by the budget deficit.
Some administration officials, themselves impatient with the president's personal commitment to free trade, would like to see a tough response to what they consider Japanese intransigence on greater access to the Japanese market. But they think the new bill goes too far and would be counterproductive.
One administration source said: "We're really in a weak position: the trade deficit will continue to grow, maybe to $150 billion this year. And Congress will keep saying that we in the administration aren't doing anything. The big question is whether we would have enough votes to override a veto."
The essential features of the Rostenkowski-Bentsen-Gephardt bill require that when the U.S. trade deficit exceeds 1.5 percent of the gross national product (in 1984 it was 3.4 percent of GNP), countries with a two-way trade of at least $7 billion would be subject to an extra 25 percent ad valorem tariff if their bilateral trade surpluses with the United States, or surpluses with the whole world, exceed what the bill considers reasonable amounts.
There are two possible "triggers" exposing individual countries to the extra tariff: global exports exceeding 150 percent of their global imports; or exports to the United States over 165 percent of a country's imports from the United States. These determinations would be made by the International Trade Commission within 90 days of each calendar year.
The next test to be applied is whether countries with "excessive" surpluses have unfair trade barriers. Unless the president declared them free of unfair trade restrictions (he would have 15 days to do so), the country would have to cut its trade surplus 5 percent below the 1984 level, then by 10 percent a year in the succeeding five-year life of the bill.
Japan and Brazil also have "excessive" global surpluses, the bill says. Thus, to avoid the 25 percent tariff, they would not just have to begin reducing their bilateral surplus with the United States, but their global surpluses as well. Taiwan and South Korea would be required only to reduce their surpluses with this country.