President Reagan said today he is prepared to veto protectionist legislation because it would trigger a "trade war" and harm the U.S. economy under the guise of helping it.
"Instead of protectionism, we should call it destructionism," Reagan said in his weekly radio speech. "It destroys jobs, weakens our industries, harms exports, costs billions of dollars to consumers and damages our overall economy."
Reagan's veto warning came three days after he rejected import quotas or tariffs to protect the hard-hit domestic shoe industry. The president said this would have directly cost the American consumer $3 billion and "quotas would have entitled our trading partners to another $2 billion or they would have retaliated, slapping quotas or tariffs on the products we sell to them."
In a Democratic response, however, Rep. Morris K. Udall (D-Ariz.) said Reagan has helped create the problem and done nothing to help industries beset by foreign competition.
"Administration budget policies have led to high interest rates and a substantial rise in the value of the dollar," Udall said. "An overvalued dollar has made it nearly impossible for U.S. companies to compete overseas. And our domestic industries have become sitting ducks for foreign competiton.
"But it's not just the overvalued dollar," the Democrat said. "The administration's anything-goes trade policy has made a bad situation even worse. Our weak position has been exploited by foreign governments. They subsidize their exports to this country, while protecting their home markets from U.S. competition. Free trade is quickly becoming a one-way street."
Reagan acknowledged in his speech that "protectionist fervor" is stronger in Congress than at any time since the Great Depression of the 1930s.
But Reagan repeated his long-held view that the Depression was caused in part by the protectionist Smoot-Hawley Tariff Act, which he said "helped plunge this nation and the world into a decade of depression and despair."
"From now on, if the ghost of Smoot-Hawley rears its ugly head in Congress, if Congress crafts a depression-making bill, I'll fight it," Reagan said. "And whether it's a tax, trade or farm legislation that comes across my desk, my primary consideration will be whether it is in the long-run economic interest of the United States. And any tax hike or spending bill or protectionist legislation that doesn't meet the test of whether it advances America's prosperity must and will be opposed."
Reagan has been a consistent opponent of protectionist legislation since the 1930s, when he was a supporter of Democratic President Franklin D. Roosevelt's New Deal.
In his speech today, the president pointed with pride to a growing number of jobs he said had been created in the United States during the past three years by international trade.
"The surest way to destroy these jobs and throw Americans out of work is to start a trade war," Reagan said. "And one of the first victims of a protectionist trade war will be America's farmers, who have it tough enough already."
Reagan's only concession to his protectionist critics was an acknowledgment that U.S. manufacturers were sometimes victimized by other nations' unfair trading practices.
Saying "free trade also means fair trade," Reagan pledged to "move vigorously against unfair trading practices using every legal recourse available to give American manufacturers a fair shake at home and open markets abroad."
White House officials said this week that a new administration trade policy is being discussed by the Cabinet and will be announced within the next few weeks.
Officials said it is likely that the president will invoke Section 301 of the 1974 Trade Act, which gives him broad powers to move against specific unfair practices. This may help Reagan head off protectionist legislation or at least help him sustain a veto, officials said. A probable first target was said to be Taiwan.