President Reagan yesterday unveiled a new administration trade policy that sets up a war chest to counter export assistance by other governments and toughens enforcement against unfair trade practices by U.S. competitors.
"We will take all the action that is necessary to pursue our rights and interests in international commerce" and "to see that other nations live up to their trade agreements with us," Reagan said in his 25-minute address to a group of business leaders gathered at the White House.
In trying to get out ahead of congressional demands for swift action on record trade deficits, Reagan put forward a grab bag of proposals that represent sharp departures from past administration positions.
The president's speech came less than a day after the administration agreed to a much more aggressive policy to try to bring down the value of the dollar against major foreign currencies. The new policy of coordinated intervention in foreign exchange markets came out of an extraordinary meeting in New York Sunday of finance ministers and central bankers of Japan, France, Great Britain, the United States and West Germany.
As a result of that agreement, the dollar took its sharpest plunge in more than a decade yesterday as worldwide financial markets were thrown into chaos. The dollar fell 5 percent in Europe and 6.1 percent in New York to its lowest levels in weeks. Gold rose nearly $10 while stocks surged, with the Dow Jones industrial average jumping 18.37 points. Details on Page E1.
In his speech, Reagan restated his strongly held position in favor of free trade and against protectionism, but offered American industries and workers suffering from a flood of imports tougher enforcement and a tightening up of laws against unfair trade practices already on the books.
As the main new initiative of his program, Reagan supported a $300 million war chest to counter subsidized financing by other countries -- especially France and Japan -- that mix foreign aid and liberalized credit terms to win contracts away from U.S. firms. This is a major switch for the Reagan administration, which consistently has opposed the mixture of credit and foreign aid and twice tried against congressional opposition to scuttle the Export-Import Bank, which would administer them.
With the high dollar responsible for as much as half of the estimated $150 billion trade deficit, however, the action likely to have the greatest impact is the agreement to join in a coordinated effort to bring down the dollar. That move also marks a turnabout for the administration, which previously resisted pressure to force down the dollar, which analysts say is overvalued by about 30 percent. Just two weeks ago, Reagan described the strong dollar as "a reflection of America's economic strength."
The president's program received a mixed reaction from Congress. Senate Majority Leader Robert J. Dole (R-Kan.) applauded the action to lower the dollar and said the president's speech "sent us a very good signal." But he and others said it comes too late to forestall passage of a bill to protect domestic textile manufacturers, which the president has threatened to veto.
Another Republican, Sen. John C. Danforth (R-Mo.), was more skeptical, saying "one speech is never enough" and that the administration needs "a consistent trade policy day in and day out."
Democrats, who see the trade issue as an opportunity to gain congressional seats and a leg up in the 1988 presidential race, were less enthusiastic. "The Reagan administration still has one eye closed as it faces a mounting deficit on foreign trade. They are still behind a Congress bent on toughening our response to unfair trade," said Chairman Dan Rostenkowski (D-Ill.) of the House Ways and Ways Committee, which is considering stiffer trade legislation.
House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) called the presidential message "an uncertain trumpet" and accused Reagan of "stalling for time." Senate Minority Leader Robert Byrd (D-W.Va.) said the president's action came "too late" to stop congressional action on trade, while Sen. Lloyd Bentsen (D-Tex.) derided a "90-degree change" in administration policy.
None of the White House proposals will produce a quick fix for the trade deficit. Treasury Secretary James A. Baker III said it will take between 10 and 18 months for the effects of a lower dollar to show up in improved trade figures, while a senior administration official, briefing reporters at the White House, said other aspects of the president's new trade plan will take a year to 18 months to produce results.
The thrust of President Reagan's proposals was directed at unfair trade practices that allow imports to undersell American products here and keep U.S. manufacturers from competing in overseas markets. A senior administration official estimated these practices account for no more than 20 percent of the trade deficit.
Reagan said he has directed U.S. Trade Representative Clayton Yeutter to move against countries that illegally subsidize exports, dump products at below-market prices in the United States and close their markets to American goods. These would be in addition to actions he ordered two weeks ago against three countries -- Brazil, Japan and South Korea -- and the European Community for unfair practices.
Reagan ordered Yeutter to open talks with countries that steal U.S. intellectual property by ignoring patent and trademark protections, and held out the threat of possible legislative or administrative actions if negotiations fail to produce results.
He also directed the establishment of a "strike force" from throughout the government to identify unfair trade practices, and called for a deadline, probably Jan. 1, for the completion of market-opening negotiations with Japan that have been under way since last January.
He also offered to work with Congress on legislation that would strengthen existing laws against other countries' practices that hurt American companies.
Reagan also sought negotiating authority from Congress to go ahead with a new global round of trade talks aimed at expanding the General Agreement on Tariffs and Trade (GATT), which governs international trade, into areas such as services, agriculture and high technology. The new global round has been opposed by a group of Third World nations headed by India and Brazil, and at May's economic summit by France.
An administration official said yesterday that France has withdrawn its objections to the new GATT round. Reagan said he is instructing U.S. trade negotiators to go ahead with regional or bilateral agreements if there is no action on starting global talks.