President Reagan's chief economic advisers have recommended that industries hurt by surging imports be exempted from antitrust restrictions on mergers, Commerce Secretary Malcolm Baldrige said yesterday.
The unanimous recommendation was sent to the president this week as part of a broad overhaul of the nation's antitrust laws to make American industry more competitive in the global marketplace. Baldrige said at a breakfast meeting with reporters that Reagan is likely to decide whether to approve the package within 10 days.
Most of the recommendations of the Cabinet-level Economic Planning and Domestic Planning councils, headed by Treasury Secretary James A. Baker III and Attorney General Edwin Meese III, respectively, have been debated openly within the administration, where they have been pressed strongly by Baldrige.
The provision that would allow businesses hurt by imports to merge without fear of antitrust laws, however, is a new wrinkle that takes on increased importance as the administration develops an active trade policy to fight protectionist pressures from industry and in Congress. These pressures have increased as a result of record trade deficits; this year's is expected to reach $150 billion.
The new provision dovetails with the most controversial recommendation in the antitrust package, which calls for measuring the competitive effects of a merger on a global scale, rather than solely on the basis of its impact on the domestic industry.
This loosening of a key provision of the 71-year-old Clayton Act, one of the two major antitrust laws, is expected to attract widespread opposition in Congress, especially from House Judiciary Committee Chairman Peter Rodino (D-N.J.). A strong advocate of vigorous competition, Rodino complained at a recent conference that antitrust laws are being made "the whipping boy for everything from record trade deficits to the perceived loss in U.S. technological leadership."
The provision to help import-battered industries by giving them even more freedom to merge also is being pushed in a bipartisan trade bill by Sens. John C. Danforth (R-Mo.), John Heinz (R-Pa.) and Daniel Patrick Moynihan (D-N.Y.).
The new proposal arises from a growing frustration in the administration and on Capitol Hill with the limited options available to the president to help an industry that the International Trade Commission finds has suffered economic injury from soaring imports.
Under existing laws, the president has only two possible responses to an ITC finding of injury under Section 201 of the Trade Act of 1974. He can either do nothing, or offer protection by restricting imports with tariffs and quotas.
Baldrige said the new proposal gives the president a third way of helping an industry by giving it a five-year exemption from antitrust laws that otherwise would bar mergers. This would allow the industry time to restructure itself to become internationally competitive by getting rid of inefficient operations and merging the viable companies, Baldrige said.
"It makes great sense to me to give the president a third option," Baldrige said.
Reagan, for instance, was criticized this fall for refusing to protect the import-battered shoe industry with tariffs and quotas as the ITC recommended. An industry with hundreds of marginally successful small companies, domestic shoe manufacturers could have been a prime beneficiary if the antitrust exemption had been in effect.
ITC head Paula Stern also has been pressing to increase the options available to the president in Section 201 cases, although she is seeking greater powers for her quasi-judicial commission to allow it to give the White House more recommendations than a choice between protectionism or no action.
"I'd like to see the commission be able to talk about other ways to make an industry competitive besides giving tariffs and quotas," she said. These could include tax benefits, changes in environmental laws and special low-interest financing in exchange for industry promises to modernize, Stern added.
Baldrige said protection increases costs to American consumers without helping an import-injured industry that "is sheltered" from international competition.
"It is a rare industry that gets more competitive" as a result of protection, said Baldrige.
The Commerce secretary added that the American consumers would be protected by the increased efficiencies and lower costs that would result from mergers that make companies more competitive.