Reagan rejects quotas but accepts another form of protectionism
In a long-awaited decision last week that left no one jumping for joy, President Reagan ruled out import quotas to shield the American steel industry from cheaper foreign steel. Instead he opted for a system of voluntary restraints on shipments to the U.S. by producers in Japan, Brazil, South Korea and elsewhere and vowed stiffer enforcement of existing Fair Trade laws. Unionized steelworkers said Reagan did not go far enough toward protecting their jobs. The steel industry, drained by $4.7 billion in losses during the past two years partly because of foreign competition, had lobbied for more protection.
In deciding against strict import quotas, Reagan turned down the recommendations of the U.S. International Trade Commission. It said in July that the domestic industry was being damaged by imports and urged a five-year program of high tariffs and quotas for such important products as sheet and strip steel, plate and wire. Reagan would have none of it. Quotas, he said, would do more harm than good to the economy and not "be in the national interest," even though they might temporarily save some jobs in steel. Voluntary restraints seemed to be the only workable way to go.
While steel unions and companies were urging quotas, other interest groups were lobbying against them. Farmers were opposed because they feared foreign governments would retaliate by restricting U.S. agricultural sales. U.S. banks did not want the White House to be too restrictive against steel from Brazil and other developing countries, which need the money from exports to pay interest on debt owed to American banks. Cheaper foreign steel keeps the price of Detroit's cars more competitive with those from Japan, so Detroit's autoworkers have reason to approve Reagan's decision. Major steel users who are big exporters, Caterpillar Tractor of Peoria, Ill., for one, are also in favor of lower-cost steel. It allows them to make products for sale abroad at more competitive prices.
Under the program announced last week, U.S. Trade Representative William Brock will begin talks with foreign governments about reducing the inflow of their steel from about 25% of the $30 billion U.S. market to 18½%. That is slightly more than the 15% sought by the industry and its unions. This would be similar to a plan worked out by the Reagan Administration in 1981 that put limits on the number of cars Japanese manufacturers shipped to the U.S. In steel, as in cars, the threat of more restrictive measures by Congress will be a lever in the hands of U.S. negotiators. Washington could also threaten to block foreign access to the U.S. market if the other countries do not go along with lower steel exports.
In addition to the so-called voluntary restraints, the Reagan plan calls for stricter enforcement of laws against dumping, wherein steelmakers sell products in the U.S. for less than their cost of production. Merely suggesting that exporters might be subjected to unfair trade investigations could be enough to stop dumping.