SUNS  4323 Friday 13 November 1998

Washington, Nov 12 (IPS/Jim Lobe) -- The U.S. government, having gained at least a temporary respite in the global financial crisis, is moving to head off a rising clamour by trade protectionists.

In containing this pressure, the administration of President Bill Clinton suddenly is talking a lot tougher about protecting domestic industries from the increasing flood of cheap imports.

Clinton said this week that Washington remained committed to global free trade but it would not tolerate the "flooding of our markets" with cheaper goods that threatened domestic industries and jobs.

As he spoke, Commerce Secretary William Daley approved an expedited procedure to hear and act upon petitions from the steel industry and unions to impose strict limits on imports from Brazil, Russia and Japan.

"We are committed to a full, timely enforcement of our trade laws... to protect this industry," Clinton declared. His remarks were the first concrete sign that exports from Asia, Russia, and Latin America had become a major political headache for the administration.

Economists have long warned about these trends - and the likelihood of increased protectionist pressure - ever since East Asian economies were forced to drastically devalue their currencies in order to gain U.S. and International Montary Fund (IMF) support for financial bailouts.

Those devaluations have made imports in a variety of key industries, especially steel, much cheaper. As the Asian crisis spread to Russia and Latin America, their exports raised the level of the flood across the U.S. market place.

At the same time, a strong dollar and austerity in Latin America dampened the demand for U.S. exports abroad - creating a mushrooming trade deficit that is expected to hit an all-time high of 170 billion dollars this year and top 250 billion dollars in 1999, according to Treasury Secretary Robert Rubin.

When devaluations first occurred, the general assumption was that the affected countries could export their way back to good economic health. But, as the economic "Asian flu" spread to more and more countries, the number of markets capable of absorbing these exports soon declined.

Washington had hoped that recession-racked Japan would take strong measures to stimulate its economy, making it a major magnet for East Asian exports, but there has been little indication that Tokyo's latest financial reforms would have the desired effect.
That left the European Union (EU) and the United States as the obvious targets for the troubled nations' export drive.

"We're looking at a situation where basically the only part of the world that is growing is the United States and Europe," said Undersecretary of Commerce David Aaron.
But the EU's response plainly has disappointed Aaron and other policy-makers who accused Brussels at joint business conference in North Carolina last week of not doing enough to open its market to imports.

"The US cannot be the importer of only resort," Vice President Al Gore told the North Carolina meeting.

Washington's frustration with Europe may have contributed to its threat earlier this week to impose punitive sanctions against dozens of EU imports if Brussels does not end a long-running dispute over bananas to Washington's satisfaction.

In a move certain to inflame trans-Atlantic trade tensions, the administration announced that it would slap 100% tariffs on more than one billion dollars worth of European goods as early as next February, if Brussels did not agree to a plan that would ensure greater access to Latin American-produced bananas - most of which are marketed by US companies.

The European Union responded by threatening retaliation of its own, prompting some trade analysts to warn of a possible trade war that would weaken prospects for global recovery at a delicate moment in the evolution of the 16-month-old crisis.

While the U.S. economy was growing at a healthy pace and unemployment and inflation figures remained at historic lows, specific industries - including semiconductors, automobile parts, machine tools, electronics and textiles, as well as steel - were under rising pressure from foreign imports.

All of these industries have suffered layoffs in recent months, but US steelmakers and unions filed formal complaints against alleged dumping by Japanese, Russian, and Brazilian competitors in September and are likely to file soon against South Korean companies as well.

Steel industry leaders met Clinton last week at the White House to press their case. They want the administration to impose a one-year ban on hot-rolled steel imports from these countries.

The foreign steelmakers denied they were dumping their goods - that is, selling at below-production prices - in order to grab market share. They argued that the surge in imports was due to sharp currency devaluations, tight demand in the United States, and last summer's General Motors strike.

Their case reportedly split the administration which is very wary of adopting any measures which could make it much more difficult for struggling economies to recover - especially in Russia and Brazil.

The more political elements of the administration, led by Commerce Secretary Daley, favoured some action to in the most-affected industries, especially steel. "We will not be the dumping ground for troubled economies," he said Tuesday.

But Rubin, widely considered Clinton's most influential economic adviser, is worried that any appeasement of protectionist sentiment could result in a chain reaction threatening global recovery and international free trade.

The steel industry's complaint, he said "can have all kinds of effects that would be adverse on other industries if, for example, it results in greater protectionism abroad.... I think we are going to have a very complicated and trying time ahead of us..."