Veto Awaits Protectionist Bill, Yeutter Says : Chances of Compromise Are ‘Less Than 50-50,’ Executives Are Told

WASHINGTON — The Administration’s top trade official Thursday reassured businessmen that President Reagan would veto any protectionist trade legislation sent to him by Congress but said there is still a chance--”less than 50-50”--that a compromise can be worked out.

“We are not going to end up with a protectionist bill,” U.S. Trade Representative Clayton K. Yeutter told the U.S. Chamber of Commerce at a breakfast meeting. “The President is going to veto it.”

But, he added, “we haven’t given up” on the prospect of putting together a workable bill “from the best elements of both” the House-passed trade package and separate legislation awaiting final action in the Senate.

“We still have a reasonable chance--though I’d put it at less than 50-50--to emerge with a sound legislative product,” Yeutter said, inviting “the business community to weigh in” and make sure that Congress is aware of their concerns that trade-shrinking protectionism may be the consequence of many of the legislative provisions.

“What could be a fundamentally sound package is now laden with many dangerous provisions, and others of that ilk are on the horizon,” he added in a prepared speech. “What happens on the Senate floor will determine whether there is any chance to rescue the final package in conference,” which will reconcile differences between the House and Senate bills.

The Administration already has expressed dismay over the trade bill that passed the House last month after extensive amendment. One provision in particular has been singled out as guaranteeing a veto if it is not removed: an amendment mandating 10% reductions in the trade surpluses of Japan, West Germany and other trading partners with whom the United States carries a deficit.

Yeutter singled out other provisions of the Senate package that he said are equally likely to draw a veto:

- Changes in the President’s authority to grant temporary protection to declining industries injured by foreign competition. In the Senate package, such “temporary relief” would be all but automatic if injury is proved, regardless of other economic effects, and the relief would be extended from the current five-year term to as long as 13 years.

- A proposal, also contained in the House bill, to restrict foreign investment in the United States. Yeutter noted that the United States remains the “largest foreign investor in the world” and, for years, has been seeking fewer global restrictions on investment. The nation has become temporarily dependent on foreign capital to finance domestic growth.

- A provision mandating an oil import fee and other controls on petroleum investment once the U.S. dependence on foreign oil reaches 50%.

- A provision pushed by the Labor and Human Resources Committee to require all businesses with more than 50 employees to provide public notice of any intention to close an unproductive or unprofitable plant.

“If we are to maintain a vibrant, dynamic economy in this country, we should encourage structural adjustment, not discourage it,” Yeutter said.

- A host of new requirements that the President retaliate against certain “unfair” trading practices, without allowing the negotiating flexibility Yeutter believes has permitted workable compromises in recent years with the European Common Market, Korea, Taiwan and Japan.

Many of these mandatory attacks on foreign imports would only invite retaliatory restrictions on U.S. exports, which this year are finally beginning to expand, Yeutter concluded.

“It would be a serious mistake to pass legislation that would constrict our own export opportunities just as exchange rate movements and other positive actions have begun to create such opportunities for the first time in several years,” he said.

Replying to questions, Yeutter also conceded that “wide differences on key areas” still remain to be solved in the U.S.-Canada Free Trade negotiations, which must be completed by Oct. 1. Yeutter said that final U.S. positions on all outstanding issues would be tabled by the end of June and that he expects negotiations to run virtually non-stop through July.

Yeutter also said that he hopes the Administration will be able to lift the remaining 83% of the trade sanctions against Japanese electronic goods “relatively soon.” Citing increased Japanese compliance with a U.S.-Japan agreement to ban dumping of semiconductors in third-country markets, Reagan this week announced that he would lift 17% of the retaliatory tariffs he imposed in April on about $300 million of Japanese electronic goods.

“There has been an improvement,” Yeutter said, “and easing the sanctions was a reward for that improvement. But we expect them to go all the way. An agreement is an agreement.”