Protectionists Test Carter

Amid all the good fellowship that Jimmy Carter enjoyed last week when he attended a town meeting in Clinton, Mass., there was one discordant note. The President was greeted by a full-page ad in the Clinton daily Item urging him to save the American shoe industry by imposing stiff tariffs and quotas on imports. Earlier in the week, the Government's independent International Trade Commission, which is already on record in favor of protecting the shoemakers, had called for tight curbs on U.S. imports of sugar and color-television sets as well. "The protectionist heat is on," said a top Carter economic aide. "Suddenly trade is a very high-priority issue."

The timing could not be more awkward for the President. In early May, he will go to a seven-nation economic summit in London to argue, among other things, for free trade and lower tariff barriers. He must make a decision on shoe tariffs by April 9, and on sugar and color-TV imports one to two weeks after the summit. If the President acts to cut imports sharply, his free-trade evangelism in London will seem hollow or even hypocritical. If he ignores the protectionist pressures, his summit partners will be pleased, but Carter will face domestic protest--and a showdown with Congress--which can override presidential rejection or modification of ITC recommendations.

The protectionist case is formidable. Since 1968, foreign shoes have increased their share of the U.S. market from 22% to 46%. During the same period, 300 domestic shoe factories have closed, wiping out 70,000 jobs. Imported color-TV sets, mostly from Japan, Taiwan and Korea, grabbed 42% of the $2 billion American market last year, a huge increase from 18% only the year before. The American sugar industry, undersold by foreign competitors, faces similar troubles.

Tariffs and Quotas. The ITC wants a quota of 265 million pairs--equal to 1974 imports--on the number of shoes that can come in under the present 10% tariff, and quadrupling the tariff to 40% on any additional imports. It would raise tariffs on color TVs from 5% now to 25% for the next two years, then drop them back to 20% for an additional two years. The commission further would cut the quota on sugar, now 7 million tons, to a maximum of 4.4 million tons a year. Labor leaders, businessmen and politicians from regions hurt by imports --the Northeast in the case of shoes, the South for sugar, the East and West Coast for TV sets--have formed an alliance to press for these ideas. Last week the shoe industry sent Carter a petition signed by 29 Governors supporting the ITC recommendation; 133 Congressmen signed a similar letter.

Carter may not agree. "I don't see how the President can grant the relief we recommended," says a high official of the ITC with refreshing candor. By law, he notes, the commission can consider only whether domestic industries are in fact being hurt by foreign competition and what sort of restrictions on imports would be sufficient to repair the damage. "If the ITC had to take into account the impact on consumers or on foreign relations, it would have recommended differently." The President, of course, must weigh those issues and, as he and his advisers do so, they are finding compelling reasons not to increase tariffs sharply.

One is inflation. Says Treasury Secretary Michael Blumenthal, who used to be a top trade negotiator for Presidents Kennedy and Johnson: "You can put up a lot of protection at the border. You can put in quotas. If you do, you may protect some jobs, but you also raise prices for all consumers." The ITC'S recommended TV tariff would add $40 to the price of an imported color set. Increases on shoes would be $170 million a year for American consumers.

Another worry is the threat of foreign retaliation. The U.S. practice has been to compensate another nation if it cuts imports. If the Government increased tariffs on shoes, for instance, it ordinarily would lower tariffs on some other product, thus hurting one industry by helping another. If it did not do so, shoe-exporting nations such as Italy, Brazil and Spain would be free to increase tariffs on U.S. exports of their choice. Then there is the broader problem of stimulating world trade, which is essential to a speedy global economic recovery. Says Harald Malmgren, a Washington trade specialist: "If the U.S. starts throwing up trade barriers, everyone will jump on the bandwagon. There is tremendous protectionist pressure out there waiting to be released."

Boxed In. Yet the domestic political appeal of protectionism has to some extent boxed in Carter. Simply offering depressed communities "adjustment assistance"--federal funds for retraining workers and retooling factories--will not wash. Recipients call that "burial assistance" because, they say, it is too little and too late. If Carter does only that, Congress could override his decision and insist on the ITC's tariff plan.

So Carter probably will recommend some mix of modest increases in tariffs --considered acceptable by Blumenthal as a "last resort"--and "substantial economic aid" to depressed areas. He also may well try to negotiate what are euphemistically called orderly marketing agreements with exporting nations. Under such a pact, Japan, for example, would "voluntarily" reduce exports of color-TV sets in return for a U.S. promise not to raise tariffs too sharply. Similar pacts already hold down sales of Japanese steel and of textiles from 18 nations to the U.S., and Congress probably would go along with such an arrangement on shoes, TV and sugar. That would hardly be a ringing victory for free trade, but it would spare consumers and the world economy from the worst effects of all-out protectionism.

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