The Tricks of the Trade

By Charles P. Alexander.

Unfair trade practices come in many guises. Some are straightforward, like tariffs and quotas. Others are more subtle, like nitpicking import regulations and government subsidies to domestic industries. Whatever the strategies used, no country, including the U.S., can claim that it always plays fair. A guide to the tricks of the trade:

Tariffs. Through a series of painstaking negotiations, 17 major industrial countries in the Organization for Economic Cooperation and Development have lowered their tariff levels on nonagricultural goods to about 5%, down from 15% in the 1950s. But mountainous tariff barriers remain a favorite defense against imports in developing countries. Taiwan slaps a 65% fee on imported cars, Mexico charges 50% on textiles, and Brazil demands 105% on wine and sausage.

Even developed countries resort to old-fashioned tariff walls. Japan, which generally has some of the lowest import fees in the world, imposes a 15% to 20% tariff on plywood because of the political clout of its lumber industry. In 1983 the U.S. hiked its duty on large motorcycles from 4.4% to 49.4% to protect Harley-Davidson, the last American manufacturer of the big bikes.

Quotas. No form of protectionism is more effective than outright quotas. Japan strictly limits imports of numerous goods, including leather, beef and citrus fruits. Italy in turn restricts imports of Japanese cars to a mere 2,200 a year, or less than 1% of the Italian market.

Quotas often come thinly disguised as "voluntary" pacts between trading partners. Under polite but firm pressure from the European Community, the Japanese agreed to limit shipments of quartz watches, hi-fi equipment and computer-controlled machine tools. The U.S. has won similar promises from 15 steel exporters, including Brazil and the European Community.

Many developing nations have gone beyond quotas to total bans on some foreign products. The purpose, they say, is to nurture young industries at home. Brazil has prohibited imports of light passenger aircraft and small computers, and Taiwan keeps out chemicals used in drugmaking if they can be produced domestically.

Regulations and Standards. Imagine how confused a professional football team would be if it faced a different set of game rules every time it played away from home. That is precisely the predicament of the world's exporters. Every nation has its own distinctive, and sometimes impenetrable, thicket of product standards, customs procedures, health and safety regulations and testing requirements.

The multiplicity of national standards within Western Europe alone forces Philips, the Dutch electronics company, to manufacture 29 types of electrical outlets, ten kinds of plugs and twelve varieties of cords. West Germany has a law dating from 1516 that prohibits the sale of beer made from anything but pure water, malt, yeast and hops. The rule originally gave Germans protection from adulteration, but now it serves mainly to keep out foreign beers, like Heineken and Carlsberg, that contain other grains or preservatives.

The grand masters of the obstructionist art are the Japanese, who in the past have become infamous for strict inspections of everything from autos to baseball bats. The Japanese government has been gradually easing many regulations, but some niggling barriers remain. In the cosmetics and grooming- aid business, the government has an official list of colorants and preservatives that are allowed to be in products. But there is also a supplemental group of permissible ingredients that do not appear on the list because they have been used for many years and have grandfather status. The problem is that only established Japanese companies and the government know what is on the supplemental list, and they are not telling foreign manufacturers, who have no way of knowing in advance if their products will make it past import inspectors.

The red tape can be just as daunting in developing countries. Raul Velarde, a Mexican importer and exporter, complains that every time he brings in goods, he must get at least 15 signatures. He once got a permit to import zippers, but they arrived unassembled. They were held up in customs, Velarde says, because his permit did not cover "parts of zippers."

Government Procurement Policies. Governments are among the biggest customers | in world trade, and they almost always favor the home team. Westerners have long complained that Japan's state-owned Nippon Telephone and Telegraph bought relatively little equipment from foreign firms. Now that two-thirds of NTT is being sold to private investors, the government has pledged that outsiders will be able to sell more products to the company. Last week NTT announced its first major cooperative agreement with a U.S. corporation: a joint venture with IBM to build a complex computer network in Japan.

The U.S. is far from blameless in its Government procurement practices. Congress has passed amendments to the defense appropriations bills that require the Pentagon to buy such items as uniforms and food from American companies. In addition, the Pentagon almost never buys foreign aircraft or other weapons systems, even from NATO allies.

Government Subsidies. Most nations use loans, grants or other subsidies to help their industries compete against imports and build up export markets. Airbus Industrie, the passenger-jet manufacturer financed by the governments of France, West Germany, Britain and Spain, offers unusually attractive deals to customers. When Pan American agreed to purchase 28 jets in May, Airbus allowed the airline to postpone payments for a year. Last month Airbus won a contract to sell 19 planes to Indian Airlines for a price that was reportedly discounted as much as 25%.

Countries frequently stimulate exports by giving grants or loans to foreign governments. A Japanese-led consortium landed a $550 million contract to build a bridge across the Bosporus strait because Japan agreed to give Turkey a 25- year, $205 million loan at 5% interest. A French firm used government financing to close a deal to put up a $160 million fertilizer plant in Thailand.

Japanese and French officials defend such largesse as a legitimate form of foreign aid to developing countries. Similar rationales can be mustered for almost all the different methods nations use to interfere with trade. Sums up Sir Roy Denman, the European Community's Ambassador to the U.S.: "What one does oneself is fair trade, and what the other fellow does is unfair."

With reporting by Lawrence Malkin/Europe and Christopher Redman/Washington