YOU ARE HERE: LAT HomeCollections

U.S. Acts to Counter 'Unfair' Trade Deals : Export-Import Bank Will Offer Subsidies for $250 Million in Sales to 3rd World

October 24, 1985|OSWALD JOHNSTON | Times Staff Writer

WASHINGTON — The Reagan Administration stepped up its new "get-tough" policy of retaliating against unfair trading practices Wednesday by offering a mixture of easy lending terms and foreign aid to induce Third World countries to buy U.S. equipment.

The Export-Import Bank said it would offer the subsidies for six contracts worth $250 million in potential sales that have been offered to countries in Africa, Asia and Latin America. The goods involved are heavy transportation equipment, electric power generators and computers.

The Administration regards such subsidies as a "predatory trading practice," but its efforts to win agreement among industrial countries to reduce the practice have been resisted by France, Italy and Belgium. Ex-Im Bank officials said the subsidies announced Wednesday are designed mainly as retaliation against similar practices by those countries.

"Our proposed actions are targeted against countries that are hampering the progress of international negotiations to eliminate these predatory practices," William H. Draper III, the Ex-Im chairman, said Wednesday.

Retaliatory Offensive

Draper has told congressional committees in recent weeks that a retaliatory offensive was in the works to match "in an aggressive, consistent, targeted way" the subsidy packages combining aid grants and liberal lending terms that are being offered by France. The aim, he said, is to persuade France to negotiate.

He told a House Banking subcommittee last week that the aim of the retaliatory measures would be to win the contract for the U.S. supplier or make it "cost the competition a lot more to keep the business, and that should make them (the French) more willing to come to the bargaining table."

In recent years, the United States has negotiated limits on the practice of subsidizing exports in the guise of foreign aid linked to export contracts.

The most recent success came last April, when the Export Credit Committee of the Organization for Economic Cooperation and Development, the Paris-based "club" of advanced industrial countries, agreed to ban such aid for aircraft and nuclear generating equipment exports. The OECD also agreed to require that the foreign aid portion of any subsidy package combining aid grants and easy credit terms be at least 25% of the contract's value.

Boost Aid Component to 50%

The United States would like to ban the subsidy practice altogether, but, failing that, it would like to raise the required aid component to 50%--a level high enough to make it unprofitable to disguise trade subsidies as foreign aid. But the French, backed by Belgium and Italy, have declined to negotiate further limits to the "gentleman's agreement" that governs what export subsidies OECD member countries are allowed to offer.

The Administration has asked Congress to provide $300 million for a "war chest" of aid grants, but the Ex-Im bank acted before congressional approval. If Congress does not approve those funds in time, the Ex-Im Bank is prepared to cover the aid portion by offering low-interest loan credits, Ex-Im Bank spokeswoman Ann Frey said.

In another trade development Wednesday, a delegation of visiting Taiwanese officials announced tariff cuts averaging 23% on nearly 200 American products. The Administration, seeking to limit an $11-billion trade deficit with Taiwan, has been pushing to gain greater access to that market.

Los Angeles Times Articles