Mickey Kantor's Bad Cop/Bad Cop Routine

In his trademark red suspenders, crisp white shirts, and double-breasted suits, poker-faced Mickey Kantor looks the part of a G-man in a 1930s-style cops-and-robbers flick. Think of the new U.S. Trade Representative as the tough cop in the shadows behind the hot white light. Nice touch, given the role he will play in President Clinton's aggressive strategy to open world markets and foster global economic growth.

Clinton's trade policy melds a strong commitment to free trade with stern warnings that unfair practices won't be tolerated. That's where Kantor, a Los Angeles lawyer who ran Clinton's campaign, comes in. "We won't shy away from enforcing agreements and enforcing the law," he told BUSINESS WEEK in a wide-ranging interview on Mar. 1.

TIT FOR TAT. The strategy is risky--and potentially costly. At its heart is a doctrine Kantor calls "comparable action." "The U.S. will take comparable actions and provide comparable resources" to U.S. companies when trading partners don't alter their ways, Kantor declares. "We'll take the leadership on free trade, but our trading partners have the responsibility to join us."

Case in point: the European Community's decision to give EC companies a 3% price advantage in government bids over non-EC competitors. The EC had been mulling the move for a year, and the U.S. had objected to no avail. Now, the Administration may ban EC companies from competing for U.S. contracts. "We gave them a year," Kantor says. "We had to provide leadership."

The Trade Representative also wants to add to his arsenal for combating unfair tactics. He notes that, in the face of strong Japanese protest, the President welcomes congressional passage of a new Super 301 law, which would allow him to punish countries that engage in what the U.S. deems unfair trading practices. And Kantor will aggressively pursue reopening the U.S. agreement with the EC that caps subsidies on Airbus Industrie.

The Administration, Kantor adds, may ask Congress for a two-tiered extension of negotiating authority that expired Mar. 1. That would allow the U.S. to wrap up a global trade agreement by yearend, then press a host of bilateral talks over the long term.

Kantor's ambitious agenda reflects a carefully orchestrated policy. In effect, it allows the President and Treasury Secretary Lloyd M. Bentsen to promote Clinton's economic plan, especially education and retraining aid and public investment. They hope the package will lure foreign investment by creating a more skilled labor force and a better infrastructure--and prove that the Administration is not protectionist. But there's a caveat: "As we welcome that investment, we insist that our investors should be equally welcome in other countries," Clinton warned Feb. 26 at American University.

It's doubtful the Administration will be able to stick to this two-track strategy for too long, however. "They may think they can ride two horses at the same time, but one of the horses is going to have to lead," says Gary Hufbauer of the Institute of International Economics, a free-trade group. The Administration may find that nasty disputes over steel and Airbus will crowd out discussions of market-opening pacts such as the Uruguay Round and the North American Free Trade Agreement. A collapse of either would be disastrous to world trade.

There's also a danger that U.S. companies will soon figure out the game--and loot the Treasury. They may push for market-opening negotiations with trading partners, knowing U.S. pressure won't work, and then seek help under the comparative-action doctrine. While applauding Clinton's speech overall, former USTR Carla A. Hills worries he "has made a lot of promises of help to Boeing, Silicon Valley, autos, and steel. Is the Administration really going to follow a policy of matching subsidy for subsidy? That's not consistent with free trade."

Maybe not. But it's a price the Clintonites say they'll pay if trading partners don't adhere to free-trade principles. Otherwise, Kantor will be there to play Mr. Enforcer.

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