SANTA BARBARA, Calif. -- President Reagan's refusal to impose import quotas on shoes is the first round of a long fight the administration intends to wage on behalf of free trade, a White House source says.
Although the president disappointed the shoe industry and members of Congress who represent the Northeast -- where most of the domestic industry is located -- the administration will soon take action to restrict imports of about half a dozen other products, the source said.
One likely target is Taiwanese jeans-makers who allegedly are stealing American copyrights and selling counterfeit dungarees.
Reagan's decision Wednesday not to aid the shoe industry, crippled by a shrinking share of the U.S. market, was based on his lifelong belief in free markets and on the economic facts of the case.
Shoe quotas, Reagan said, 'would be detrimental to the national economic interest.'
'If our trading partners cannot sell shoes in the United States, many will not then be able to buy U.S. exports,' he said. 'That would mean more American jobs lost.'
Shoe quotas proposed by the U.S. International Trade Commission would have created as many as 22,000 jobs paying an average of $14,000 a year for five years. But higher prices resulting from the quotas would cost consumers about $3 billion in higher prices, Reagan said.
In addition, he argued, the United States could be liable for $2.1 billion in compensatory tariff reductions or retaliation from other countries.
In Washington, trade representative Clayton Yeutter said that despite the decision, 'This is not an industry on its last legs by any means.'
The decision followed heated internal debate in the Cabinet, and another meeting is scheduled next week to prepare a presidential statement on overall trade policy 'from top to bottom' next month, the source said.
'The president is prepared very quickly to back up his words, ensuring that we meet head-on punches that are abusing our free trade policy,' the source said, noting that Reagan has authority under trade laws to initiate punitive measures against unfair practices.
Despite the president's strong language on free trade, the policy will also stress 'fair trade,' the source said, meaning that 'in other cases, we're going to clamp down.'
But other industries, such as steel and semiconductors, which face stiff foreign competition, can take little solace in Reagan's statement.
'Protectionism is both ineffective and extremely expensive,' Reagan said. 'In fact, protectionism often does more harm than good to those it is designed to help. It is a crippling 'cure,' far more dangerous than any economic illness.'
The U.S. International Trade Commission had recommended that foreign shoemakers' share of the U.S. footwear market be cut back from 76 percent to 60 percent.
The market share for shoe imports has risen from 22 percent to 76 percent since 1968 and threatens the domestic industry with 16 percent unemployment.
The hard-pressed U.S. footwear industry, once a bastion of New England economies, closed 105 plants and lost 13,000 jobs last year, officials said.
Sen. Bill Cohen, R-Maine, called Reagan's decision 'grossly insensitive to the needs of the 200,000 shoe workers throughout the country.' Cohen, chairman of the 34-member Senate Footwear Caucus, said the president 'is effectively signing the death warrant of the U.S. footwear industry.'
Cohen said he will pursue legislation he introduced in April to impose a global quota on imported shoes and would be meeting in the next few days with industry officials to plan strategy.
'The president has abdicated his responsibility to the shoe workers of Maine; now it's Congress' turn to act,' he said. Sen. Robert Kasten, R-Wis., said, 'The administration is trying to pull the plug on small shoe factories all over America, but Congress isn't going to stand by and let that happen.'
Sen. George Mitchell, D-Maine, said, 'This is a total abdication of presidential responsibility to enforce our trade laws. It is an insult to thousands of hardworking shoeworkers, many of whom now face the loss of their jobs.'
Reagan said American consumers could lose $3 billion in higher prices if the import restrictions were imposed and said the result of quotas proposed by the commission 'could invite retaliation from our trading partners. The result would be an immediate and significant loss of American jobs and a dangerous step down the road to a trade war, a war we fought in 1930 with the infamous Smoot-Hawley tariffs and lost.'
'If our trading partners cannot sell shoes in the United States, many will not then be able to buy U.S. exports. That would mean more American jobs lost,' Reagan said.
The president said he was instructing his trade representative, Clayton Yeutter, to investigate and 'root out any unfair trade practices that may be harming U.S. interests.'
He also asked Labor Secretary William Brock to develop a plan to retrain unemployed shoe workers.
Explaining his decision, Reagan said that shoe manufacturers received trade protection during the Carter administration 'but emerged from that period even more vulnerable to international competition than before.'
Reagan also said that if import relief were granted, the United States would have to pay more than $2 billion in compensatory claims by the major shoe exporters -- Italy, Spain, Brazil, Taiwan and South Korea.
'Thus, we find that the true price of protectionism is very high indeed,' Reagan said. 'In order to save a few, temporary jobs, we will be throwing many other Americans out of work, costing consumers billions of dollars, further weakening the shoe industry and seriously damaging relations with our trading partnes.'
