SKILLFUL TACTICS BY HILLS KEEP TRADE ON TRACK

SKILLFUL TACTICS BY HILLS KEEP TRADE ON TRACK

U.S. Trade Representative Carla Hills' decision last week to cite India for trade restrictions but not to launch new proceedings against it may allow the Bush administration to pursue two key, perhaps conflicting, goals.

In naming India without bringing new charges against it, Mrs. Hills deflects congressional anger but doesn't endanger the Uruguay Round of trade talks under the General Agreement on Tariffs and Trade.GATT is the Geneva-based body that governs most world trade in goods.

Prior to the decision Friday, there was broad sentiment within the administration not to designate any countries as unfair traders under the so- called Super 301 segment of the Trade Act of 1988.

The rationale was that in designating India, the United States would leave itself open to charges that it was bullying a poor nation. There was concern that would lead developing countries to align themselves in multilateral trade talks with India's hard-line position against liberalizing trade in services, a more open investment regime and better protection of intellectual property.

Had the administration failed to name any countries under Super 301, however, Mrs. Hills would have been in the uncomfortable position of dealing with an angry and perhaps uncooperative Congress during a time when congressional support will be critical.

But the delicate manner in which India was named may get the administration off the hook on both counts. India had been named a Super 301 country in 1989 for impeding foreign investment and trade in services by foreign firms. Rather than cite the Indians for any new practices, or launch a new investigation, the administration will "roll over" the existing charges and decide by June 16 whether or not to retaliate against India.

Indian officials were not pleased with the decision but said the blow was softened somewhat by the fact that no new practices were cited.

"This is not inflammatory because there is nothing new in there. But to the extent they have continued to pressure us bilaterally when we are in multilateral discussions in the round is unfortunate," said a commercial officer at the Indian Embassy.

At this stage it's a bit unclear what impact the designation of India will have on the Uruguay Round. One GATT official in Geneva said any reaction from the developing countries would be shaped by statements out of New Delhi.

Mrs. Hills said she didn't believe the prospects for achieving a satisfactory conclusion to the round would be dampened over the Indian designation.

"I would think that the ambassadors at the GATT would understand why we implemented the law as we have," she told reporters.

One official close to the GATT process said no countries will be surprised that India was named and since there were no new practices cited, any furor should blow over quickly, he said.

"India really wasn't named again, it was merely cited for last year's practices . . . Nobody is surprised India is still under a cloud," the official said.

India has refused to negotiate under Super 301, and one Bush administration official said that because India has been cited twice for the same practices, it seemed inevitable that Washington will retaliate in some manner following the June 16 deadline.

"We don't hold high expectations for India. Either they are going to sign on to the Uruguay Round negotiations where we are trying to solve (investment and services) problems or India is going to have a lot of problems," said one U.S. official.

While there was strong negative reaction among lawmakers that Japan was not cited, the administration's targeting of India was enough to forestall any confrontational response from Sen. Lloyd Bentsen, D-Texas, the powerful chairman of the Finance Committee.

Sen. Bentsen, a major architect of the 1988 Trade Act, was concerned the administration would cite no countries and "violate the intent" of the law.

The decision "buys the administration a little more time" he said. Unlike many of his colleagues in Congress, Sen. Bentsen did not criticize the administration's decision not to name Japan. But he did say he will "continue to monitor the Japan situation."

In addition to its Super 301 decision, the Bush administration also released its list of countries with unsatisfactory records in protecting foreign patents, copyrights and trademarks.

No countries were placed on a "priority" list, which would have launched an investigation and possible retaliation next year, and Portugal and Mexico were removed from last year's list for improving their enforcement against intellectual property piracy.

A "priority watch list" of countries that could move up to the priority list of countries without improvement in policies included India, Brazil, China and Thailand.