BAD TIMING FOR A GOOD TRADE AGREEMENT
It's signed. It's sealed. Delivery--well, there's a problem. The ink on a new global trade accord isn't quite dry yet, but chances are growing that Congress may embarrass President Clinton by refusing to act on ratification of the pact this year. His aides know the General Agreement on Tariffs & Trade is in trouble, but he is preoccupied with health-care reform and Bosnia and hasn't focused on the issue.
The Uruguay Round accord, initialed by more than 100 trade ministers in Marrakesh, Morocco, on Apr. 15, is the most sweeping rewrite of global trading rules in a half-century. Economists estimate that tariff cuts averaging 37% will pump at least $5 trillion into the world economy over the next decade. And new safeguards will boost trade in services and intellectual property, areas where the U.S. excels.
So why isn't Congress rushing to approve the deal by its Jan. 1, 1995, effective date? The main reason is an inside-the-Beltway spat over how to recoup lost tariffs. New Congressional Budget Office estimates will peg the shortfall at $14 billion to $16 billion over the next five years. Under pay-as-you-go budget rules, Congress must make up the loss. CBO Director Robert D. Reischauer opposes U.S. Trade Representative Mickey Kantor's suggestion the rules be waived. It "would start Congress down a very slippery slope," Reischauer says.
NO PUSH. That sets up a painful election-year scenario for lawmakers: Cut spending or raise taxes to fund a trade pact. Proposals on how to do it have riled Capitol Hill. Senate Minority Leader Bob Dole (R-Kan.) is miffed that Administration officials have suggested cuts in farm subsidies. And Democrats don't want to offer the GOP a target by hiking taxes on U..S. consumers so that foreign companies can enjoy lower tariffs.
House Majority Leader Richard A. Gephardt (D-Mo.), a supporter of the accord, wants to postpone action until after the election. "We have a big money problem," he says. Senate international trade subcommittee Chairman Max S. Baucus (D-Mont.), says that while delay would be "an abdication of world leadership," he privately fears it may be inevitable.
Business deserves part of the blame. While support for GATT is broad, corporations haven't launched the sort of intensive lobbying push that ensured passage of the North American Free Trade Agreement. "GATT is so big that most companies see only modest benefits," says Robert D. Hormats, vice-chairman of Goldman, Sachs International. Meanwhile, interest groups are kicking up a storm. The consumer group Public Citizen argues that the agreement will give bureaucrats in Geneva the power over U.S. trade policy. And Senator John C. Danforth (R-Mo.), a Hill free-trade leader, wants side agreements restricting government subsidies to such high-tech companies as Europe's Airbus Industrie.
KEY AREA. Is GATT dead? Hardly. Analysts still expect the implementing legislation to pass, even if held until 1995. "The only thing less popular on Capitol Hill than voting for GATT is letting it die," insists Deputy U.S. Trade Representative Rufus Yerxa, a key negotiator. "After much to-ing and fro-ing, it will pass."
Clinton could force a vote this year, since action is required within 90 days of submission. But the First Lady and other advisers are pressuring him not to let a trade fight interfere with health-care reform.
The same forces made the same argument a year ago for delaying consideration of NAFTA. In the end, Clinton ignored them and won the biggest legislative victory of his first year. Backing down on GATT would damage Clinton in the one area of foreign policy where he has shown effective leadership. The President is running out of time to seize the issue--and stop the quiet erosion of a crucial trade pact.EDITED BY STEPHEN H. WILDSTROM Douglas Harbrecht, with Paul Magnusson