The Gephardt amendment to the House trade bill is such a bad idea that it may, in the end, be excluded from legislation that lands on President Reagan's desk.
But, unfortunately, the Gephardt amendment -- which arbitrarily calls for retaliation against surplus countries depending on what we allege to be "unfair trade practices" -- has diverted attention from equally mischievous protectionist efforts in the Senate bill, which came to the floor last week.
There is one part of the present trade law, known as Section 201 -- the so-called "escape clause" -- designed to help domestic industries get temporary relief, even if the injury they claim comes from perfectly legal, fairly traded imports.
Now, the Senate bill would mandate that U.S. industries hurt by imports obtain protection without regard to the impact on the rest of the economy. Such costs could not even be considered by the International Trade Commission or the president.
First, some background: Since 1980, the ITC has determined that six industries have suffered enough from import competition to warrant tariff or quota relief -- motorcycles, specialty steel, carbon steel, wood shakes and shingles, copper and footwear.
The president is supposed to weigh the national interest, including the impact on consumers, against the cost of relief for a given industry. He agreed with the ITC in the first four and provided tariffs or quotas to protect them for up to five years.
But Reagan ruled against the ITC in the copper case where, as U.S. Trade Representative Clayton Yeutter points out, relief would have hit copper fabricators, which account for six times as many jobs as copper producers. Reagan also ruled against the ITC in the footwear case, where little proven gain in the ability of domestic shoe producers to compete with imports would have cost consumers and American exporters $6 billion.
Now, to the Senate bill: What protectionists are trying to sneak through is a revision of Section 201 eliminating the president's discretion to weigh national interest against special interest. It would require the president to impose restrictions recommended by the ITC.
If the Senate version of 201 becomes law, some future president will helplessly have to bestow the $6 billion worth of relief to the shoe industry that Reagan denied it. And the lineup for handouts will be long -- while consumers and other sectors of the economy pay the price.
Under international rules, a country against which we impose tariffs or quotas to satisfy a domestic Section 201 complaint is entitled to receive compensation. Thus American exporters, including farmers, know that they will be helping to pay the bill to keep inefficient companies in business under 201.
"This radical change would send a disturbing message," says Consumers for World Trade. "The United States would be announcing to its trading partners that American domestic industries are unable to compete against foreign products even when these products are fairly traded -- an assumption with which CWT and many others in the trading community strongly disagree."
To put it even more boldly: The backers of this legislation aren't interested in fair trade, or justice or a "level playing field." They are interested in closing U.S. borders to all trade, allowing inefficient companies to hang onto their business -- and to hell with the prices that the customer must pay.
Anyone in business who can't make it by producing a good product can go running to the ITC, screaming about imports. Whereupon, the ITC will be bound to find injury, and the president will be reduced to a messenger boy for the ITC, putting restrictions in effect that will protect the industry for up to a 10-year period.
Sen. Bob Packwood (R-Ore.) has an amendment that retains a measure of discretion for the president in Section 201 cases, but requires him to find alternative ways of helping an injured industry if he turns down the ITC recommendations. This is a generosity that goes beyond what should be necessary, because the president could order not only monetary assistance, but also exemptions from antitrust laws to weak domestic industries.
But at least the Packwood amendment would allow the president enough flexibility to take into account the impact of quotas or tariffs on the whole economy, or to consider whether our trading partners might retaliate.
I am not as persuaded as some that the Gephardt amendment is dead just because it was not recommended by the Senate Finance Committee. Sen. Donald Riegle (D-Mich.) intends to offer the same language in a floor amendment. Thus, open-trade advocates such as the "Pro Trade" group, representing diverse manufacturing, consumer and agriculture interests that have done such a good job of alerting the public to the dangers of the Senate bill's Section 201, need to keep up the attack on Gephardt.
We should not be dazzled by the charts displayed to the Senate by Riegle, and his argument, echoed by Sen. Lloyd Bentsen (D-Tex.), that the huge trade deficit justifies the restrictive legislation they propose. To cite the $168 billion trade deficit figure or the newly reported external debt figure of $264 billion as justification for the legislation is meaningless. Those numbers are symbols of huge economic problems. But the trade bill offers no route to, or method for, restoring America's economic health.
Back in the small print of Bentsen's opening statement, you can find an admission of that. But Bentsen contends that the trade bill "does point America in the right direction." That's where Bentsen and Riegle are wrong -- and so long as counterproductive measures such as the Gephardt-Riegle amendments and a rigid 201 stay in the bill, they will continue to be wrong.