Congress returns for a shortened election-year session Monday with prospects for passage of a trade bill still up in the air even though congressional Democratic leaders made its passage their prime objective after the party won control of the House and Senate 14 months ago.
Reagan administration trade officials, the congressional leadership and broad segments of the nation's business community all say they want a trade bill. But there are wide gaps between what President Reagan says he is willing to accept and different versions of legislation passed last year by the House and Senate. One of the largest and most complex conference committees has been set up to reconcile the measures.
And the politics of trade have been complicated by election-year politicking; thus trade looms as a major issue in the Feb. 8 Iowa caucuses.
According to new polls, Rep. Richard Gephardt (D-Mo.) has jumped into the lead after making his trade proposal, the most controversial part of the House-passed bill, a major element of a new populist push. Gephardt's standing in the polls fell after he began soft-pedaling trade as an issue this fall, but shot up when he resurrected it after Christmas as part of a broader attack on corporate and government corruption.
The Gephardt amendment, which the Reagan administration and other Democrats have called protectionist, threatens retaliation if countries fail to make yearly cuts in trade surpluses that have been gained through unfair practices. The amendment targets Japan, South Korea, Taiwan, West Germany and Italy; Brazil is exempted because of its large debt.
Congressional trade specialists believe it will be harder to pass a bill the president will sign if Gephardt is perceived as having done well in Iowa because of his stance on trade.
Before the new polls showing Gephardt's enhanced standing in Iowa, a Democratic congressional trade specialist said, "I just don't see this trade bill as having much political mileage any more, which means we can get a decent bill with a lot of things dropped out." That could change if Gephardt does very well in Iowa, he continued, and "if the perception is that Gephardt is an 'also ran' in Iowa, there will be a further receding of political muscle for trade."
Although House Speaker Jim Wright (D-Tex.) has set an end-of-February deadline for a trade bill to emerge from the House-Senate conference, that committee will not resume work until early in the month and its deliberations are likely to be colored by the Iowa caucus results.
According to a "script" developed by House and Senate Democrats, the conference would drop the Gephardt proposal from the bill after the caucuses. But that may be harder to do if it is seen as having carried Gephardt to victory or an unexpectedly strong showing in that race, which is crucial to his presidential aspirations.
Gephardt's proposal would lead to a certain veto by Reagan. Further, there are some concerns among congressional Democrats that keeping Gephardt's amendment in the trade bill will be seen as a sharp protectionist turn for the United States, triggering a new stock market collapse and a further decline of the dollar.
U.S. Trade Representative Clayton K. Yeutter said the "debacle" in world financial markets, set off in October by unexpectedly poor trade figures, and the report this month of a sharp improvement in the trade picture have "enhanced" the chances for the passage of a "constructive" trade bill that Reagan can sign.
"The Hill is united in fear of doing something that is seen as a disaster and a 'Black Monday' turns into a recession Congress is blamed for," said a business lobbyist who is watching the trade bill's progress.
Nonetheless, trade specialists in the administration, on Capitol Hill and in the lobbyist-business community put the odds on a trade bill becoming law at little more than 50-50.
"I think there will be no trade legislation this year," said former Treasury official C. Fred Bergsten, chairman of the Institute for International Economics. He noted, however, that Congress might pass a bill that Reagan will veto.
With U.S. exports rising and America needing to achieve a large positive trade balance to repay foreign lenders, Bergsten said, "This is the craziest possible time for the United States to pass legislation that either is or appears to be protectionist."
It is the appearance of protectionism that worries key lawmakers, such as Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.), who says Congress will pass legislation that is market-opening, not protectionist.
"Congress has a real problem. Even if it reports out a responsible trade bill, the editorial writers and the press won't give it credit. There is a mindset that any bill will be protectionist," said William T. Archey, international vice president of the U.S. Chamber of Commerce.
"Congress has got to do something to educate the electorate," he said.
But a key Republican trade specialist is concerned that the Democratic leadership, especially Wright, would prefer passing "a nasty trade bill" the president will veto in the hopes of creating a partisan political issue rather than compromising with the administration on acceptable legislation.
But there is distrust on both sides. Although Yeutter said the administration wants to work with Congress in passing a constructive trade bill, some House and Senate Democrats have doubts that the commitment is real and fear that the White House will return to the "veto strategy" it pursued in 1986 to forestall the passage of trade legislation. "With the good economic news they can afford to play hardball. I think they can pursue a veto strategy in the Senate and win," said a congressional Democratic trade specialist.
There are, however, major parts of the bill the administration wants. Most important to the administration are renewed authority to negotiate the new round of global talks to strengthen the international compact that governs world trade, the General Agreement on Tariffs and Trade (GATT), and congressional approval of a new method of classifying products for tariffs that went in place in most of the world on Jan. 1.
Furthermore, chairmen of the Senate Finance and House Ways and Means committees, Bentsen and Dan Rostenkowski (D-Ill.), have told the president they will not consider the U.S.-Canada free trade agreement until June, after work on the trade bill is completed.
Both the GATT talks and the free trade pact are major elements of administration trade policy and could provide Congress with weapons to ensure White House cooperation.
"Now is a good time to do the trade bill. Everyone will bend over backward to do the right thing," said Calman J. Cohen of the Emergency Committee for American Trade (ECAT), a business lobbying group. He said business has its own wish list in the trade bill, including changes in the Foreign Corrupt Practices Act and in export control regulations.
If a trade bill doesn't become law this year, it will be part of the agenda for a new administration and a new Congress to tackle in 1989. A more liberal international trade environment could lead to increased economic growth around the world.
But many economists believe that the United States will be in the midst of a recession then, which one trade specialist said "is no time to write a trade bill" because pressure for protectionism is likely to intensify as joblessness mounts.