Within two weeks after Super Tuesday, the House-Senate conference committee on the trade bill will conclude its work on competing versions of restrictive legislation and decide on a final package to send to President Reagan.
There is a tendency to believe that if the most highly publicized proposals in the legislation -- such as the Gephardt amendment to punish trade-surplus nations -- are taken out or watered down, President Reagan would have a hard time justifying a veto.
The bipartisan House Export Task Force, headed by Rep. Don Bonker (D-Wash.), notes in its annual report for 1987 "a true sense of frustration on the Hill" because the administration and the media portray the trade legislation "in less than positive light." Bonker cites positive features of the bill, including the protection of patent rights and other "intellectual property," money for job training, improvements in the education system and funds for a consortium to stimulate research in semiconductors.
In addition, the legislation provides the necessary authority for a new multilateral round of trade negotiations.
But the Gephardt amendment aside, there is so much else that is bad and counterproductive in both the House and Senate bills that it is difficult to see how they can be cleansed sufficiently to warrant the signature of a president who claims to believe in free and open trade -- or the support of Democrats who claim they don't deserve a "protectionist" label.
The omnibus bills are comprehensive, establishing new laws and procedures that would depart from our normal practices not only on trade, but on investment, finance, exchange rates, export controls and shipping. A committee report comparing House and Senate proposals runs 504 pages and weighs more than eight pounds.
The changes move in a single direction -- toward increased barriers to trade and greater limitations on the president's authority. They not only do not deal with the real problem, but are certain to invite retaliation if and when the United States ever moves into a trade surplus.
Specific examples are the best way to illustrate the depth and scope of the proposed "trade and competitiveness" legislation: Fair trade. Under the current law, the president must take the national economic interest into account in determining whether to grant relief from alleged injury resulting from imports. But under both Senate and House bills, the national economic interest would not be considered, and costly settlements -- such as one Reagan avoided in 1985 that would have amounted to $2.8 billion to save a handful of jobs in the shoe industry -- are sure to go forward. Unfair trade practices. Under the current law, responses to charges of unfair trade practices are carefully reviewed by the Cabinet, then sent to the president for a decision. The legislation transfers almost all of the decision-making process to the U.S. trade representative, shortens the deadline and adds new ways to retaliate. (The Gephardt amendment is an extra element that would mandate a reduction in the "excessive" surpluses of some countries, as unilaterally defined by the United States, whether the trade is fair or unfair.)
Antidumping. The current law targets only the importation of a specific product after an investigation proves injury caused by a foreign shipper charging less here than at home. But the legislation redefines "dumping" to include pricing practices that until now were considered completely normal or justified, and then allows retaliation to be extended to other products, not just the one "dumped." Foreign investment. The legislation would put new controls on financial flows into the United States, completely reversing a traditional open investment policy. The House bill would require detailed public disclosure of investors, by name and nationality, including portfolio investment over $50 million. This could have a chilling effect on foreign investors, who rode to the rescue of the U.S. budget deficit in the past few years. Both bills shift from the Treasury to Commerce the chairmanship of an interagency committee that reviews foreign acquisitions, and gives more power to the president to block such acquisitions to protect not only national security but "essential commerce." Exchange rates and the dollar. The bills direct the president to achieve "a competitive exchange rate" -- which is tough to define, let alone negotiate. World Bank lending. Indirectly, the Senate bill would result in a rigid, protectionist stance on loans by all multilateral banks, rather than considerations based on the economic need in the developing world. A new rule would require the United States to oppose bank loans unless the bank affirms that the money will not finance production of commodities "in surplus on world markets." As in the Gephardt amendment, the United States alone would define what is excessive. But if the bank went ahead with such loans, the United States could not participate in a capital increase in the bank, thus reducing U.S. voting power in such institutions.
Global investment guarantees. The Senate bill would in effect scuttle the soon-to-be started Multilateral Investment Guarantee Agency of the World Bank by setting conditions for U.S. participation that other countries won't accept. For example, the bill would bar U.S. participation in MIGA if the insured investments produce goods that might compete with U.S. products, or where worker "rights" are less than in the United States. Steel and coal. More products would be included in existing steel quotas imposed by the United States, quotas that already have caused a shortage of steel and higher prices. In addition, both bills would force foreigners to pay for their quota privileges by buying specific amounts of U.S. coal. Surplus capacity. In a device conjured up to help the U.S. copper industry, the Senate bill would require the trade representative to generate an unfair-trade practice charge against subsidies for new production in nonagricultural surplus industries. State Department officials say this would hold foreigners to a standard we do not accept at home. Export enhancement. Both bills, despite budget stringencies, provide an extra $1 billion for subsidies to commodities currently competitive on world markets. This is a gift to buyers -- including Japan and the Soviet Union -- that now pay full price for agricultural imports. Maritime practices. Both bills set up their own standard of "unfair" foreign shipping practices that would generate U.S. penalties. This is bound to invite retaliation and raise shipping costs for American exporters, thus exacerbating lack of U.S. competitiveness in some areas. The House bill mandates sanctions against foreign carriers whenever their market share exceeds that of U.S.-flag carriers by 15 percent in 600 to 700 categories of cargo. Candy. The hypocrisy award goes to the Senate bill, which would direct the president to pressure Europe to reduced tariffs on liquor-filled chocolates made in the United States, even though Food and Drug Administration regulations bar the importation of such candies here.
This is not an exhaustive list. There are other controversial issues, including the pros and cons of liberalized export controls; the Senate's plant-closing provision, which requires large companies to give advance notice of a shutdown or mass layoffs; and Japan-specific provisions designed to pressure action on current issues under negotiation, including U.S. participation in construction of the Kansai Airport and more purchases by Japan of U.S. fighter aircraft.
There also is an innovative proposal for debt relief that the administration doesn't like, but a variation of which may ultimately form the basis for future resolution of the debt crisis, even if it's misplaced in this legislation.
The true and total cost of "procedural protectionism" and special favors conferred by these bills likely won't be known until the legislative fine print dries, and then yields its secrets over the years. The answer to the trade deficit will be found not in punitive legislation aimed at marginal problems, but in changing faulty economic policies and in enhancing the skills, productivity and commitment of our own economy. The trade problem mostly isn't "them" but "us."