Revived trade bill defies easy labels
AFTER three years of deliberation, initial passage by the Senate and House, a presidential veto, and the assumed coup de grace of congressional failure to override, the Omnibus Trade and Competitiveness Act of 1988 has sprung back to life. The plant-closing provision that brought the veto is now a separate bill, and the rest of the measure appears headed for passage in Congress and likely signing by President Reagan. Does this mean that protectionist sentiment is still strong in this country? In fact, it is debatable whether the legislation, as it stands, is even ``protectionist.'' The document contains 1,000 pages and resists easy categorization.
Some features of the bill are clearly not protectionist and are universally desirable. One provision would hasten the process by which American companies' complaints against discriminatory foreign competition are addressed. Another contains a code of tariff classification that is in ``harmony'' with the system used by most of our trading partners. Extension of the president's now-expired authority to negotiate trade agreements is a step in the right direction.
The most controversial provision of the bill had been the Gephardt Amendment, which required mandatory tariffs against countries running excessive trade surpluses with the United States. But as Rep. Richard Gephardt (D) of Missouri faded from the presidential race, the amendment faded from the bill. Yet the section of the new bill, known as ``Super 301,'' is a Senate clone of the Gephardt Amendment. It requires the president to produce an annual list of unfair trading partners, and to retaliate against the offenders within 19 months.
Retaliation is justified as a response to others' unfair trading practices. But there is no evidence that countries running large surpluses are the same ones that close their markets. In the dynamic world of multilateral trade relations, some countries must naturally have deficits with others. This is healthy when these deficits are balanced by surpluses elsewhere. Even Japan runs bilateral deficits with countries that supply it with energy and raw materials. Pointing the finger at our trading partners is politically popular but economically naive.
Ironically, the major battle for the trade bill was fought over a measure that had almost nothing to do with trade. It required 60 days notice of plant closings for firms with more than 100 workers. Yet many states already have strict plant-closing laws; two-thirds of American industry voluntarily gives 60 days notice.
It is also curious that the administration clearly signaled that this provision would ensure a presidential veto. It allowed congressional Democrats to set up a ``heads we win, tails you lose'' situation. The Democrats would have taken credit for passage of the bill in any case, but the Republican administration is saddled with the blame for its near demise. Democrats can now point to their persistence in reviving the bill and in pushing the popular plant-closing measure under separate cover.
An approach to free trade that has much potential but receives little press is the negotiation of bilateral trade agreements. The real trade bill of the decade is the US-Canada Free Trade Agreement, now queued up in Congress behind the omnibus trade bill and the plant-closing bill. If implemented, it will sweep away a host of trade barriers. This treaty depoliticized the negotiation process by taking it out of the grip of elected officials and placing it in the steadier hands of unknown arbitrators.
The trade bill of 1988 will probably be more a political performance than a genuine attempt at either protectionism or trade promotion. The best stategy for shrinking the trade deficit is phased reduction of our own budget deficit. As long as we borrow from abroad to finance our domestic deficit, foreigners are forced to run trade surpluses with us to underwrite their lending.
Kathleen Carey is assistant professor of Economics at Wellesley College in Wellesley, Mass.
