Bill for GATT trade pact makes Congress blanch

April 14, 1994|By New York Times News Service

WASHINGTON -- After seven years of negotiations, a new global trade agreement will finally be signed tomorrow in Morocco. The treaty weighs 385 pounds and runs to more than 22,000 pages. It eliminates or freezes so many tariffs around the world that it is expected to stimulate some $5 trillion in new trade by the year 2005.

There's a problem with it, though: It may not be ratified by the U.S. Congress anytime soon.

Why? No one can figure out how to pay for it.

The General Agreement on Tariffs and Trade, or GATT, involves the lowering of tariffs, which are taxes levied by governments on imports.

Under the very tight pay-as-you-go budget rules in Congress, any reduction in a tax -- even one that, as with the GATT agreement, is expected to promote billions of dollars in new business and income tax revenue over the long run -- has to be compensated for by a tax increase elsewhere or by spending cuts.

Since GATT is projected to cost $13.9 billion in tariff collections over the next five years, Congress and the White House are required by law to come up with an equal amount.

"We've had such a hard time trying to find the money that at one point I suggested to the administration that maybe we could get it by raising some tariffs," said Sen. Daniel Patrick Moynihan, New York Democrat and chairman of the Senate Finance Committee. "I will do my damnedest to resolve this problem, but we could genuinely end up with an embarrassment."

Many agree that it is ludicrous that a multitrillion-dollar treaty should be imperiled for lack of $13.9 billion -- small change in Washington terms. But, as Mr. Moynihan remarked, with the current airtight spending limits, "We are not a very grown-up government in budgetary matters right now."

U.S. Trade Representative Mickey Kantor said his office had three studies showing that in the next five years the Treasury would collect about $3 in revenue for every $1 lost in tariffs because of GATT.

GATT, he said, "will contribute about a trillion dollars to our gross national product over 10 years -- that's the low end. So it's an enormous economic winner. But we can't count all that in the pay-go concept."

With the budget already cut, and 1994 congressional elections making lawmakers queasier than ever about any kind of tax increase for fear of raising voters' anger, no one knows how to get out of this budget box.

When some Clinton administration officials broached the idea of Congress waiving the pay-as-you-go rule, it was quickly rebuffed by Republicans, who do not want to give the Clinton team any precedents to use in financing health care or welfare reform. So it's back to the ledger.

"No one wants to look at something on either the spending side or the revenue side that is so controversial it undercuts the treaty getting passed," said Leon E. Panetta, director of the Office of Management and Budget. "It is my job to find a solution that doesn't cross that fine line."

The latest idea floated by the White House is a royalty tax on some of the new transmission frequencies being granted to communications companies. But that has the communications industry up in arms.

The advantage that GATT has over the North American Free Trade Agreement, Mr. Panetta said, is that there is no "huge political controversy surrounding it, so the funding issue is not taking place in a heated emotional atmosphere."

Or is it? As the approval debate on the GATT agreement gets closer, opponents are coming out of the woodwork.

For instance, Public Citizen, the consumer group founded by Ralph Nader, takes issue with the role of the newly created World Trade Organization, which will oversee GATT's operations and serve as a global referee to settle trade disputes.

Public Citizen argues that the new GATT agreement will shift decision-making over sensitive matters, such as what pesticides can be used in growing food or whether U.S. environmental laws can protect dolphins from tuna fishermen, to a group of unelected bureaucrats in Geneva.

Congressional Democrats make it clear that they want any GATT financing legislation to be bipartisan, so that they are not punished by voters for a tax increase while the Republicans get credit for all the trade benefits GATT brings.

But some Republicans say they do not want any credit; they want a different agreement.

In order to secure the GATT accord, the Clinton administration agreed to demands, mostly from European nations, that they be allowed to subsidize basic and applied research of some prized high-tech industries, like the European aircraft consortium Airbus Industrie.

"For me, the big problem is this subsidies code," said Republican Sen. John C. Danforth, whose state of Missouri is home to McDonnell Douglas Corp.

White House officials are convinced that no Republican with presidential aspirations, including Senate Minority Leader Bob Dole, will want to stand in the way of such a pro-business treaty as GATT.

Mr. Moynihan said that Republican concerns about the subsidies issue could not be dismissed, but that they should not be a reason for rejecting the GATT agreement. Countries, he said, "don't get rich subsidizing their exports."

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