Clinton's Next Trade Battle

May 23, 1994

White House expectations that congressional approval of the biggest world trade pact in history would be a cakewalk compared to last year's battle over the North American Free Trade Agreement are going a-glimmering. Opposition is coming not only from the Democratic protectionists who fought NAFTA but from Republicans influenced by House minority whip Newt Gingrich's alarums about a supposed loss of U.S. sovereignty rights to the proposed new World Trade Organization.

But even before the administration deals with these challenges it has to solve a financing dilemma of a kind never seen in the NAFTA struggle. Under budget rules, Congress has to come up with tax increases or spending cuts to make up for a projected loss in tariff revenues of $14 million over five years and $40 billion over 10 years.

Executive branch officials are putting together a package under which Congress would raise the $14 billion figure through a series of moves hitting industries with most to gain from the world trade pact but would waive the additional $26 billion required under 10-year projections.

This appears to be a plausible plan rather than a budget-buster because we are convinced the world trade pact will be so beneficial to the U.S. that the tariff revenue losses will be considered a bargain five years hence. But for the administration plan to fly, President Clinton will have to fight for it with a ferocity comparable to his triumph in NAFTA. (He vows he will.) The role of the U.S. in world trade is so immense that the new pact, a successor to the General Agreement on Tariffs and Trade, goes nowhere without Washington's approval. For Congress to balk would not only undercut U.S. international leadership but damage the nation's economic interests. It would make a hash of seven years of arduous negotiations that finally will extend world trade rules to agriculture and service industries - long a U.S. goal - and safeguard U.S. patent rights.

Ironically, the flanking attacks on the world trade pact hit at some of its strongest features. Mr. Gingrich may wring his hands that WTO members could vote to impose penalties on the U.S. (and any other country), but a serious weakness in GATT was that any nation could ignore its edicts. Either we have binding world trade rules or we don't.

Another objection heard is a concern that unilateral U.S. power to penalize other countries under domestic laws is at odds with the new world trade pact. To which we would say, so what? The U.S. tendency to go-it-alone deserves to be stymied.

Clearly, U.S. industry as a whole has to start showing a lot more muscle to put some momentum behind the WTO pact. But in the end, whether this year or next, it will be President Clinton's issue to win or lose. Having prevailed courageously on NAFTA, we have confidence he will win on global trade reform as well. But it will take some doing.

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