H.R. 3 A PRAGMATIC TRADE BILL

The U.S. economy is at a crossroads. Foreign competition matters as never before. Changes in our competitive position in the world economy can make the difference between national prosperity and national bankruptcy.

In this new era, the United States faces the mind-boggling prospect of a $1 trillion foreign debt. This is no time for business as usual or minor technical or procedural changes. The process and substance of U.S. economic policy needs basic remodeling.Our trade laws and economic policy reflect the way the world was between 1945 and 1970. During this golden era, foreign competition had little impact on U.S. economic fortunes. So much has changed since then. It is time we bring our laws and policies up to date.

This means asking difficult, big questions. What should be the government's role in the economy? Should we emulate or crack down on foreign governments that do things differently?

More to the point, how can Congress reassure average middle-class Americans that an open trading system continues to make sense,that the deck is not stacked against them? What is it going to take, to borrow a line from Lane Kirkland, to ensure that we trade goods, not living standards, with the developing countries?

I believe that the answer to these questions is a dose of good old- fashioned, hard-nosed American pragmatism.

Stand-pat, free trade-at-any-cost homilies are not the answer. Neither is protectionism, which would amount to the United States, the greatest power on earth, crawling into its shell.

My bill is practical, not ideological. For the public to remain convinced that an open trading system is worth keeping, I believe the federal government must:

1) Go to bat for U.S. firms by using tough, hard-nosed negotiating strategies to secure our products fair access to foreign markets;

2) Exercise our leverage as the world's most important market to win agreement in the new GATT round on rules to control increasingly sophisticated dumping, subsidizing and targetting by foreigners in our market;

3) Promote productivity in the work place and competitiveness in the marketplace by providing the proper means and incentives for American workers to sharpen their skills and for U.S. businesses to adjust to import competition; and

4) Identify in advance the impact fiscal and monetary policies will have on our ability to compete in order to focus attention on problems before the damage is done.

My bill would transform the federal government into a full partner of U.S. exporters. It would institutionalize active, coordinated trade and export promotion policies by making important changes to the Office of the United States Trade Representative and the Foreign Commercial Service.

Further, my bill would require this and future administrations to use our clout when unfair barriers get in the way of U.S. sales. We shouldn't defy the rules of the game. But neither should we be a shrinking violet about using our leverage as the world's biggest market to get the rules changed to conform to our idea of fairness.

This no-nonsense negotiating strategy should apply to foreign unfair practices in our home market as well. H.R. 3 contains four provisions mandating action not presently permitted by international rules. I propose that Congress put other countries on notice that if the new GATT round does not yield adequate improvements to the dumping and subsidies laws, the United States will act unilaterally to protect its interests by implementing these provisions.

When the deck is stacked against Americans in ways beyond the reach of traditional trade policy, special actions are required. Trade is a two-way street. When it is not conducted in this manner, the U.S. government should speak up and, if necessary, act. It is time to state out loud, in a constructive spirit, that with respect to Japan the deck is stacked. The public has a right to know why.

It is not much of an oversimplification to say that Japan's economic policies suppress the living standard of its people to subsidize exports. In addition, Japan maintains a web of unofficial, largely private sector barriers forming a protective veil against imports that remains in place long after formal trade barriers are negotiated away.

Japan is a rich country. Its national survival no longer depends on policies that were put in place to rebuild the country from the devastation of World War II. For the good of the world economy, the United States, as only it can, must exercise the leadership to require Japan to take the painful political actions necessary to restructure its economy. It is in this spirit that I offer very carefully crafted amendments to Section 301 of the Trade Act of 1974 to induce Japan's leadership to implement the structural reforms its own advisers have rec ommended.

Competitiveness begins in the work place. The president's budget and the Lovell Commission report have acknowledged the need for retraining dislocated workers; however, both plans lack definition and a dedicated source of funding. My proposal would provide the resources and the incentive for workers to retrain and improve their basic skills. It is designed to rapidly re-employ dislocated workers, to enhance the number and nature of opportunities they face, and to improve the overall productivity of the U.S. work force along the way.

My bill also refines Section 201 of the Trade Act of 1974, which provides temporary relief to industries injured by imports. Management and labor would be required to agree on the general framework of restructuring (not a detailed plan) that must take place for the industry to be viable after the expiration of relief. At the same time, presidential discretion to refuse relief recommended by the ITC would be narrowed but not closed. In most cases, relief would take the revenue-generating form of tariffs or auctioned quotas to fund fully adequate adjustment assistance programs for affected workers and communities. My bill would transform Section 201 into a complete, self- financed adjustment package that carefully balances all inter ests.

The budget deficit is at the heart of our trade problems. I believe it is time we made the link between the budget deficit and the trade deficit very visible to the voting public in a Federal Budget Competitiveness Impact Statement.

Basic accounting tells us that the key to the trade deficit lies in the imbalance between savings and investment in the domestic economy caused by government borrowing to finance the deficit. We can get a good idea of what the trade deficit is going to be for the coming year simply by estimating the excess of the budget deficit and private investment over domestic savings.

My bill would require every president's budget proposal to project the trade deficit for the year covered by the proposal. The trade deficit projection would be based on an analysis of the proposed budget's impact on the savings-investment balance of the economy. The House and Senate Budget committees would have to make the same estimates in their proposals. In essence, each document would propose a budget deficit and a trade deficit.

In this way, the federal government would be fully accountable in advance for impact of the federal budget on the nation's competitiveness. Moreover, a Federal Budget Competitiveness Impact Statement would expose the gimmickry of asset sales, which have no impact on the economy's savings-investment balance and trade deficit.

Similarly, to ensure the timely exposure of macroeconomic conditions that handicap American workers and firms, my bill creates a foreign exchange rate policy with tightly defined reporting and oversight requirements. By clarifying and refining similar provisions in H.R. 3, my bill would ensure that no administration ever again falls asleep at the switch of exchange rate policy and that existing and future exchange rate misalignments are quickly identified and corrected.

Without action on each of these fronts, I am skeptical that the faith of Americans in an open trading system can be maintained in the coming decades. That faith has already seriously eroded in many parts of the country in light of our unilateral industrial disarmament in the past five years.

The time has come for the federal government to make a compact with the citizens of this country.

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