WHAT KIND OF TRADE BILL will Senate Democrats bring to the floor next year? The dust from last month's congressional elections has barely settled and already speculation is rife.
The Democrats promised to make trade a big issue in the election and they were true to their word. The huge U.S. trade deficit - $148 billion last year - stirs emotions in many parts of the country and the Democrats played it for all it's worth. President Reagan's veto of the Jenkins textile quota bill, in particular, badly hurt several Republican senators in the Southeast.With its new majority in the Senate, and the fact that President Reagan can be counted on not to father a bill of his own, the trade issue now lies at the feet of the Democrats. Any legislative package they draw up should have profound affect on the presidential election in 1988.
Outgoing Senate Finance Committee Chairman Bob Packwood, R.-Ore., was too tied up with tax reform to dirty his hands with trade. That won't be the case with the new chairman, Lloyd Bentsen, D-Texas.
"We've got a crisis," he says. "Trade will be a top priority."
It's fine that Sen. Bentsen is making trade a priority. It's fine, too, that the senator wants to pressure other countries, particularly Japan and South Korea, into opening their markets. What's not so fine is the prospect that protectionist legislation will emerge from his committee.
In terms of economics, Sen. Bentsen has long been one of the more sensible members of the Senate. He's not the sort to be prodded into writing bills incorporating automatic retaliation. Nor is he apt to propose sweeping protectionist legislation like this year's House Omnibus bill. Rather, he seems likely to use the threat of protectionism to force open other markets. He also would like to give the president more authority to deal with unfair traders.
But as the campaign for the White House heats up, Democrats are likely to use the succession of huge trade deficits rung up during the Reagan presidency as an excuse for tacking on even more protectionist legislation. Protectionism already is commonplace. The list of industries protected from foreign competition includes steel, autos, textiles, lumber and agriculture. Saving jobs is the reason given most often for barring foreign competition, but even after gaining protection the number of jobs in these industries has continued to fall.
In the meantime, protectionism has become an unbelievable burden to the U.S. consumer. A March report by the Institute for International Economics said protection costs consumers of textiles $27 billion a year, of carbon steel $6.8 billion, of autos $5.8 billion and of dairy products $5.5 billion.
Additional protectionism also is likely to bring swift retaliation. Only last month, Canada slapped a $1.05 a bushel tariff on U.S. corn in after this country had imposed a 15 percent tariff on Canadian lumber.
These counterproductive actions are rapidly poisoning the environment for the GATT talks scheduled to kick off in January. New protectionist legislation would be another wrench in the gears of the multilateral trade mechanism. If the GATT talks were to unravel, the effect would be nothing less than the collapse of the world trading system.
Surely, Sen. Bentsen wants to avoid this. As Senate Finance Committee chairman, he is in a unique position to do exactly that.