A MONTH FOR ALL TRADE BILLS

A MONTH FOR ALL TRADE BILLS

Congress appears about to deliver its first major package of trade legislation since the heady years of 1993-94, when the North American Free Trade Agreement and the Uruguay Round accords were ratified.

This May, it passed the Trade and Development Act, opening U.S. markets wider to sub-Saharan and Caribbean goods while laying the basis for a long-term effort promoting closer U.S.-African trade and investment ties. Pending now are a landmark China trade measure, a multi-billion dollar trade-related tax proposal, a resurrected export control regime, and proposals easing the Cuban trade embargo.Congress has only about a month to act, given its Oct. 6 adjournment target, but chances look reasonably good that much of that legislation will win final approval.

The China bill, extending permanent 'normal' trade benefits to China, towers in importance. Its defeat would undermine U.S.-Chinese relations generally, perhaps with repercussions cutting across much of the rest of the Asia-Pacific region. But its passage would secure major trade benefits for U.S. companies, as China slashes its tariffs and takes other market-opening actions.

The bill cleared the House in late May and now the Senate is due to start debate when it reconvenes Sept. 5. Sen. Max Baucus, D-Mont., says three of every four senators favor it.

But a problem is time. The bill's opponents, including Sen. Jesse Helms, R-N.C., and Ernest Hollings, D-S.C., are expected to try to saddle the bill with amendments, ranging across labor, environmental, humans rights, arms and other policy issues. If only one passes, it would send the bill back to the House, devouring more time.

The House approved the bill by only 40 votes and only after a heroic lobbying effort by the Clinton administration and U.S. business. No supporter of the bill wants a second House vote, especially so close to the November elections while risking the chance that some new Chinese weapons deal or human rights scandal hits the headlines.

Still, U.S. business spokesmen are guardedly optimistic that the Senate will pass a 'clean' China bill, clearing it for the president's signature next month. A 'very solid' Senate majority appears to support such a measure, says Robert Kapp, president of the U.S.-China Business Council.

Meanwhile, the Clinton administration and congressional leaders will try to speed action on a bill with a name as long as time is short: the 'FSC Repeal and Extraterritorial Income Exclusion Act of 2000'. The bill would repeal the Foreign Sales Corp. tax exemption for U.S. exporters that affords them billions of dollars a year in corporate savings.

The proposed repeal follows a World Trade Organization finding that the FSC tax exemption is an export subsidy violating WTO rules, a charge first raised by the 15-nation European Union. Absent repeal, for which the WTO set an Oct. 1 target date, U.S. exports could be subject to EU reprisals ranging in the billions of dollars.

In a hurry-up mode, the House Ways and Means Committee in late July approved, 34-1, an administration bill repealing the FSC program, replacing it with a new tax benefit on income not only from U.S. exports but also from U.S. output abroad. This new tax exclusion, the administration contends, would not violate WTO subsidy rules. And U.S. business groups enthusiastically support the change, as some smaller firms would for the first time obtain the tax benefit.

So far, though, the EU has been non-committal, some of its officials suggesting that the administration tax plan still does not fully comply with WTO rules. A formal EU reaction is expected by early September. Meanwhile, the Ways and Means Committee may do some further work refining the administration bill.

As with the China bill, business spokesmen feel reasonably confident that Congress, spurred by the WTO ruling, will this year enact a new foreign income tax exemption for U.S. business.

The prospect that Congress will for the first time ease the U.S. embargo on Cuba is gathering force. Sentiment in Congress for this is rising, witness overwhelming votes last month in both the House and Senate to cut administration funding for the embargo.

House-Senate conferees working on an agricultural appropriations bill are expected to approve shortly proposals permitting U.S. commercial sales of both agricultural and medical items to the Cuban government as well as to the governments of Iran, Sudan, Libya and North Korea. (Sales to private entities are already possible.)

The question is whether to permit U.S. banks and other private sources to finance the Cuban sales; the Senate says yes, the House no.

Then there's the much broader issue of U.S. export control policies worldwide. Nearly a year ago, the Senate Banking Committee unanimously voted a new export administration law. The bill, it seemed, had something for nearly everyone. For example, controls on goods such as personal computers sold in 'mass markets,' would be dropped, while fines for control violations would be dramatically increased.

But the bill has gathered only dust, as several key senators insist the bill goes much too far in liberalizing controls. Compromise efforts have failed, while the House hasn't even seriously considered a companion bill. The odds for a basic new export administration law this year are now down to one-in-four, says Paul Freedenberg, a former Commerce undersecretary for export administration.

But hold on. The administration has begun making a special push for a scaled-down export control bill that at least would assure firms applying for export licenses confidentiality for their data. Triggering the push is a U.S. district court ruling that absent statutory protection the data cannot be kept confidential. The ruling threatens to severely disrupt the U.S. export licensing process.

But whether even such a modest, non-ideological bill can pass is questioned. It might just be too tempting a vehicle for legislators to add their own controversial export control amendments -- the very same that have deadlocked for months the broader export administration legislation.