A SENSIBLE APPROACH

A SENSIBLE APPROACH

A notion that surfaced at a hearing on Capitol Hill last week offers a rational approach to resolving the impasse over who pays for two vital components of the nation's trade framework. Congress and the Clinton administration should give it prompt and serious thought.

It's not a new tax or fee. Rather, the idea is to tap an existing and significant revenue stream - the import duties the U.S. Customs Service collects - that depends on those components.The approach was discussed by congressmen and port officials at a hearing of the House Water Resources and Environment Subcommittee as a way to fund the job of keeping the nation's harbors navigable. But there's no reason it couldn't also be used to pay for the replacement of the Customs Service's antiquated computer system, which is chugging ever closer to a crash that would disrupt the nation's economy.

Washington has a vast blind spot when it comes to international commerce. Congress and the White House pay close attention to the economic potential, the policy questions, the political impact. But they don't want to bother with the practical realities that make trade possible.

Dredging is a prime example. Ninety-five percent of the nation's inter-continental trade moves by ship. But harbors have to be deep enough to accommodate modern ships safely and efficiently. Usually that means dredging channels, and then periodically re-dredging them - a process known as maintenance dredging - to keep them clear of the inevitable silt build-up.

For nearly 200 years, the United States accepted the responsibility for dredging and maintaining channels. Then, beginning in the Reagan administration, Washington decided that someone else ought to pay. It levied an ad valorem tax on imports and exports to fund part, then all, of the cost of maintenance dredging. It instituted a cost-sharing formula for new dredging and deepening.

The Supreme Court, however, threw out the tax on exports as unconstitutional. The tax on imports remains, but is under challenge by U.S. trading partners. So the Clinton administration decided that the beneficiaries of channels and waterways are commercial ships - not imports, not exports, not the people who make and use imports and exports, not the nation at large.

The administration's numbers-crunchers closeted themselves behind closed doors and put together a formula based on vessel size and type. And they made sure the take from the new dredging tax - not quite $1 billion a year - would cover the federal government's share of channel-deepening projects as well as the cost of maintenance dredging.

The measure has gone nowhere, but the administration shows no signs of abandoning it. Meanwhile, 40 congressmen have backed a bill calling for full federal funding of port dredging.

The approach discussed last week is the first sign of a way around the impasse. The logic is evident in the numbers cited by Lillian Borrone of the Port Authority of New York and New Jersey, on behalf of the American Association of Port Authorities: Customs revenues in 1996 were $22.3 billion, of which $15.6 billion came from cargo moving through seaports.

By way of comparison, the current cost of maintenance-dredging those ports - keeping their channels deep enough for ships to bring in the cargo on which those duties are levied - is about $500 million a year.

Meanwhile, in another classic example of federal myopia, Washington also is balking at coming up with $1.2 billion over four years for a new computer system that will enable Customs to collect those duties efficiently.

It makes eminent sense to use a relatively small percentage of the government's revenue stream to ensure that the stream keeps flowing. And that's not even considering the broader benefits that oceanborne trade provides for the United States and its people.

Is this a gimmick? No. Details remain to be worked out, but it is a legitimate approach that could provide a dedicated source of funds directly and clearly related to the activity on which they are spent. And it would help highlight that activity. The origin of the Customs revenue stream is obviously getting lost in the shuffle in Washington; the Clinton administration and many in Congress must think it's due to divine providence, not something that depends on ships and channels and computers.