No. 2 — January 19, 1996


Weekly Review

--- by Christopher B. Johnstone

As attention in Washington continues to focus on the raging budget battles between the White House and Capitol Hill, trade-related matters awaiting congressional action largely have been placed on the legislative backburner — a trend that is likely to intensify as the presidential campaign heats up. Although opinion is divided on the importance of trade as an issue in this election year, key figures in both political parties have taken a decidedly cautious — if not openly hostile — approach to new market-opening agreements. As a result, while the Clinton administration will begin negotiations on a number of Asian trade policy initiatives in 1996 — ranging from a new trade agreement with Vietnam to an extension of the 1986 and 1991 semiconductor agreements with Japan — Congress likely will take up only a few, relatively minor, items in the coming year.

Perhaps the most important item on the congressional trade agenda — the renewal of the president's so-called fast-track negotiating authority — is likely to remain in 1996 what it was in 1995: essentially dead. The renewal of fast-track authority, which allows the president to submit trade agreements to Congress for a simple yes-or-no vote without amendment, has been the subject of considerable partisan wrangling over the last several months. Without such authority, talks on Chile's accession to the North American Free Trade Agreement have gone nowhere, and American contributions to the Asia Pacific Economic Cooperation forum's summit in November were constrained severely. Many Republicans staunchly oppose a key White House demand on this issue: that environmental and labor standards be included under the range of negotiating objectives subject to fast-track authority (see JEI Report No. 40B, October 27, 1995, and No. 33B, September 1, 1995). This stalemate alone led many observers to believe that no compromise was possible. Prospects for fast-track renewal dimmed further when Senate Majority Leader and presidential candidate Robert Dole (R, Kan.) announced in November his opposition to reauthorization and the negotiation of new trade agreements "at this time" (see JEI Report No. 43B, November 17, 1995).

The most recent attempt to fashion a deal on fast track collapsed in late December. At that time Republicans in the House of Representatives put forward a proposal extending fast-track treatment only for Chile's accession to NAFTA. The draft bill, which was structured to exclude labor and environmental standards from the covered objectives, failed to receive White House support, however; Republicans reportedly were critical particularly of U.S. Trade Representative Mickey Kantor's "intransigence" and continued insistence on a broader authority. But GOP opinion was divided over the proposal as well; many freshmen Republicans in the House opposed the legislation. Moreover, when presented with the draft proposal Mr. Dole reiterated his position that more time is needed to evaluate the results of NAFTA and the Uruguay Round of multilateral trade negotiations before Washington concludes any new trade agreements. With the failure of this latest effort to achieve a workable compromise, most observers believe that the fast-track renewal issue now will lie dormant until after the November elections. In the meantime Canada, frustrated by Washington's inability to move toward expanding NAFTA, has begun its own discussions with Chile aimed at forging an independent bilateral trade agreement.

Congressional moves to dismantle the Department of Commerce and to create a unified trade agency (see JEI Report No. 31B, August 18, 1995) also appear to be stalled — though by no means dead. President Clinton vetoed December 19 appropriations legislation that would have made deep cuts in Commerce's FY 1996 budget as a prelude to the department's eventual elimination; House efforts to override the president's action fell 26 votes short. A movement among House Republicans — led by the 73-member freshmen class — to include similar legislation in the budget reconciliation bill also was thwarted, this time by Senate rules barring the inclusion of "unrelated items" in the budget bill. Observers indicate that House Republicans remain "very committed" to eliminating the department, suggesting that the issue will be revisited in 1996. Although Mr. Dole also supports the proposal — and has indicated that he may submit a similar, freestanding bill in the Senate — sources on Capitol Hill indicate that the majority leader likely will be unable to find enough votes to secure passage. House Republicans thus may choose to "focus on things they can win" and leave Commerce as it is — at least for now.

A handful of new trade initiatives are expected to see daylight during the coming year. Perhaps the most controversial is the Temporary Duties Suspension Act of 1995. Introduced by House Ways and Means trade subcommittee chairman Philip Crane (R, Ill.) December 21, the legislation would allow the Commerce Department to suspend temporarily the application of antidumping or countervailing duties on goods deemed to be in short supply in the United States. While seemingly innocuous, the bill is described by observers as a "divisive" issue within the community of high technology industries. The American computer industry and others heavily reliant on imported parts and materials are said to be strong supporters of the measure. At the same time industries victimized by dumping in the past — integrated steel companies, for example, as well as semiconductor producers — are staunch opponents, arguing both that the bill is unnecessary and could be subject to abuse.

The "short supply" bill thus faces a questionable future, particularly in light of the problems faced by similar measures offered during the drafting of the Uruguay Round implementation legislation in 1994. The White House opposed the measures at the time, and both the House Ways and Means and the Senate Finance Committees ultimately rejected the proposals. Administration officials have said that they continue to harbor "very strong reservations" about short-supply legislation. Even within the GOP divisions are acute. Representatives Amo Houghton (R, N.Y.) and Sander Levin (D, Mich.) indicated their opposition to the measure in a December 7 letter to House Ways and Means Committee chairman Bill Archer (R, Texas); 16 members of the committee signed a similar document in November. While Mr. Crane insists that his new bill addresses many of the opponents' concerns, opposition continues to be strong. Further, with Mr. Dole — and many others in the Senate as well — unlikely to support the legislation, prospects for quick passage appear questionable at best. The bill is expected to be taken up in committee some time in January.

Congress also is expected to consider legislation to revise American export control laws at some point early this year. Plans to renew the Export Administration Act, which covers controls on commercial technologies with military applications, lay dormant for much of 1995. The previous legislation covering such restrictions expired in 1994; the White House has enforced controls since then by executive order. This, too, is likely to be a divisive issue. Many industries have argued that the current regime severely constrains their exports since competitors often have greater latitude to all these products in world markets. Nonetheless, numerous defense experts continue to argue for tight controls on certain commercial technologies with military potential to impede proliferation and other developments inimical to U.S. national interests. Although there is wide agreement on the need for a more liberal export regime in the post-Cold War world, commercial and national security interests are likely to clash in the debate on new export control legislation.

In the absence of other major initiatives congressional action on trade policy most likely will be limited to oversight hearings on NAFTA and the Uruguay Round. With Capitol Hill and the White House largely focused on a domestic agenda, trade probably will occupy only a relatively minor position on the policy radar in the coming year. President Clinton — with what seemingly were just half-hearted attempts to secure extension of fast-track authority — and Mr. Dole — with his opposition to new trade agreements — both have sought to downplay trade as a campaign issue. Barring any unexpected success by Republican presidential candidate Patrick Buchanan, who has made antitrade rhetoric a centerpiece of his campaign, trade may prove an issue of only secondary concern on the American political scene in 1996.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

Top aaaa Issue Index aaaa 1996 Archive Indexaaaa Search aaaa Subscriber Area aaaa Home