Going After the Trade Gap

By Janice Castro

The 1,000-page bill was four years in the making and remaking. It was debated, dissected and many times given up for dead. But last week Congress finally finished -- and seemed overwhelmingly pleased with -- the most extensive reworking of U.S. trade laws in 25 years. By a vote of 85 to 11, the Senate passed a bill identical to the one that had already been approved 376 to 45 by the House. Although President Reagan vetoed and nearly killed the bill only four months ago, he will sign it this time, since Congress removed the offending provision requiring companies to give workers advance notice of plant closings and large layoffs.

To politicians in both parties, as well as many economists and business executives, the trade bill is a major advance in the drive by the U.S. to reduce the dangerous gap between its imports and exports -- a deficit that hit a record $170 billion last year. Texas Senator Lloyd Bentsen, the Democratic vice-presidential candidate, called the bill the "most important piece of legislation on competitiveness this country has ever considered" and a "great victory for restoration of U.S. economic leadership."

That remains to be seen. The law could be used as a creative force to enhance U.S. competitiveness or as a tool of protectionism that could contribute to economic stagnation. The legislation gives the President new power to counteract trade practices by foreign countries, but it also gives the White House the latitude to decide when to retaliate. In short, the law will be as tough as future Presidents make it.

Among its many provisions, the law will allow the President to block a foreign takeover of a U.S. company if the deal would harm national security. The legislation also directs the White House to speed up efforts to reduce foreign pirating of U.S. patents and copyrights. Perhaps the single most ; important provision will require the Government to begin comprehensive investigations of the trade practices of countries like Japan that allegedly maintain numerous barriers against imports. But what action to take, if any, is largely left up to the President. The legislation no longer contains the highly protectionist amendment proposed by Representative Richard Gephardt, which would have forced the White House to hike tariffs or take other retaliatory measures against nations that did not reduce excessive trade surpluses with the U.S.

The law contains plenty of election-year goodies for industries. Among them: $2.5 billion in new export subsidies for U.S. farm products, and a provision that will help depressed energy-producing states by repealing the windfall- profits tax on oil and gas. But the drafters of the bill wanted to avoid coddling business. The legislation says industries will be eligible for relief from imports only if they take steps to become more competitive.

Congress recognized that more money for better education and job training is crucial to competitiveness. But the amounts specified in the law are small: $980 million for worker retraining, $10 million for a literacy program and $25 million for special English-language classes for immigrant workers.

Trade experts doubt that the election will make much difference in how the law is administered. Both George Bush and Michael Dukakis praise free trade, but both would undoubtedly succumb to political pressure to protect many U.S. industries, as President Reagan has. Dukakis might be more insistent that U.S. business do things in return, like investing in equipment and training programs to enhance competitiveness. Either candidate will do well to remember that the object of the law is not to keep foreign products out but to make sure that American goods can compete.

With reporting by Jerome Cramer/Washington