Businessweek Archives

`Delay Would Mean The Death Of Gatt'


News: Analysis & Commentary

`DELAY WOULD MEAN THE DEATH OF GATT'

Looks like GATT's a go. Sure, GOP conservatives such as Senator Jesse Helms of North Carolina are eager to deal President Clinton another huge setback when the sweeping trade pact reaches the Senate floor in late November. And a new crop of "America First" Republicans, swept into office on Nov. 8, have joined a liberal Democratic chorus that claims the General Agreement on Tariffs & Trade will destroy U.S. jobs and erode American sovereignty. Even the usually reliable free trader, Senate Republican Leader Bob Dole of Kansas, is playing hard-to-get by extracting White House concessions in exchange for his support for GATT.

Worrisome developments all for Corporate America, most of which backs the accord. Yet the smart money is still betting that a lame-duck Congress will approve the trade accord, on which the House is expected to vote Nov. 29 and the Senate on Dec. 1. Clinton Administration officials may be numb over the Democrats' election rout, but they can still count votes. "At the end of the day, I think we will have enough votes. But it won't be easy, and it won't be pretty," says one senior Administration official.

The reason for the growing optimism: As it did with the North American Free Trade Agreement, the White House is pulling out all stops to get a GATT deal through. U.S. Trade Representative Mickey Kantor and Treasury Secretary Lloyd M. Bentsen have been in daily negotiations with Dole. As of Nov. 22, a compromise was in the works that would make it clearer that the U.S. can review decisions of the World Trade Organization, which would be set up to arbitrate trade disputes under GATT, and could pull out of the organization if it is dissatisfied with the overall tenor of its rulings. Under the tentative deal, a panel of retired judges would monitor WTO decisions for fairness.

BUSINESS BLITZ. Such bargaining won't assure passage of the accord. But if the White House can pull off GATT, business will have played a big role. Among those frantically lobbying Dole: the American Farm Bureau and Boeing Co., which manufactures aircraft in Kansas. Boeing and most other big companies expect to benefit handsomely from GATT's lower tariffs and new rules that protect service industries and intellectual property worldwide.

A year ago, an eleventh-hour corporate lobbying blitz helped rescue NAFTA from defeat. Today, the Alliance for GATT Now, a 200,000-member-strong business umbrella group, is mobilizing for a similar push. It is flooding Congress with phone calls from CEOs in their districts. Also scheduled: formal endorsements of GATT by Presidents Bush, Ford, and Carter. At the same time, the Business Roundtable has been beating on the doors of key Republicans such as Texas Senator Phil Gramm.

That's crucial because GATT's toughest hurdle is in the Senate. There, rules mandate that at least 60 senators waive budget requirements that the pact's tariff reductions be matched by offsetting tax hikes and spending cuts. That's why strong backing by Dole is essential. Without him, the GATT implementing legislation--which creates the WTO--would die.

The rub is that Dole has his eye on the GOP Presidential nomination in 1996. And his party's right wing is wary of the pact, fearing that the WTO, like a mini-U.N., will be dominated by small, anti-American developing countries. "Dole's in a tough spot," says one Clintonite. "His home state favors GATT, especially the farmers. But he's raising [doubts] to prove to his party's right wing that he's a credible candidate."

Most businesspeople, however, don't harbor any such doubts. The way they see it, GATT is NAFTA on steroids. Twenty times as big as the U.S.-Canadian-Mexican deal, the pact promises enormous macroeconomic benefits: an additional $100 billion to $200 billion a year in U.S. economic activity after a 10-year phase-in, according to the Treasury Dept. and the Organization for Economic Cooperation & Development. And U.S. approval of the 124-nation accord would give retooled U.S. companies a leg up in cracking new markets. "We're actively working for it and will continue to push hard," says Chrysler Corp. Chief Executive Robert J. Eaton.

WARNINGS. But the chief motivation for passing GATT may be the overriding fear that defeat or delay would almost certainly doom the pact in a new Congress more hostile toward free trade. "Delay would mean the death of GATT, pure and simple," warns Vice-President Al Gore. "And that would hurt the country's economy immeasurably."

Indeed, the defeat of GATT would humiliate the U.S. and send shock waves through world financial markets. After all, three Administrations spent seven years pushing for an accord to open world markets despite fierce objections from Europe and Asia. "The markets would be badly shaken," says Robert Hormats, vice-president for international relations at Goldman Sachs International Ltd. "If GATT fails, it will stop U.S. global economic policy dead in its tracks." Hormats contends that, in a GATT-less world, the U.S. could forget about winning future international cooperation on currency stabilization or persuading Russia to stick with free-market reforms. Adds John P. Pipsky, chief economist at Salomon Brothers Inc.: "It's inconceivable that Congress wouldn't pass it."

The vote also marks the first big test of bipartisan cooperation since the Democrats were decimated in the election. If Congress hands Clinton a defeat of this magnitude so soon after the GOP landslide, the President's weakened status will loom over every policy initiative for the remainder of his term. And Republicans will look like masters of gridlock rather than the leaders of a new era of accomplishment. That's why Representative Newt Gingrich (R-Ga.) has embraced the pact, over the objections of GOPers who want to delay it until next year.

GIVEAWAYS. Of course, even if GATT passes in the lame-duck session, both parties are running political risks by pushing for it. The Administration foolishly loaded up the GATT bill with extraneous pork such as the Pioneer preference amendment. That provision settles a dispute with Washington Post Co. and two other media companies seeking settlement of a flap with the government over use of cellular-phone airwaves. The companies, forced to pay market prices for licenses originally given for free, won financial concessions in the amendment.

That has been seized upon by critics as the kind of giveaway that voters rejected on Election Day. White House officials now say the provision may be renegotiated next year. But by asking for quid pro quos in return for his support for GATT, Dole could come off as being just as mired in deal-mongering.

Despite the turbulence, business believes there's too much at stake for GATT to fail. The U.S. software industry would would have no recourse in fighting copyright piracy of an estimated $12.8 billion a year, says the Business Software Alliance. And by some estimates, U.S. agribusiness would lose up to $10 billion in additional crop exports over the next decade. Without passage, moreover, the Summit of the Americas in Miami on Dec. 9-11 (page 52), where Clinton is to unveil his plan for a hemispheric free-trade zone, would turn into a Wake of the Americas. It's such fears that should put GATT over the top....AND PRICES WILL FALL

1995 savings from reduced tariffs MILLIONS

MACHINERY

AND APPLICANCES $2,056

ELECTRICAL EQUIPMENT 2,375

IRON/STEEL 534

GAMES, SPORTS EQUIPMENT 566

FURNITURE AND BEDDING 222

ALL ITEMS $9,253

DATA: OFFICE OF THE U.S. TRADE REPRESENTATIVE,

THE URUGUAY ROUND: AN ASSESSMENT

Douglas Harbrecht, with Susan B. Garland and Owen Ullmann, in Washington, and bureau reports


Silicon Valley State of Mind
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus