Statement of Administration Policy: H.R. 5100 - Trade Expansion Act of 1992

(House Floor)
(Rostenkowski (D) Illinois and 46 others)

Trade expansion is of vital importance to the U.S. economy — particularly at this time, when more of our citizens than ever before owe their jobs to trade. The Administration has been successful in opening markets worldwide. The market-opening negotiations now underway, and the aggressive use of existing trade tools, will continue to ensure trade expansion abroad and job creation at home.

Now is not the time to abandon a successful strategy and begin to raise barriers to trade. If H.R. 5100 is presented to the President in its current form, his senior advisers would recommend a veto.

H.R. 5100 contains a number of provisions that would send the United States down an ill-conceived path leading to cycles of adversarial trade retaliation and economic contraction. The Administration's specific objections to the trade provisions of H.R. 5100 are described in the Attachment.

These provisions are particularly destructive at a time when U.S. economic growth and job creation are both directly linked to exports.

—   Since 1988, 70 percent of U.S. economic growth has come from exports, generating almost 2 million export-related jobs.

—   The U.S. is now the world's largest exporter, with over $420 billion in exports annually.

—   Every $1 billion in additional merchandise exports generates 20,000 export-related jobs in the United States.

The scorekeeping language in section 444 is unacceptable. This section contains the CBO scoring language required by House Rule XXI. In a letter of December 21, 1990, the President stated that he would veto any bill containing such language. The effect of this provision is to overturn a key element of the Federal spending control mechanisms enacted pursuant to the 1990 Budget Agreement.

SCORING FOR THE PURPOSE OF PAYGO

H.R. 5100 would increase receipts; therefore, it is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation ACT (OBRA) of 1990. OMB's preliminary scoring estimates of this bill are presented in the table below. Final scoring of this proposal may deviate from this estimate. If H.R. 5100 is enacted, final OMB scoring estimates would be published within five days of enactment, as required by OBRA. The cumulative effect of all legislation on direct spending and revenue will be issued in monthly reports transmitted to Congress.

ESTIMATES FOR PAY-AS-YOU-GO
($ in Millions)

Attachment

PROVISIONS OF H.R. 5100 THAT THE ADMINISTRATION STRONGLY OPPOSES

—   A new super 301 provision that could severely disrupt trade flows by triggering cycles of retaliation and counterretaliation, and deny the President what every successful negotiator needs — flexibility in choosing how and when to pressure a trading partner.

—   Anticircumvention provisions that would boomerang against U.S. exporters, brand certain kinds of normal business behavior as unfair trade practices, and raise concerns among our trading partners about GATT consistency.

—   A mandated section 301 investigation of the Japanese auto and auto parts market that would undermine our ongoing market-opening efforts, discriminate against U.S. workers in Japanese owned or controlled plants in the United States, unconstitutionally infringe on the President's authority to negotiate with foreign governments, and could lead to counter-retaliation.

—   A mandated 301 investigation on rice that would undermine ongoing negotiations in the Uruguay Round that have already produced a text that would benefit U.S. rice producers, and unconstitutionally infringe on the President's authority to negotiate with foreign governments.

—   An unilateral increase in bound tariff rates on iron and steel pipe and tube, which our trading partners could claim violates our GATT obligations, and could entitle them to retaliate against U.S. exports.

—   A requirement to review compliance with trade agreements, which would allow any individual, including foreign persons, to petition for review, and would provide no standard by which the Administration could distinguish meritorious petitions from frivolous ones, thus diverting resources from negotiating market-opening agreements.

—   An amendment to the special 301 provisions (intellectual property rights) that would require the United States to ban entry of certain reciprocal products, thus reducing the country's ability to craft the most effective sanctions possible.

—   A prevision requiring grain importers to obtain end-use certificates specifying the purpose of the imported commodity. This requirement would impose costly new regulations on the U.S. grain handling system, undermine the competitiveness of U.S. agriculture, raise questions about consistency with our obligations under the GATT and the U.S.-Canada Free Trade Agreement, and potentially have an adverse effect on U.S. grain exports to Mexico.

—   A provision purporting to require the President to negotiate to harmonize the world's antitrust laws, which could make our antitrust laws less effective in ensuring the competitiveness of American firms. This requirement would unconstitutionally infringe on the President's authority to negotiate with foreign governments and could undermine efforts underway to eliminate anticompetitive conduct in international trade.

In addition, the bill contains other provisions to which the Administration has expressed opposition, including:

—   A provision that purports to require USTR to request consultations with a foreign country whenever a 301 petition is rejected for failure to demonstrate a current burden or restriction on U.S. commerce, but future impact is likely.

—   Various amendments to the antidumping law, including (1) a modification of the injury standard that would require the ITC to consider the relative health of the domestic industry only in terms of the impact of imports, and (2) a restriction to a single surrogate country in any non-market- economy dumping case.

—   Amendments to the Generalized System of Preferences that would limit the effectiveness of the program for agricultural products generally, and would restrict the President's flexibility to respond to emerging market economies such as those of the former Soviet Union.

Finally, the Administration strongly opposes any amendment to H.R. 5100 that purports to require a negotiated voluntary restraint agreement regarding Japanese auto and light truck imports. Such protectionist provisions like those in the Levin amendment would:

—   Cost U.S. consumers billions of dollars annually in higher prices, while padding the bank accounts of Japanese producers.

—   Serve only to insulate U.S. automakers from the market forces that can stimulate their competitiveness.

—   Worsen the Budget Deficit with revenue losses which could range from $150 million in FY 1994 to nearly $360 million in FY 1997. This would be subject to the PAYGO provisions contained in OBRA of 1990.