By  on December 20, 2005

WASHINGTON — The House narrowly passed a budget-reduction package Monday that will repeal a trade law that compensated U.S. companies hurt by undervalued and subsidized imports and eliminate a cotton subsidy program. The World Trade Organization said the two measures violated global trade rules.

An anticipated Senate vote on the package had not been taken by press time. Although there was stronger opposition in the Senate to repeal the trade law known as the Byrd Amendment, most experts predicted the legislation would pass.

In an all-night session, House lawmakers voted 212 to 206 to pass the almost $40 billion package of mandatory spending cuts, giving Republicans an aura of being fiscally responsible and countering criticism of the trade deficit, which hit $68.9 billion in October.

The package, which covers a wide range of domestic programs, including Medicare, food stamps and student loans, caught the attention of textile executives and the retail and importing sector. The House and Senate passed separate budget-reduction packages last week and a conference committee negotiated into the weekend to reconcile the differences between the two bills.

A main point of contention in the conference committee was the provision to repeal the Byrd Amendment, which channels funds — $1 billion in the last five years — to companies hurt by undervalued imports. The provision was contained in the original House bill, but not in the Senate's.

The House voted to phase out Byrd, allowing the disbursement of tariffs collected from foreign firms found to be "dumping" products on the U.S. market at below market prices to U.S. companies hurt by such action until Oct. 1, 2007. The House Ways and Means Committee stated the provision would provide a net trade savings of $300 million from fiscal year 2006 to 2010 and a total savings of $1.8 billion over 10 years.

As part of the budget-cutting package, the House also approved eliminating the Step 2 cotton subsidy program as of Aug. 1. The Step 2 payments, which provide subsidies to cotton farmers, textile mills and exporters, amounted to $2.4 billion between 1995 and 2004, according to the Environmental Working Group, a consumer advocacy group opposing agriculture subsidies, based on Department of Agriculture data. The amount of subsidies fluctuates based on a formula established by Congress that is intended to offset the higher price of U.S. cotton when the world cotton price average falls.Importers and retailers pressed for repeal of the Byrd Amendment, contending it increases consumer prices because it gives incentives to U.S. firms to file more of the unfair trade cases. Textile executives, however, oppose the elimination of the Byrd Amendment and argue the money helps compensate companies hurt by dumped goods and filing expensive antidumping cases.

Paul Kelly, senior vice president at the Retail Industry Leaders Association, which counts Wal-Mart and Target Corp. among its members, said the phaseout of Byrd is "much better than current law."

"We would have preferred a full and immediate repeal," Kelly said. "However, in the legislative process, compromises are part of life."

Missy Branson, senior vice president of the National Council of Textile Organizations, which opposed repeal of the Byrd Amendment, said the provision was important for companies that need protection against unfair competition.

To access this article, click here to subscribe or to log in.

load comments
blog comments powered by Disqus