By  on May 18, 1994

WASHINGTON -- As Congress starts zeroing in this week on the GATT Uruguay Round treaty, prospects for the pact's approval on Capitol Hill have gone from a sure thing to a toss-up.

GATT's detractors are skirmishing on numerous fronts; what the Clinton administration once viewed as solid support for the treaty has started to erode as questions are raised over its funding and U.S. sovereignty in world trade disputes under new international rules.

As Rep. John Spratt (D., S.C.), chairman of the House Textile Caucus said, "No one knows what will happen because no one is sure what GATT is. Will it mean new taxes? Will it threaten U.S. sovereignty? Until those questions are answered by the administration, its future is questionable."

The treaty is aimed at liberalizing world trade in various sectors, including textiles and apparel.

In the Senate, Sen. Ernest F. Hollings (D., S.C.), is attempting to stop GATT procedurally by forcing the Senate to pay for the tariff revenue lost in the first 10 years under GATT, instead of just paying for the first five years as the administration requested. With Congress perplexed by the prospect of finding $13 billion for five years, the task of coming up with $43 billion for 10 years could be fatal for GATT.

Textile titan Roger Milliken, chairman of Milliken & Co., Spartanburg, S.C., has emerged as the primary industrialist fighting GATT. Milliken has mobilized the forces he organized during his unsuccessful battle against the North American Free Trade Agreement and is mounting grass-roots campaigns considered formidable by GATT proponents. Some estimate Milliken is pouring up to $1 million into his anti-GATT campaign, and as Rep. Jim Kolbe (R., Ariz.), a GATT backer, said, "He has brought in a lot of money and is paying for good talent."

Milliken declined to say in a telephone interview how much he is willing to spend to defeat GATT, but indicated he'll do whatever it takes.

"NAFTA was a battle; GATT is a war," he said.

Milliken's biggest victory so far was to convince House Minority Whip Newt Gingrich (R., Ga.) that the treaty threatens the sovereignty of the U.S. in international trade disputes by the creation of the World Trade Organization, which would replace the GATT.Gingrich's support of NAFTA was crucial, and those on both sides of the GATT debate say if GATT is to win, it too will need his backing.

Since meeting several weeks ago with Milliken, Gingrich has sought out GATT's most ardent backers in an attempt to decide his position on the treaty. Gingrich told WWD that in all probability he will attempt to amend GATT, or influence the drafting of the implementing legislation to change the WTO.

"The WTO is a big, cumbersome system," Gingrich said. Because each member of the WTO would be given one vote, Gingrich said, he is concerned that U.S. interests could be outvoted by an alliance of smaller countries and that the Clinton administration would have to accede to WTO decisions.

Milliken has characterized this WTO as "a horrifying concept," because the U.S. could face rewriting all of its trade laws to comply with WTO decisions. U.S. Trade Representative Mickey Kantor, in a letter to Sen. Jesse Helms (R., N.C.), attempted to refute that argument saying that without the WTO, the U.S. "would find it much harder to continue its economic progress into the 21st century."

Rep. Robert Matsui (D., Calif.), an administration point-man on trade, counters that should the WTO make any rulings contrary to U.S. law, the U.S. would not be bound to comply.

"It would be difficult," Matsui said, "but we wouldn't lose our sovereignty."

The House Trade Subcommittee is planning a hearing in early June in an attempt to dispel worries over the WTO.

"I think we can take care of the sovereignty problem," a subcommittee aide said. Yet Milliken and his forces continue to persevere.

His Washington counsel, Jock Nash, debated the WTO last Thursday with Assistant U.S. Trade Representative Rufus Yerxa before 15 House members who belong to the Competitiveness Counsel.

On another front, 55 House members have written President Clinton urging that consideration of GATT be postponed until 1995 for several reasons: its cost, problems with the WTO and concerns over labor and environmental protections.

Republicans, along with moderate Democrats, are starting to complain that the Clinton administration is too eager to link trade to labor standards and environmental protections. Kolbe warned that if the Clinton administration writes labor and environmental law into GATT, most Republicans would vote against it."It was bad enough in the side agreements of NAFTA," Kolbe told WWD. "It makes for bad trade law and bad politics."

Meanwhile, GATT's proponents are only getting started. The Clinton administration began its pro-GATT campaign the first week of May when the President wrote Congress asking that the implementing legislation for GATT be approved this year. U.S. Trade Representative Mickey Kantor spent most of last week meeting with House members in an attempt to persuade them of the goodness of GATT.

This week, the House Trade Subcommittee began completing the noncontroversial portions of GATT's implementing legislation Monday, and committee chairman Sam Gibbons (D., Fla.) said he'll reconvene the panel to act on the more contentious provisions of GATT when the administration is ready.

"I want to do this as soon as possible," Gibbons said.

In an appearance Monday before the subcommittee, Kantor also sought to allay concerns of textile-state members that market access in India, Pakistan and Thailand was not achieved for U.S. textiles in the GATT negotiations. This market access was one of the key points sought by the textile industry, once it was clear that the Multi-Fiber Arrangement -- which governs the current system of quotas for textile and apparel trade -- would be phased out in 10 years under the Uruguay Round treaty and not in 15 years, as the industry wanted.

Kantor told the legislators that while no market access agreements had been reached, the U.S. could secure increased access without legislation in several ways. Specifically, he said, the U.S. could deny accelerated import growth rates for countries that don't allow imports of U.S. textiles, turn away overshipments above annual quota limits, deny tariff-free treatment under the Generalized System of Preferences, seek punitive damages under Section 301 and delay tariff reductions on textiles exported by countries that don't permit U.S. textiles entry until the end of the 10-year MFA phaseout.

GATT's money woes aren't going away, though. Under budgeting laws, the lost tariff revenue must be offset either via spending cuts or new taxes and fees. Leon Panetta, director of the Office of Management and Budget, is looking for ways to raise the money and said the administration plans to submit GATT-implementing legislation to Capitol Hill by mid-June.Industries predicted to profit the most from GATT, including retailing, are being targeted for higher taxes, and one method being considered is altering the method retailers use to value their inventories and consequently, calculate their profits. The change in tax law governing inventories could raise $1.3 billion, the administration predicts.

Rep. L.F. Payne (D., Va.), a member of the House Textile Caucus who remains undecided on GATT, has proposed that Congress not offset the costs of tariff reductions because they will spur increased trade and, consequently, additional income for the government. Such a waiver has bipartisan support in the House and Senate, but opponents such as Hollings could make it difficult for such a plan to win Congressional approval.

Timing of Congressional consideration also could be difficult, as Congress faces an already full agenda of health care and welfare reform, and consideration of China's trade status.

"The administration has to show Congress its leadership on trade," Kolbe said. "The consequences of failing to pass GATT would be catastrophic, and we can't take anything for granted."

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