WASHINGTON — The chairman of the Senate Trade Subcommittee said Thursday that if Congress has to come up with $13 billion to cover lost revenues from the tariff reductions in the GATT Uruguay Round treaty, the worldwide trade agreement will not win Capitol Hill approval.
In a speech to the U.S. Chamber of Commerce, Sen. Max Baucus (D., Mont.) also said the Clinton administration wants to include in GATT a plan to give Caribbean Basin Initiative countries treatment equal to Mexico under the North American Free Trade Agreement, as well as extend the Generalized System of Preferences.
The GSP, which will expire this year, reduces tariffs on imports from developing countries. Adding those two items to the GATT pact would boost the cost in the first five years to $18 billion, Baucus estimated.
He urged that Congress waive the requirement that the revenue shortfall be covered. “A budget waiver is good policy,” Baucus said.”I am pessimistic about the political chances to pass a GATT bill any other way.”
Any spending cuts or new taxes that can pass congressional muster this year would likely go toward health care reform, he said.
Baucus also urged the business community to press Congress to consider GATT this year instead of postponing it until 1995, as has been proposed by some on Capitol Hill.
A retail lobbyist at the meeting said the industry favored waiving the costs, largely because the administration has proposed changing the tax treatment on inventory as a means to help raise the needed money. Representatives for the U.S. Chamber of Commerce and the National Association of Manufacturers, however, said their memberships would oppose waiving the treaty’s costs.
The proposal to waive the costs of GATT is not favorably viewed by the administration. On Capitol Hill Wednesday, Leon Panetta, director of the Office of Management and Budget, told reporters that he favored waiving the costs of the second five years of GATT, but would insist that the first five years be paid for.
“It’s important we maintain that discipline,” Panetta said. “If we allow a waiver here, where do we draw the line on other things? One thing that has restored our credibility with the financial markets is our willingness to abide by the rules.”
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Baucus said that financial markets would not react negatively to waiving the costs of GATT because they would realize the agreement would ultimately raise money for the Treasury by increased trade.