WASHINGTON — Senate Republicans are objecting to a provision in the GATT Uruguay Round treaty that permits government industrial subsidies, a sign the agreement may not have smooth sailing when it reaches Congress.
In a letter Monday to U.S. Trade Representative Mickey Kantor, all 44 Senate Republicans said the agreement reached in December promotes an industrial policy, which they oppose.
“We have serious doubts about the wisdom of this shift toward industrial policy,” said the letter, written by Sen. Jack Danforth (R., Mo.). Danforth is a member of the Senate Finance Committee, which has jurisdiction over trade. The committee is to meet with Kantor on GATT on Feb. 8.
While government industrial subsidies are not expected to affect textile and apparel trade, the issue “could open a Pandora’s box,” said Seth Bodner, executive director of the National Knitwear and Sportswear Association. “This may mean some people are really unhappy and may make some changes to the agreement. And if they ask for changes, we’ll ask for other changes.”
The industrial subsidies agreed to in GATT would permit governments to subsidize research and development, regional development and environmental compliance. For example, a company could seek government aid to pay for a new technology that is environmentally cleaner.
The Republicans have asked Kantor what the subsidies would mean to foreign competition and what they could end up costing the U.S. The Republicans also want to know what industries would be subsidized and what help would be available to U.S. industries facing subsidized competition.
A House staffer said there is quite a bit of discomfort in Congress about industrial subsidies and expects it to be a point of discussion in the upcoming debate. She added, however, that it “likely wouldn’t derail GATT.”