The oil and gas industry should tell U.S. lawmakers convening for a short, single-issue session this week that an imperfect trade bill is better than no trade bill at all.
If implementing legislation for the General Agreement on Tariffs and Trade (GATT) doesn't pass this month, it might never pass at all. Failure would hurt trade, weaken economies, and suppress demand for oil and gas.
LEGITIMATE CONCERNS
Legitimate concerns have been raised about the trade bill. But they are overwhelmed by the prospect of tariff reductions averaging 30% by 123 countries. The resulting cut in governments' collective take from human enterprise is expected to boost the worldwide economy by $235 billion/year by 2000.
So the stakes are huge. If the U.S. doesn't ratify the Uruguay Round trade agreement, turning GATT into the World Trade Organization, other major trading nations probably won't either. Trade, economies, and energy demand then would suffer.
Failure of the U.S. to ratify is indeed possible if Congress doesn't do the job now. Delay into the next session of Congress would cancel fast-track status of the implementing legislation, which would open the bill to amendments. Protectionist interests would try to load the bill with changes and make passage impossible.
Republicans who think delay would enable them to improve the legislation as well as protectionist Republicans who just want to kill it must weigh the risks carefully. If the bill fails, history and a public keen to make government work will blame their party. Failure, moreover, would come after weeks or months of controversy early next year, weeks or months for which campaigning Republicans committed themselves to another, more constructive agenda.
Ratification's major hazard lies in the Senate. One of the problems there is righteous reluctance by some Republicans to appear careless with the federal budget. To pass the trade bill, 60 senators must vote to waive a requirement for new revenues offsetting income presumed to be lost when tariffs drop. Some senators fear that approving the waiver would make them look fiscally irresponsible.
What is irresponsible, of course, is a set of budget rules blind to the economic effects of tax changes. Republicans want to replace the rules with dynamic budgeting, which would acknowledge that not all tax hikes raise revenues and that some tax cuts boost revenues by encouraging economic activity.
Republicans should indeed adopt dynamic budgeting, but they shouldn't wait until they've had the chance to do so before taking up the trade bill. Agreement is widespread that federal revenues will grow if tariffs come down. Senators should say so, waive the faulty budget rules without blushing, pass the trade bill now, and adopt dynamic budgeting next year.
POLITICAL INTERESTS
The oil and gas industry has political reasons that go beyond their stake in economic growth to seek prompt action on the budget waiver and trade bill. Supply side arguments favoring the budget waiver will be central to future issues, most immediately for producers. To win tax relief during market slumps, producers must argue that lower rates can help government revenues by preserving or enlarging the tax base. It would be helpful if a majority of senators accepted the concept now.
They call it a lame duck session of Congress. But that's no reason to ignore it. Issues facing lawmakers in the next couple of weeks have the potential to affect industry's economic and political fundamentals for many years.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
