Magazine article Insight on the News

GATT Could Raise Revenues and Boost Economy by Billions

Magazine article Insight on the News

GATT Could Raise Revenues and Boost Economy by Billions

Article excerpt

Taking nearly a decade to negotiate the new worldwide General Agreement on Tariffs and Trade will reduce or eliminate thousands of trade barriers that currently block exports of U.S. goods and services to more than 100 countries. Although the United States must also reduce its own tariffs -- thereby forgoing the revenue that those tariffs would have generated -- many believe that these losses will be more than recovered as expanded export opportunities generate increased taxable income. The benefit to the U.S. economy alone could exceed $100 billion annually.

But congressional approval of GATT appears blocked by Congress's quirky accounting constraints requiring that GATT have no adverse effect on the federal budget deficit during the next five years. Fair enough. But while those rules account for lost tariff revenues, they disregard the positive effects that GATT will have on other federal revenues during the same period. It seems that these effects are discounted partly because nobody is really sure how to count them.

To make matters worse, the Senate has its own requirement that GATT -- using those same rules -- have no adverse budget impact during an additional five-year period. Such a one-sided calculation means that GATT will increase the budget deficit by close to $30 billion (if the Senate does the math).

The resulting mess is almost comical. To "pay" for GATT, the president now must propose tax increases and cuts in federal programs. Such proposals already have provoked a predictable chorus of complaints from members of Congress, most of whom face reelection this year or oppose tax increases or cuts in their favorite programs. The president could seek a waiver of these budget rules on GATT, but that possibility appears blocked by congressional budget hawks who are leery that GATT may open the way for other measures that might increase the deficit.

Clearly, what is needed is a compromise between those who want to pay for GATT now and those who believe that GATT will pay for itself automatically. One solution -- which recently was embraced by House Minority Whip Newt Gingrich, a Republican from Georgia -- allows for GATT's revenue gains to be counted as well. …

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