Easing Trade Restrictions

Lowering the trade deficit has been a priority of the US government for number of years. Of the many proposals brought forward, most deal with fairness of trade with some of the trading partners instead of reducing imports or adjusting other trade policies. Many believe that too many countries are allowed to trade freely in the United States without granting equal access to US products in their countries. Japan was for two decades the trading partner with which we had the largest deficit and which elicited the most concern about fairness. The Omnibus Trade and Competitiveness Act of 1988 addressed the trade fairness issues and focused on ways to improve US competitiveness. At the turn of the century China took over from Japan as America’s number one “trade problem”.

The Omnibus Trade and Competitiveness Act:

The Omnibus Trade and Competitiveness Act of 1988 is many faceted on assisting businessman to be more competitive in world markets as well as on correcting perceived injustice in trade practices. The trade act was designed to deal with trade deficits, protectionism, and the overall fairness of our trading partners. Congressional concern centered on the issue that US markets were open to most of the world but markets in Japan, Western Europe, and many Asian countries were relatively closed. The act reflected the realization that we must deal with our trading partners based on how they actually operate, not on how we want them to behave. Some see the act as a protectionist measure, but the government sees it as a means of providing stronger tools to open foreign markets and to help US exporters be more competitive. The bill covers three areas considered critical in improving US trade: market access, export expansion, and import relief.

The issue of the openness of markets for US goods is addressed as markets access. Many barriers restrict or prohibit goods from entering a foreign market. Unnecessarily restrictive technical standards, compulsory distribution systems, customs barriers, tariffs, quotas, and restrictive licensing requirements are just a few. The act gives the US president authority to restrict sales of a country’s products in the US market if that country imposes unfair restrictions on US products. Further, if a foreign government rules discriminate against US firms, the US president has the authority to impose a similar ban on US government procurement of goods and services from the offending nation.

Besides emphasizing market access, the act also recognizes that some problems with US export competitiveness stem from impediments on trade imposed by US regulations and export disincentives. Export controls the Foreign Corrupt Practices Act (FCPA), and export promotion were specifically addressed in the export expansion section of the act. Export license could be obtained more easily and more quickly for products on the export control list. In addition, the act reaffirmed the government’s role in being more responsive to the needs of the exporter. Two major contributions facilitating export trade were computer based procedures to file for and track export license requests, and the creation of the National Trade Data Bank (NTDB) to improve access to trade data.

Export trade is a two way street: We must be prepared to compete with imports in the home market if we force foreign markets to open to US trade. Recognizing that foreign penetration of US markets can cause serious competitive pressure, loss of market share, and, occasionally, severe financial harm, the import relief section of the Omnibus Trade and Competitiveness Act provides a menu of remedies for US businesses adversely affected by imports. Companies seriously injured by fairly traded imports can petition the government for temporary relief they adjust to import competition and regain their competitive edge.

The act has resulted in a much more flexible process for obtaining export licenses, in fewer products on the export control list, and in greater access to information, and has established a basis of negotiations with India, Japan, and other countries to remove or lower barriers to trade. However, since a 1999 congressional report (accusing China of espionage regarding defense technology) restrictions on exports of many high tech products have again been tightened for national security reasons.

As the global marketplace evolves, trading countries have focused attention on ways of eliminating tariffs, quotas, and other barriers to trade. Four ongoing activities to support the growth of international trade are GATT, the associated World Trade Organization (WTO), the International Monetary Fund (IMF), and the World Bank Group.