How the 105th Congress Voted on Trade and Subsidies

The 105th Congress voted on a number of bills and amendments directly affecting the freedom of Americans to engage in trade with people in the rest of the world. Among the more important pieces of legislation voted on were renewal of normal trade relations with China, authorization of fast-track authority for the president, a resolution calling for a one year ban on steel imports, a bill to lower barriers to imports from Caribbean countries, sanctions against foreign entities that engage in religious persecution, and reforms that would make it more difficult for Congress to impose sanctions in the future.

Freedom to Trade
Members of the 105th Congress voted on the following major bills affecting the freedom of Americans to trade:

•Fast-Track Trade Authority. Officially titled the Reciprocal Trade Agreements Authorities Act, H.R. 2621 would have authorized the president to negotiate agreements with other nations to lower barriers to trade. Any agreement negotiated by the president would be subject to an up-or-down vote in Congress with no amendments allowed. If passed, so called fast-track authority would have provided momentum for negotiation of the Free Trade Agreement of the Americas, the proposed regional trade pact that would lower barriers to trade among 34 nations in the Western Hemisphere, including the United States. It would also have enhanced the ability of the
United States to participate in multilateral negotiations through the World Trade Organization, beginning in 1999, to lower barriers worldwide to trade in services and agriculture.⁹

On September 25, 1998, the House voted 243 to 180 to reject H.R. 2621 and deny the president fast-track authority. On November 5, 1997, S. 955, a procedural bill that would have allowed a Senate floor vote on fast track, passed by a vote of 68 to 31. A vote against S. 955 was
a vote to defeat fast track, while a vote in favor moved it closer to passage.

•Trade with China. The House voted twice in the 105th Congress to continue normal trading relations with China. Each year, under the Trade Act of 1974, the president is required to issue a waiver in order for China to qualify for "normal trade relations"¹⁰ with the United States. Congress can override the waiver by a majority vote in the House and Senate. Without normal trade relations, the average tariff level on goods imported from China would jump from 6 percent to 44 percent, dramatically raising costs for Americans who benefit from the $60 billion in goods imported from China annually. Higher trade barriers against China would also invite retaliation by China against U.S. exports and would set back efforts to raise the living standards and enhance the autonomy and human rights of millions of Chinese citizens.¹¹ On July 22, 1998, the House voted 264 to 166 to reject the resolution to revoke normal trade relations with China.¹² On July 17, 1997, the Senate voted 77 to 22 to reject a similar motion to repeal China's normal trade status.

•Steel Import Ban. Responding to pressure from domestic steel producers, the House voted 345 to 54 on October 15, 1998, for a resolution threatening a one-year ban on imported steel. The resolution called on the president to impose the ban if he found that foreign competitors were selling steel in the United States at "unfair" prices. Such a ban would be a boon to the domestic steel industry and its unions, but it would impose a heavy cost on the economy as a whole by driving up costs in far larger industries, such as the automotive sector, that use steel as an input of production. Besides hurting end consumers and other industries, a steel ban would invite retaliation against U.S. exports and undermine the rule of law in the global trading system. It would add to economic instability in Japan, Brazil, Russia, and other steel-exporting nations by denying them foreign exchange, adding to the global downturn that has already hurt American exporters. Although H.R. 598 was nonbinding, it was calculated to pressure the Clinton administration to take "aggressive action" against steel imports. It expressed a sentiment in Congress that is profoundly anti-trade and anti-consumer.

•Sanctions against Religious Persecution. Although watered down from earlier versions, H.R. 2431—the Freedom from Religious Persecution Act—would have imposed selective trade sanctions against countries that commit
or condone religious persecution. It would also impose a sweeping ban on trade with Sudan because of alleged abuses there. While everyone can agree that religious persecution abroad should be opposed, trade sanctions have proven to be an ineffective and self-defeating tool for achieving U.S. foreign policy aims. Diplomatic pressure and private economic engagement produce better results without disrupting trade and harming U.S. interests. Nonetheless, the House voted 375 to 41 on May 14, 1998, to pass the Freedom from Religious Persecution Act.¹³

•Sanctions Reform. Sen. Richard Lugar (RInd.) proposed an amendment to the fiscal year 1999 agriculture appropriations bill that would place a number of restrictions on future economic sanctions imposed unilaterally by the United States. Sanctions have become a costly and ineffective tool of U.S. foreign policy, denying American companies export and investment opportunities abroad while failing to achieve stated foreign policy goals. Among other reforms, the Lugar amendment would impose a two-year sunset provision on future sanctions; grant more flexibility to the president to waive sanctions in the national interest; and ban restrictions on exports of food, medicine, and medical equipment. The committee recommending a sanction would be required to report on the specific objective of the sanction and how the proposed sanction would help to achieve that objective. The International Trade Commission would be required to report on the immediate and long-term economic cost of any new sanction proposal. The Lugar amendment would have encouraged a more deliberate and informed debate on future sanctions. The Senate rejected the Lugar amendment by voting 53 to 46 on July 15, 1998, to table it.

•CBI Parity. The United States–Caribbean Trade Partnership Act, H.R. 2644, would have lowered tariffs on selected imports from Caribbean and Central American exporters. The bill was originally intended to offer tariff "parity" to nations included in the Caribbean Basin Initiative. It would have lowered tariffs to help Caribbean exporters compete in the U.S. market against imports from Mexico and Canada that enter the United States duty-free under the North American Free Trade Agreement. The bill in its final form granted only partial tariff relief and contained a number of restrictions that fell short of true free trade. Nonetheless, the bill was still opposed by,
among other interests, the domestic textile industry to thwart competition from lower cost Caribbean producers. Granting tariff parity to the small trading nations south of our border would have boosted economic development in a poor region of our hemisphere (made even poorer in 1998 by the ravages of Hurricane Mitch) while providing benefits to American consumers. On November 5, 1997, H.R. 2655 failed by a vote of 182 to 234.¹⁴

Freedom from Taxpayer Subsidies

The 105th Congress also voted on several bills affecting the use of taxpayer dollars to subsidize
international transactions. The bills determined funding for the IMF, Ex-Im Bank, OPIC, ESF, and the marketing of agriculture exports.

•IMF Funding. The Senate voted overwhelmingly to provide $17.9 billion in additional taxpayer resources for the IMF. The funding was provided despite the IMF's poor record on promoting economic growth and stability in recipient countries. Although the IMF is touted as a necessary defense against financial crises, IMF bailouts actually make future crises more likely by shielding investors and policymakers from the full consequences of their mistakes, thus inviting risky behavior and economically unsound policies. IMF loans short-circuit market signals in the global economy, delaying needed policy reforms (as in Russia) and socializing the risk of private
investors. IMF loans distort rather than enhance the global market economy.¹⁵ On March 26, 1998, the Senate voted 84 to 16 in favor of the full IMF appropriation. The House did not vote directly on IMF funding in the 105th Congress, instead approving it through the $500 billion Omnibus Appropriations bill in October.

•Exchange Stabilization Fund Limits. The House did cast a vote on international bailouts of a different kind when Rep. Bernard Sanders, the Vermont Independent, offered an amendment to the 1999 Treasury/Postal appropriations bill. The Sanders amendment would have barred the secretary of the Treasury from using more than $250 million from the Exchange Stabilization Fund in any rescue package for foreign countries. The fund was established in the 1930s to be used by the Treasury Department to intervene to stabilize the U.S. dollar against foreign currencies. In 1995 the Clinton administration used $20 billion from the fund to cobble together—without the need of congressional approval—an international bailout package for Mexico in the immediate aftermath of the collapse of the peso in December 1994. A strong argument can be made that the Mexican bailout set the stage for the far more serious financial meltdown in East Asia two years later by signaling to investors and policymakers alike that another bailout would be forthcoming if their investments proved unwise. This "moral hazard" encouraged excessive risk taking, setting the stage for another, even more expensive bailout. A vote for the Sanders amendment would have at least reduced the opportunity for damaging U.S.
intervention in the future. The amendment failed by a vote of 195 to 226 on July 16, 1998.

•OPIC Funding Cut. Both the House and the Senate considered amendments to cut taxpayer
spending on OPIC. OPIC charges private companies a fee to insure their investments abroad, often in places where the risk of failure is relatively high. The agency returns a nominal profit to the U.S. Treasury each year but still requires an annual appropriation of $32 million for administrative costs. The agency currently backs about $20 billion in projects overseas, exposing U.S. taxpayers to huge payments should those investments go bad. OPIC distorts the international flow of capital by steering investment dollars to projects and countries that a truly free, private capital market would deem too risky. It also discourages reform in less developed countries by
shielding policymakers from the full effects of their uneconomic policies. OPIC is not a protrade
or pro-investment agency but a form of government intervention that distorts the market.¹⁶ In the House, an amendment by Rep. Ed Royce (R-Calif.) would have cut taxpayer funding by one-third. It failed on July 30, 1997, by a vote of 156 to 272. A similar amendment in the Senate, offered by Sen. Wayne Allard (R-Colo.) on July 16, 1997, failed by a vote of 35 to 64.

•Ex-Im Bank Funding. The House considered an amendment to eliminate funding for Ex-Im Bank, OPIC, and other programs that subsidize foreign trade and investment. Similar to OPIC, Ex-Im Bank provides subsidized incentives for U.S. exporters to sell in markets where the risk of nonpayment would otherwise be too high. Export subsidies do not expand total U.S. exports but shift exports toward the small percentage of U.S. companies that qualify for the subsidies. In that way, Ex-Im Bank distorts rather than promotes free trade. Sponsored by Rep. Ron Paul (R-Tex.), the amendment to zero out funding for Ex-Im Bank and OPIC failed on July 30, 1997, by a margin of 40 to 387.

•Market Access Program Limits. Market Access Program funds are used to promote the sale abroad of goods containing U.S. agricultural products. Like other export subsidies, the MAP program does not promote trade in general but favors some exporters—in this case those using U.S. farm produce in their final products—over others. An amendment proposed by Sen. Richard Bryan (D-Nev.) to cut funding for MAP from $90 million to $70 million was defeated in the Senate on July 23, 1997, by a vote of 59 to 40. An amendment offered in the House on July 24, 1997, by Rep. Stephen Chabot (R-Ohio) to eliminate the program failed by a vote of 150 to 277.

Who Supports Free Trade?

Examining how members of Congress actually voted on major trade and subsidy bills allows us to classify members according to the matrix developed above. Members who voted in favor of freer trade on a majority of trade votes and against subsidies on more than half of the subsidy votes are classified as free traders. If they tended to vote in favor of freer trade and also in favor of subsidies, they are classified as internationalists. Those who opposed a majority of the subsidies and also a majority of the trade-expanding initiatives are classified as isolationists.
Finally, those who opposed the major trade initiatives while favoring trade subsidies are classified as interventionists.

House Members Preferred Subsidies to Trade

In the 105th Congress, 249 members of the House, or 58 percent, earned the label interventionist," voting at least half the time against more open trade and against cuts in subsidies. Another 106 members, or 25 percent, fit in the internationalist category, voting at least half the time to reduce import barriers and to continue subsidies. Another 49 members, or 11 percent, were isolationists, voting at least half the time both to cut subsidies and to oppose trade liberalization. Only 25 members, or 6 percent, could be called free traders on the basis of their votes in the 105th Congress in favor of trade expansion and against subsidies. (See Appendix A
for a list of members in each category.)

The center of gravity in the House on trade and subsidies is clearly in the interventionist quadrant. Overall, members of the House in 1997–98 voted in favor of trade expansion in only 33 percent if the major votes cast. On the four major votes on international economic subsidies, only 31 percent of the votes cast were against subsidies. Republicans were somewhat less interventionist; 43 percent of them voted for freer trade compared to 21 percent of the Democrats, and 42 percent of them voted to cut subsidies compared to 19 percent of the Democrats. In other words, the typical Republican in the 105th Congress, although tilting toward intervention, was still more than twice as likely to support trade liberalization and cuts in subsidies as was the typical Democrat (see Figure 2).

Republicans predominate among free traders, internationalists, and isolationists, while Democrats predominate among interventionists. All 25 of the free traders in the House were Republicans, while Republicans outnumbered Democrats 4 to 1 among both isolationists and internationalists. Among interventionists, Democrats outnumbered Republicans by more than 2 to 1.

No member of the House voted for less government intervention on all nine trade and subsidy votes. Of those missing only one vote, Rep. Phillip Crane (R-Ill.), chairman of the House Ways and Means Trade Subcommittee, voted to expand trade on all five major trade bills while voting to cut subsidies on three of the four measures surveyed. (See Figure 3 for selected House members.) Only four other House members—Tom Campbell (R-Calif.), Mark Sanford (R-S.C.), J. D. Hayworth (RAriz.), and John Shadegg (R-Ariz.)—voted to cut subsidies at all four major opportunities while voting to expand trade on four of the five major initiatives considered.¹⁷ (See Appendix B for the ratings and votes of individual members.) Of the one-half of House members who voted consistently to intervene in the international economy, 17 could be described as hardcore, opposing every major trade initiative while opposing every major amendment to curb subsidies. Most prominent among them is House Minority Leader Richard Gephardt (D-Mo.).

Senate Leaned toward Trade and Subsidies

In the Senate the voting record on international economic issues during the 105th Congress was pro-subsidy, as in the House, but it also tended to be mildly pro-trade. More than half of the Senate's 100 members, a total of 55, compiled internationalist voting records that were generally pro-trade and pro-subsidy. Another 14 senators voted as isolationists, generally opposing both trade expansion and subsidies, while 19 tended to vote for intervention by voting against trade liberalization and in favor of subsidies. Only 12 senators earned the title of free traders by voting a majority of the time both for major pro-trade legislation and against subsidies (see Figure 4).

As a group, senators voted in favor of liberalized trade on 64 percent of the total votes cast on the three major trade bills considered and voted against subsidies only 30 percent of the time on the three major subsidy votes. Senate Republicans were only slightly more pro-trade than the Democrats, voting 65 percent of the time for more open trade compared to 62 percent for Democrats. The difference was wider on subsidies, where Republicans voted 36 percent
of the time to cut subsidies compared to a rate of 24 percent for Democrats.

Only one member of the Senate, Wayne Allard (R-Colo.), voted consistently in favor of the free market on all six major trade and subsidy votes of the 105th Congress, scoring a perfect three on both the pro-trade and the antisubsidy scales. Five other senators were solidly in the free trader camp. Don Nickles (R-Okla.) voted against subsidies on all three occasions and in favor of trade on two of the three major votes. Sam Brownback (R-Kans.), Rod Grams (R-Minn.), Judd Gregg (R-N.H.), and Kay Bailey Hutchison (R-Tex.) voted in favor of trade liberalization on all three votes and against subsidies on two of the three.

Eighteen senators could be described as hard-core pro-trade, pro-subsidy, voting in favor of expanded trade on all three opportunities and in favor of all three subsidy measures. Another 28 senators were safely within the pro-trade, pro-subsidy box, missing only one vote to support either subsidies or trade liberalization. (See Appendix C for a list of senators in each category and Appendix D for the ratings and votes of individual members.)

Four senators—Russell Feingold (D-Wis.), Paul Wellstone (D-Minn.), Lauch Faircloth (R-N.C.), and Robert C. Smith (R-N.H.)—voted a solid isolationist line, opposing trade expansion and subsidies on every vote. Two senators—Carl Levin (D-Mich.) and Olympia Snowe (R-Maine)—were consistently interventionist, opposing all three trade initiatives while supporting all three subsidy measures.

Class Divisions on Trade Muted

Our analysis of trade votes in the 105th Congress does not indicate a sharp break between veteran legislators and more recently elected members. House members elected before the 1992 elections voted as a group almost exactly the same as those elected in the last six years, each group supporting trade by 33 percent of votes cast on the five major trade issues. The newer members were somewhat more skeptical of international subsidies, voting to cut them on 35 percent of the votes they cast, while veteran House members voted against subsidies only 25 percent of the time. Imposing a six-year term limit on House members would not, it appears, make a dramatic difference in how the House votes on trade, although it would probably erode support for subsidies.¹⁸

Sharper divisions can be found among the House members elected since 1992. Those elected in 1994 and 1995 were slightly more inclined to support trade liberalization than the House average (36 percent vs. 33 percent) and significantly more inclined to oppose subsidies (50 percent vs. 31 percent). Those elected in 1996 and 1997, in contrast, were slightly less inclined than the House average to support trade expansion (32 percent) and to oppose subsidies (25 percent). In fact, House members elected in 1996–97 were less than half as likely to vote against international economic subsidies as House members elected in 1994–95.

The 60 remaining members of the Republican class of 1994 scored slightly below the overall Republican average in their support for freer trade, voting pro-trade 39 percent of the time vs. 43 percent for Republicans overall. They were significantly more skeptical of subsidies than were other House members, including their fellow Republicans, opposing them on 55 percent of votes cast. Its majority opposition to subsidies places the GOP class of 1994 just inside the isolationist category.

In the Senate the trend is much the same. Senators elected before 1992 voted for expanded trade on 66 percent of votes cast, not much different from the 62 percent of pro-trade votes cast by senators elected since 1992. Newer senators were twice as likely to vote against subsidies, casting anti-subsidy votes 39 percent of the time compared to 20 percent for senators elected before 1992. The 11 Republican senators elected in 1994, like their counterparts in the House, were slightly less inclined to vote for trade liberalization than the Senate average but were significantly more inclined to oppose subsidies, voting 55 percent of the time for expanded trade and for cutting subsidies. Indeed, the average rating for the 11 members of the GOP class of 1994 places them just inside the free-trader quadrant.

Clues to the 106th Congress

Because of the historically high reelection rate in the 1998 midterm elections, fewer than 10 percent of the nation's 435 congressional districts will be represented by new members in the 106th Congress. As a group, the 39 members of the 105th Congress who will not be returning in January voted for freer trade 29 percent of the time and against subsidies 27 percent, both slightly below the overall House average. This means the average rating of returning House members is somewhat more pro-trade and anti-subsidy than the overall House average in the 105th Congress.

The post-election changes made by the Republican House caucus point to a majority leadership that is marginally more market friendly. New Speaker Dennis Hastert (R-Ill.) is a free trader, voting on three of four opportunities to cut subsidies and on three of five to reduce trade barriers. Although by tradition the departing speaker, Newt Gingrich (R-Ga.), seldom voted in the 105th Congress, he fit into the internationalist group, supporting fast track and IMF funding.

One other top GOP position saw a change in type. Rep. J.C. Watts Jr. (R-Okla.), the newly elected chairman of the Republican Conference, compiled a moderately internationalist voting record, supporting trade on three of five votes and opposing subsidies on two of four votes. The member he replaced, Rep. John Boehner (R-Ohio), voted pro-trade on only two of five opportunities and was zero for four on anti-subsidy votes. This means the House Republican Conference swapped an interventionist for an internationalist.

Among the top GOP House leaders who were reelected, Majority Leader and former economics professor Richard Armey (R-Tex.) compiled a solid record as a free trader, while Majority Whip Tom DeLay (R-Tex.) voted as an internationalist.

On the Democratic side of the aisle, Minority Leader Richard Gephardt (D-Mo.) and David Bonior (D-Mich.) are both solid interventionists, with Gephardt voting against trade initiatives and for subsidies at every opportunity we surveyed. Bonior deviated from the interventionist line only to support the proposed modest cut in the OPIC administrative budget.

One negative change for free trade will occur in the House Ways and Means Subcommittee on Trade, where a pro-trade, pro-subsidy internationalist, Robert Matsui (D-Calif.), will be replaced as the minority ranking member by an anti-trade, pro-subsidy interventionist, Sander Levin (D-Mich.). This change could make bipartisan cooperation on free-trade legislation even more difficult.

In the Senate, the 11 members who will not return for the 106th Congress voted in favor of
expanded trade in 58 percent of votes cast, slightly below the overall Senate average, and
scored 42 percent on the subsidy scale, slightly above the average. This means the average voting record of the 89 returning senators is even more pro-trade, pro-subsidy than the average of the 105th Congress.

Three retiring senators will be replaced by House members who served in the 105th Congress, allowing a comparison of their voting records on trade and subsidies. Pro-trade, pro-subsidy Republican Dirk Kempthorne of Idaho will be replaced by an anti-trade, antisubsidy Republican, Michael Crapo. In New York, voters cashed in an anti-trade, anti-subsidy Republican, Alfonse D'Amato, for an antitrade, pro-subsidy Democrat, Charles Schumer. In Kentucky, voters stuck with the same model, electing an anti-trade, pro-subsidy Republican, Jim Bunning, to replace Wendell Ford, a retiring Democrat of the same stripe.

The trend in both the Senate and the House is for newer members to be more inclined to cut subsidies but slightly less inclined to vote for freer trade. As an institution, Congress appears to be drifting slowly toward a more isolationist approach to international economic issues.

Conclusion

Debate over America's engagement in the global economy has been oversimplified into a battle between isolationists and internationalists, whereas the ultimate struggle is between those who support a truly free market and those who favor various forms of government intervention in the international marketplace.

Measured on this free-market scale, the 105th Congress was found wanting. The number of representatives and senators who voted most of the time in favor of free trade and against subsidies was disappointingly small. Too few members of Congress apply a consistent
philosophy of freedom and limited government when casting votes affecting how Americans participate in the global economy. Only 25 members of the House and 12 of the Senate voted consistently to curb government intervention in our international economic relations.

By supporting free trade as well as subsidies, the members of Congress who vote as internationalists have unwittingly undermined support for U.S. engagement in the global economy. The subsidies they support—through the IMF, OPIC, Ex-Im Bank, and other conduits— have aroused the suspicions of voters without creating new support for freer trade.
They may describe themselves as free traders, but their support for trade-distorting subsidies
undermines their claim to the title. Members of Congress who want to advance the cause of limited government, economic liberty, and national prosperity should favor a consistent agenda of eliminating barriers to trade and trade-related subsidies. Protectionism and subsidies both undermine the workings of the free market, substituting the judgment of politicians for that of millions of informed citizens cooperating together in the marketplace for mutual advantage.

In The Wealth of Nations two centuries ago, the Scottish moral philosopher Adam Smith issued a warning to the politicians of his day that bears repeating:

The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no
council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.¹⁹

So when deciding U.S. policy toward the global economy, members of Congress do not need to choose between the anti-trade, antisubsidy isolationism of Pat Buchanan and the pro-trade, pro- subsidy internationalism of the Clinton administration. They can choose to vote for a coherent program to liberalize trade and eliminate subsidies—in sum, to let Americans enjoy the freedom and prosperity of a seamless free market undistorted by government intervention.