Omnibus Trade and Competitiveness Act of 1988 (OTCA)

The Omnibus Trade and Competitiveness Act of 1988 (OTCA) seeks to bolster the competitiveness of American companies through changes in the substance and process of trade law. Although building on earlier legislation, this most recent major trade law addresses a far broader scope of issues, more forcefully asserts the interests of American firms, and provides executive branch officials with much less discretion in implementation.

Although the United States has championed the cause of free trade through multilateral agreements under the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), concerns about the competitiveness of American workers and companies mounted in the 1980s with the rapid emergence of Japan as an economic power, growing trade deficits, and job losses in manufacturing. Constituent pressures on Congress for protection against unfair foreign trade practices increased, and the OTCA was passed after lengthy deliberations and over some opposition by the Reagan administration.

Rising imports led to increasing complaints that foreign firms competed unfairly by predatory pricing or “dumping” and by export subsidies from their governments. The OTCA amended earlier legislation to improve the enforcement of antidumping provisions and facilitate the imposition of countervailing duties to combat foreign subsidies. Some criticize these efforts to defend domestic markets arguing that the costs to American firms and workers in the particular industry affected may be offset by benefits to other stakeholders, most notably consumers of the cheaper goods.

More central to the OTCA than the defense of domestic markets were efforts to enhance the competitiveness of American firms abroad. To this end, the Foreign Corrupt Practices Act of 1977 (FCPA) was amended to relax constraints on payments to secure the timely performance of routine governmental actions. American employees became legally liable only when they had “knowledge” rather than the “reason to know” of the illegal uses of their funds. Corporate liability for employees' actions was also reduced, thus creating the possibility of scapegoating midlevel managers. Some suggest that these changes may undermine the intent of the FCPA to align American officials' actions abroad to their home country standards.

The most controversial sections of the OTCA deal with efforts to combat unfair trading practices of foreign governments and firms that reduced the competitiveness of American firms abroad. Congress sought to ensure aggressive actions by the executive branch by transferring authority to retaliate against such practices, conferred under Section 301 of the Trade Act of 1974, to the U.S. Special Trade Representative and specifying in detail the procedures to be followed. What came to be known as Super 301 required the identification of nations engaged in egregiously unfair trade practices and the unilateral imposition of sanctions if necessary to end them. Of particular concern were barriers to the expansion of service industries not yet protected under the multilateral agreements. Even more critical were infringements on intellectual property rights that slowed the foreign penetration of high-technology industries considered essential to American economic growth. In response, a Special 301 clause was included in the OTCA requiring close monitoring of countries for violations of these rights, the public listing of violators, and the initiation of bilateral negotiations, backed by the threat of trade sanctions. In 2006, for example, although only one nation, Ukraine, was placed on the Priority Foreign Country list reserved for the most serious offenders, 13 countries appeared on a Priority Watch List for failing to provide adequate levels of protection, and a Watch List numbered 36, including the EU, China, and Canada.

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