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  • Eyes on Trade is a blog by the staff of Public Citizen's Global Trade Watch (GTW) division. GTW aims to promote democracy by challenging corporate globalization, arguing that the current globalization model is neither a random inevitability nor "free trade." Eyes on Trade is a space for interested parties to share information about globalization and trade issues, and in particular for us to share our watchdogging insights with you! GTW director Lori Wallach's initial post explains it all.

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November 28, 2011

Election 2012: the Candidates on Trade

(Disclaimer: Public Citizen has no preference among candidates for office.)

Candidatestrade

With the budget and other scandals dominating political discourse, little space has remained for discussion of trade policy among possible presidential candidates.

To fill this void we decided to examine exactly where the politicians fall on key trade issues:


Bachmann

Although foreign policy hasn’t always been her strong suit, Rep. Michele Bachmann (R-Minn.) is pretty confident about her views on trade. Bachmann interrupted her presidential campaign and broke a streak of 88 absences to cast a vote in favor of the free trade deals with Korea, Colombia and Panama. In a press release she writes that these deals will “spur economic growth… without cost to taxpayers.” Notably, the representative voted against Trade Adjustment Assistance, which would provide support for workers displaced by the deals. Bachmann also voted against Fast Track cancellation in 2008 and in favor of the Peru trade deal in 2007.

In a blog post urging lawmakers to pass the Korea, Colombia and Panama trade deals, Bachmann writes that the “role of free trade as an expression of liberty….signifies the very principles our country was founded upon.” Unfortunately, these trade deals were negotiated under Fast Track, leaving Congress no authority to amend the agreements. (The constitution, or the document our country was actually founded upon, outlines a system of checks and balances granting Congress the power to “regulate commerce with foreign nations”).


Paul
A self-proclaimed proponent of free trade in its most pure form, Rep. Ron Paul (R-Tex.) opposes NAFTA-style trade deals because they erode U.S. sovereignty and are unconstitutional. He has voted against almost every trade deal that has surfaced during his tenure in office, including Peru, Oman, Bahrain, CAFTA, Australia, Singapore and Chile. Paul has also been an advocate of withdrawing from the World Trade Organization.

Continue reading "Election 2012: the Candidates on Trade" »

November 10, 2011

Sherrod Brown Tosses the Panama FTA

Well, not quite. But, man, that FTA text does look pretty heavy, and like it could put a hurtin' on some of the senators in the room that are against fair trade.

But here's a floor speech from fair trade champion Sen. Sherrod Brown (D-Ohio) on the night the Senate voted on the Panama, Korea and Colombia trade deals. It's about 30 minutes, and a very eloquent description of why these trade deals are no longer primarily about "trade," but about how we regulate our domestic economy. Brown's TRADE Act would go a long way to getting "trade" policy right.

June 10, 2011

FDA Foreign Food Inspections Under Threat

FDA inspector We have yet more bad news on the food safety front. Two weeks ago, news came that U.S. consumers would be barred from knowing if the tuna they're eating was caught using methods potentially fatal to dolphins. Last week we found out that the WTO would prevent country-of-origin labeling on beef from foreign countries sold in the U.S. Now comes word that the meager FDA inspections of foreign food facilities that have given U.S. consumers a modicum of protection against dangerous food will likely be rolled back.

Inside U.S. Trade reports today that proposed cuts to the FDA's 2012 budget could cripple the FDA's ability to conduct food safety inspections at foreign facilities that export food to the United States, according to a leaked FDA document.

FDA inspections of foreign facilities were set to be strengthened in the coming years. The Food Safety Modernization Act, enacted in January, requires the FDA to double the number of inspections of foreign facilities every year over 2012-2016 to protect U.S. consumers from contaminated foods.

The new proposal, contained in a bill approved by the House Appropriations Committee, would fund the FDA's food programs in 2012 at only 90 percent of their 2011 levels, and at only 79 percent of the level requested by the Obama administration to ensure full implementation of foreign food facilities inspections. The FDA is supposed to conduct at least 600 inspections of foreign facilities in 2011, but it will likely have to conduct much fewer next year if the proposed cuts become a reality.

This week, Food and Water Watch released a report examining the threat that uninspected Chinese food imports pose to U.S. consumers' safety. Since China entered the WTO in 2001, the volume of imports of Chinese food into the United States by tonnage has increased by almost 200%, and the share of Chinese imports as a proportion of food consumed in the U.S. has skyrocketed for some key products, reaching 70 percent for apple juice, 43 percent for processed mushrooms, and 78 percent of tilapia. During the same period, several food safety scandals erupted in China, sickening hundreds of thousands of people there and killing thousands of pets in the United States. Nevertheless, between June 2009 and June 2010 the FDA conducted only 13 food inspections in China.

The bill slashing the FDA’s foreign inspections budget is expected to be voted on in the House next week. Given the repeated food safety incidents in China and now news of the tragic deaths in the E. coli contamination case in Germany, the need to fully fund increased food inspections at foreign facilities has never been clearer.

April 05, 2011

Korea FTA Benefits China at the Expense of U.S. and South Korean Workers

We’re continuing our series of facts in response to the Korean Embassy’s misleading claims on the Korea Free Trade Agreement (FTA). Our full response can be viewed here. This is the final installment, focusing on the Korea FTA’s lax domestic content requirements for autos.

Lori Wallach’s Huffington Post piece: “The FTA allows its benefits to accrue to autos that contain only 35 percent U.S. or Korean content.”

Korean Embassy’s claim: “The KORUS FTA stipulates that 35% of the components used to manufacture products (under the build-up method/net cost method) or 55% of the components of the final product (using the build-down method) must originate in one of the two countries to be eligible for preferential treatment. A 45% maximum foreign content rule under the Korea-EU FTA corresponds with the minimum 55% domestic contents rule under the KORUS FTA (using the builddown method). Also, the EU’s standard foreign content rule was 40%, not 45%.” Elsewhere, the Embassy has gone further, stating that the build-up and build-down methods “are supposed to be equivalent to each other. The 20% difference between the methodologies reflects the operation cost in the final product processing stage and manufacturers’ dividends, etc.”[i]

Facts: These two methods are not equivalent. Multinational companies have pushed for rules that intentionally allow them the discretion to include as much as 65 percent content from outside the FTA countries, at the expense of workers in both the U.S. and South Korea.

As the United Autoworkers and others have repeatedly noted, Korean automakers have the option to use the “build-up” method to calculate the domestic value content under the US-Korea FTA, which requires that only 35 percent of the value of the motor vehicle be comprised of domestic parts to qualify for FTA benefits. This method allows – but does not require – that importers deduct certain “fringe” costs like transportation when calculating the maximum permissible share of content from non-FTA countries.[ii]

The EU-Korea FTA provides for only one way for automakers to calculate the domestic value content. Under the EU-Korea FTA, a Korean motor vehicle qualifies for FTA benefits only if its foreign content comprises 45 percent or less of the vehicle.[iii] Put differently, the minimum domestic value content for the EU-Korea FTA is 55 percent. Given that the EU-Korea FTA mandates that 55 percent of the value of a Korean auto must be of domestic components, while the “build up” method of the US-Korea FTA mandates that only 35 percent of the value of a Korean auto must be of domestic components, Korean automakers will be able to put a much greater portion of Chinese components into vehicles destined for the United States, undercutting auto production in the United States.

Members of Congress and fair trade groups have long raised concerns about the low percentage of originating content required for goods to qualify for duty-free FTA treatment. The Labor Advisory Committee for Trade Negotiations and Trade Policy has warned that the lax rules of origin in the Peru, Oman, and Korea FTAs would allow large quantities of goods from third countries such as China to enter the United States duty-free under the FTAs.[iv] Reports on previous FTAs have made similar points.[v] However, industry representatives have successfully pushed the U.S. Trade Representative to include lax rules of origin in FTAs.[vi]



[i] http://www.koreauspartnership.org/pdf/Other%20Issues.pdf

[ii] See Annex 6-A of the Korea FTA,  Available at: http://www.ustr.gov/sites/default/files/uploads/agreements/fta/korus/asset_upload_file680_12704.pdf. See also: International Union, United Automobile, Aerospace & Agricultural Implement Workers of America (UAW), “The Social and Economic Impact of the US-South Korea Free Trade Agreement (KORUS FTA),” September 14, 2010, Available at: http://www.imfmetal.org/files/10102608591310005/UAW_KORUS_FTA_ENGLISH.pdf

[iii] See Protocol 1 of the E.U.-Korea Free Trade Agreement, Available at: http://trade.ec.europa.eu/doclib/html/145192.htm

[iv] Labor Advisory Committee for Trade Negotiations and Trade Policy, “The U.S.-Oman Free Trade Agreement,” November 15, 2005, at 9, Available at: www.citizenstrade.org/pdf/omanLACreport_11152005.pdf

Labor Advisory Committee for Trade Negotiations and Trade Policy, “The U.S.-Peru Free Trade Agreement,” February 1, 2006, at 1, Available at: www.citizenstrade.org/pdf/peruLACreport_02012006.pdf

Labor Advisory Committee for Trade Negotiations and Trade Policy, “The U.S.-Korea Free Trade Agreement,” April 27, 2007, at 28, Available at: http://ustraderep.gov/assets/Trade_Agreements/Bilateral/Republic_of_Korea_FTA/Reports/asset_upload_file698_12781.pdf

[v] See Labor Advisory Committee for Trade Negotiations and Trade Policy, “The U.S.-Singapore Free Trade Agreement,” February 28, 2003, at 14-15. Available at: http://ustraderep.gov/assets/Trade_Agreements/Bilateral/Singapore_FTA/Reports/asset_upload_file77_3220.pdf

[vi] For example, the Industry Sector Advisory Committee on Transportation, Construction, Mining, and Agricultural Equipment urged USTR to allow the build-down method to calculate the domestic content for autos in the Chile FTA after the initial draft agreement only included the build-up method. The final agreement allowed the both methods. See ISAC 16, “Report for the Chile Free Trade Agreement,” February 2003, at 6; USITC, “U.S.-Chile Free Trade Agreement: Potential Economywide and Selected Sectoral Effects,” June 2003, at 80; Chapter 4 of U.S.-Korea FTA.

January 18, 2011

With China’s Currency Policy a Tough Topic of Hu Visit, Obama Poised to Push Korean Trade Deal With No Mechanism to Counter, Stop Currency Manipulation

With the trade advantage gained by China’s currency manipulation a top focus of Obama’s meeting with Chinese President Hu Jintao on Wednesday, concerns will rise about entering into yet another trade agreement with no provisions that forbid or redress currency manipulation with another known currency manipulator: South Korea.

Read our press release here.

November 08, 2010

Candidates of color running and winning on fair trade

Anytime you force an ad-man to compress a difficult policy problem into a 30-second soundbyte, you're going to lose some complexity.

That's why I was surprised at the push back on politicians on so-called "China bashing." (See for instance, Reihan Salam here, and Matt Yglesias here.)

I watched about 800 political ads for the 2010 cycle, and most of the China-related ads I that I saw were not bashing Chinese people - they're bashing unfair trade deals and policies, voted on in Washington, that had the effect of offshoring jobs to other countries. In other words, the reason things aren't made in America is because of policies that were. You can see the full pantheon of ads and analysis in our new report here.)

For what it's worth, candidates of color (including a number of South Indian Americans and Asian Americans) in both parties have launched some of the strongest attacks on job offshoring this election cycle.

This includes Rep. David Wu (D-Ore.) in Portland, who bears the distinction not only of being an Asian-American campaigning for fair trade, but also a Democrat showing that you can campaign and win on fair trade in the Pacific Northwest, where the (incorrect) conventional wisdom is that this message doesn't play.

Democrats and Indian-Americans Manan Trivedi in Pennsylvania and Raj Goyle in Kansas also posted credible showings in GOP-leaning districts. Both campaigned extensively on fair trade themes. As an NPR column argued:

The trick for these candidates is to never let voters forget you are running to represent Sacramento, or Wichita - not Bangalore.

Raj Goyle does this by campaigning very hard on fighting outsourcing of Kansas jobs.  Ami Bera agrees, "we have to keep those jobs here because we have over 12 percent unemployment."

(Bera ran in against Dan Lungren in California.)

In Hawaii, Democratic candidate Colleen Hanabusa criticized job offshoring in paid television ads, and was successful in her effort to unseat GOP incumbent Charles Djou, who ran the campaign's only television ad in favor of the Korea FTA. Both candidates are Asian American.

Democrat and Congressional Hispanic Caucus member Loretta Sanchez fought back a challenge from Vietnamese-American GOP candidate Van Tran in this heavily Latino and Asian district. She campaigned against unfair trade with Vietnam, and against other anti-worker trade deals.

In Louisiana, African-American candidate Cedric Richmond beat Vietnamese-American GOP incumbent Anh Cao. Richmond ran paid television ads against unfair trade deals, while Cao attacked unfair trade with Vietnam (even though he had supported the Bush-initiated Trans-Pacific Partnership while in office).

In Georgia, Democratic incumbent and African-American Sanford Bishop won re-election in his majority White-American, deep South district, and ran paid television ads attacking NAFTA and China trade policy. (Bishop has had complicated trade policy history - voting for the WTO and China's entry into it, while voting against NAFTA and cosponsoring the fair trade TRADE Act.) Meanwhile, his fellow Democratic incumbent Jim Marshall did not campaign on his fair trade record, and lost to Austin Scott, a Republican that emphasized Buy America themes. (Both Marshall and Scott are white.)

Ryan Frazier, an African-American GOP candidate in Colorado, criticized the fact that the stimulus bill was not used to buy only U.S.-made goods. Allen West, an African-American GOP candidate in Florida, criticized the job offshoring impact of cap-and-trade. Their Democratic opponents approached these candidates in different ways: Ed Perlmutter in Colorado ran anti-offshoring ads of his own and won, while Ron Klein in Florida was mum on trade and lost.

And Latino voters in California and Nevada strongly backed Democratic Senate incumbents Barbara Boxer and Harry Reid, who both campaigned against policies that send jobs to Mexico and other countries.

Finally, 75 percent of the Congressional Black Caucus, nearly half of the Congressional Hispanic Caucus, and Asian-American members like Reps. Mazie Hirono (D-Hawaii) and Judy Chu (D-Calif.) have endorsed the TRADE Act, which simultaneously pushes for good jobs here at home, while prioritizing stronger environmental justice, workers rights and democratic protections for our trading partners. Not to mention a fellow named Barack Obama, who also campaigned and won on these themes - winning not only communities of color but making serious inroads into the white working class.

In sum, elected officials don't seem to have much difficulty reconciling justice for communities of color at home and abroad with a strong working class message of standing up for job creation in the United States. They know as well as anyone what my colleagues John Schmitt and Nicole Woo (and other CEPR folks) have found: that the quality of manufacturing and other jobs here at home is a major reason that families from Asian-Pacific, African-American and Latino-American communities have ascended to the middle class.

October 19, 2010

The Political Genius of Sarah Palin: How One Facebook Post Sparked a Mass GOP Fair Trade Wave

There is some conventional wisdom that the GOP is more united than Democrats in favor of unfair trade deals. See for instance this ridiculous aside from the White House in the New York Times Magazine this weekend:

Rouse and Messina see areas for possible bipartisan agreement, like reauthorizing the nation’s education laws to include reform measures favored by centrists and conservatives, passing long-pending trade pacts and possibly even producing scaled-back energy legislation.

This is silly. Polls show that GOP and independent voters are at least as opposed to these deals as the Democratic base. (See here and here.) And, nowhere in the "everything and the kitchen sink" 48 page GOP "Pledge to America" unity document do they talk about trade or offshoring - showing that there is not a heckuva lot of GOP unity in support of unfair trade.

GOP candidates are responding to the public support for fairer trade. This cycle, we're seeing a much higher number of GOP running on fair trade than in the last two cycles, including pledging to renegotiate trade deals and end tax loopholes for companies that offshore jobs. Some are even attacking their Democratic incumbents' votes against fair trade (a vote for China PNTR, for instance).

But the message that I have seen probably 100 GOP candidates run on in this cycle is attacking the incumbent Democrat for voting for a stimulus bill with Buy America provisions criticized as weak.

Long-time readers will recall that we covered this issue in detail back in early 2009:

Enter Sarah Palin. Despite never having clarified her views on trade policy on the VP campaign trail (or in her previous run for governor of Alaska), Palin raised eyebrows earlier this year when she attacked the stimulus bill for not requiring that all money be spent here in America. Palin wrote on her Facebook wall about the stimulus bill:

“We were promised it would provide “green jobs” for Americans, but 80% of the $2 billion they spent on alternative energy went to purchase wind turbines built in China!”

At the time, I figured that this was just an accidental or not fully thought-through Facebook post. Little did I know that Sarah Palin was an absolute genius whose Facebook post would spark a mass GOP fair trade wave: virtually every GOP candidate across the country is today campaigning on this loophole in the stimulus bill.

So, what would be the solution to this problem? Well, for starters, we'd have to revisit the procurement commitments in the World Trade Organization (WTO) and other unfair trade deals in order to get even close to 100% true Buy America rules in government spending.

Sarah palin Even many free traders feel very strongly that there are moral, environmental and economic reasons to ensure that our tax dollars are used to support local jobs and production. But, as we've long argued, the WTO closes off this key, sovereign policy space. (See our book "States' Rights and International Trade" for more.) Luckily,

But Sarah Palin has pointed out the way forward: rather than falsely assume a bipartisan consensus in favor of Bush's trade deals with Korea and other countries, let's build on the true bipartisan consensus in favor of fair trade in government procurement and in other policy areas.

(Ed note: In the last two election cycles, Public Citizen has brought you detailed analysis of around 100 competitive and open seat congressional races. We found that the role of trade and offshoring increased in 2008 relative to 2006, and by all indications, 2010 will set a new record. Of about 170 races we are tracking, trade is playing in about 90 percent of them (150). That's right, we'll be releasing detailed candidate profiles of over 350 candidates - GOP, Democratic, and some third party.)

(Note: Public Citizen has no preference among the candidates.)

August 30, 2010

WSJ Got It Wrong: Tariff decision correlated with halt in tire sector job loss

UPDATED: 9/3/10

Yesterday, the Wall Street Journal wrote an editorial in which it blasted the 35 percent safeguard tariff against Chinese tires imposed by the United States in September of last year. The U.S. imposed the tariff due to a huge surge in tire imports from China that materially harmed domestic manufacturers. According to the Wall Street Journal:

The measure hasn't boosted employment. In the first five months of this year, the number of workers at U.S. tire factories fell about 10% compared to the same period last year, according to an analysis from the pro-trade U.S.-China Business Council.

Strictly speaking, the statistic that the U.S.-China Business Council claims is correct. However, this statistic cannot lead us to the conclusion that employment in the American tire manufacturing sector has continued to suffer with the tariff upon Chinese tires.  The graph below reveals how the comparison data seems to have been selected specially to support the desired negitive conclusion. First, the data referenced: According to the Bureau of Labor Statistics (BLS), there were 50,300 workers employed in the American tire manufacturing sector in June 2010, the most recent month with available data.  By contrast, only 49,100 workers had jobs in tire manufacturing in August 2009, the month before the tariff was imposed.  Since the BLS does not seasonally adjust data for small sectors of the economy, there may be some hidden seasonal effect here; 51,700 workers were employed in tire manufacturing in June 2009, though this is only slightly higher (1,400 jobs relative to 50,300) than tire employment in June 2010.

Graph of tire employment

The graph makes clear that by the end of the summer of 2009, tire employment began to stabilize, which happened about the same time that the tariffs were imposed.  Correlation certainly doesn't indicate causation, but given the evidence it is quite possible that the tariffs played a role in the tire employment stabilization. The graph also makes it obvious why the U.S.-China Business Council found that "in the first five months of this year, the number of workers at U.S. tire factories fell about 10% compared to the same period last year."  It is simply because in the first half of 2009 - before the tariff was imposed - employment in the tire sector was steadily plummeting! So, when the first few months of 2009 are averaged in (with their comparatively high employment levels which were being eroded every month by the import surge), tire employment in early 2010 looks worse by comparison to that average.  However, again, the graph makes clear that in fact by the end of the summer of 2009, tire employment finally began to stabilize. This is the period when the tariffs went into place. 

But don't take my word for it. Go here and input “CEU3232621001” as the series ID to pull the tire manufacturing data.

Besides the cherry picking of stats, what is vexing about the way that the WSJ presents the issue is that it seems to believe that Obama came up with the idea of this safeguard out of the blue and that he had sole discretion in the decision. The WSJ refers to the tariff as "Mr. Obama's tire tax."  In fact, the U.S. International Trade Commission (USITC), and independent federal body, rigorously analyzed the numbers and issued a recommendation to Obama that a 55 percent tariff be imposed on Chinese tire imports. The 35 percent tariff that Obama chose to impose was actually lower than the tariff that the USITC recommended. Rep. Sander Levin's website has a great Q&A on the Chinese tire tariffs.

May 11, 2010

Seattle Employment Not Harmed by NAFTA? O RLY?

Ron Kirk photo Last week U.S. Trade Representative Ron Kirk was in Seattle to meet with Association of Southeast Asian Nations (ASEAN) trade ministers and business executives.  In conversations with reporters, he seemed to imply that Washington workers haven’t experienced the devastating effects of the NAFTA trade policy model like workers in the Midwest have:

"When I'm east of the Mississippi, people think I'm a two-headed monster," he quipped. He said he loves coming here. "For every five trips to Michigan and Illinois I ought to earn one trip to Seattle."

Eh? Is it true that Seattle has escaped the fate that has befallen Michigan and Illinois?

No. The manufacturing base of Seattle has been crippled in the NAFTA/WTO trade policy era.  Since the implementation of NAFTA in 1994, the Seattle area has lost 29,600 manufacturing jobs, a decline of 16 percent, according to the Bureau of Labor Statistics.  Washington as a whole has lost 51,100 manufacturing jobs since NAFTA entered into force. These are prime high-paying jobs with good benefits to support families, and the NAFTA trade model was a contributing factor in their disappearance.  In fact, a study conducted by the Economic Policy Institute (EPI) found that the increase in the deficit with Canada and Mexico alone since NAFTA’s implementation has cost Washington 16,500 jobs.

The Trade Reform, Accountability, Development and Employment (TRADE) Act offers a way to fix the flawed NAFTA model through ensuring that U.S. trade agreements include strong labor, environmental, and consumer protections that would help grow jobs instead of destroy them.  If Seattle-area Representatives Jay Inslee, Jim McDermott, David Reichert, and Adam Smith were to join the 140 cosponsors of the TRADE Act, it would go a long way toward reversing the devastating effects of the NAFTA model on Washington workers.  EPI’s recent study on the effect of the rise in the trade deficit with China since it joined the WTO in 2001 upon jobs should give the members of Congress extra incentive to support the fair trade policy embodied by the TRADE Act.  Here are the EPI-estimated job losses from the China deficit in each of their districts:

1st District (Rep. Jay Inslee): 6,800 jobs lost

7th District (Rep. Jim McDermott): 5,600 jobs lost

8th District (Rep. David Reichert): 7,100 jobs lost

9th District (Rep. Adam Smith): 4,900 jobs lost

For more analysis about why the NAFTA model is bad for Washington workers, see The Real Pirates of the Caribbean: U.S. High Tech Industry’s False CAFTA Promises Disguise Bad Policy by the Washington Alliance of Technology Workers, The Society of Professional Engineering Employees in Aerospace, and The American Ingenuity Alliance (with some help from Global Trade Watch).

March 25, 2010

China Trade Deficit Toll: 2.4 Million Jobs

Robert Scott of the Economic Policy Institute (EPI) just came out with a terrific new study on the job losses that the U.S. economy has suffered because of the sky-high deficit with China.  It estimates that the rise in the deficit with China since it entered the WTO (2001) has displaced 2.4 million jobs.  

Between December 2007 (when the recession began) and February 2010, the U.S. economy lost 8.4 million jobs.  This means that if our deficit with China reverted back to its level in 2001 instead of being at its current level, the U.S. economy could generate about one-fourth of the jobs that it lost during the Great Recession.

What’s great about this study is that it estimates job losses in each congressional district.  Previous studies from EPI looked at deficit-induced job losses only down to the state level. With this study, Scott uses a different dataset that surveys millions of people per year, so there are enough respondents in each congressional district to get job loss estimates. Check out where your district ranks in job losses here (and here for an alphabetical listing).

Fortunately, there is a lot of movement in Congress to get China to allow its currency to appreciate against the U.S. dollar. Last Monday, 130 members of Congress, led by Representative Mike Michaud, sent a letter to Treasury Secretary Tim Geithner and Commerce Secretary Gary Locke urging them to officially designate China as a currency manipulator in its April 15th report.  Yesterday, the House Ways and Means Committee held a hearing on China’s currency policy, its impact on the U.S. economy, and steps that the U.S. could take to press China to revalue it currency.  Most economists believe that China’s currency is undervalued by about 40 percent, making imports from China artificially cheap for the U.S. and U.S. goods more expensive in China.

March 02, 2010

USTR’s 2010 Trade Policy Agenda: The Good, The Bad, and the Bizarre

Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch Division

Relative to last year’s March 1 report, the 2010 Trade Policy Agenda released today by the Office of the U.S. Trade Representative (USTR) excludes some troubling elements, such as the call for rapid action on the leftover Bush trade pact with Panama, the demand that climate policy conform to trade rules and the reference to renewed presidential trade authority. But at the same time, the report unfortunately fails to deliver the new fair trade agenda that President Barack Obama promised during the campaign and that is needed for our country’s economic recovery.

It also continues to mimic the misrepresentations that the Bush administration borrowed from the U.S. Chamber of Commerce with respect to only considering the role of exports on U.S job creation, as if the U.S. did not have a massive job-killing trade deficit. An example is the hilarious statement about 10 million U.S. jobs being supported by exports in 2008 – a year we had a $696 billion deficit – without any reference to the net U.S. jobs effect of the flood of imports underlying that deficit. The report also fails to mention that 5 million net U.S manufacturing jobs – one out of every four – have been lost since the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) went into effect, or the downward pressure our current trade policies are putting on wages across the economy.

Continue reading "USTR’s 2010 Trade Policy Agenda: The Good, The Bad, and the Bizarre" »

February 04, 2010

China Rights Abuses on the Rise... Where's leverage when you need it?

See Andrew Jacobs in NYT:

Emboldened by China’s newfound economic prowess but insecure about its standing at home, the Chinese Communist Party has been tightening Internet censorship, cracking down on legal rights defenders and brushing aside foreign leaders who seek to influence the outcome of individual cases...

In the 31 years since the People’s Republic of China and the United States established diplomatic relations, Chinese officials have often resisted American intervention on human rights, calling the issue a domestic matter. But there has generally been some give and take, largely behind the scenes, especially in the years after the violent suppression of protests in Tiananmen Square, when China was eager to shed its pariah status abroad.

That leverage began dissipating in 2001 after China was admitted to the World Trade Organization, and Congress surrendered the right to review China’s human rights record before granting it favorable trade status.

I'm just sayin' is all I'm sayin'.

January 16, 2010

Road Trip!

It looks like U.S. Trade Representative Ron Kirk will be tourinLoaded vang the country in a series of meetings this year.  He’ll tout the benefits of trade agreements generally, but he’ll focus on the Trans-Pacific Partnership (TPP) since its first negotiating session is slated for mid-March of this year. The potential TPP countries now include Vietnam, Australia, Peru, Chile, Singapore, Brunei, and New Zealand, though more countries might join the negotiations soon.

According to Inside U.S. Trade (subscription only), even big business is skeptical of the tour’s mission:

[T]wo business sources said they doubted a series of meetings across the country would do much to sway the public perception of trade.

The meetings should be a two-way street, however, if Kirk follows through on his promise to incorporate feedback from these meetings in the process of developing negotiating objectives for the TPP.  The Office of the USTR has said officially that they are still in the early stages of developing negotiating objectives, but the Bush administration’s trade model is still lurking under the surface:

Private-sector sources this week speculated that the negotiating objectives identified by the Bush administration in 2008 for the TPP Agreement may serve as a basis for the current administration, both because the objectives are so broad and because those original objectives were developed by career officials still in place at USTR.

These previously defined negotiating objectives include all the nasty provisions that we’ve seen in previous agreements like NAFTA and CAFTA such as intellectual property rules, financial services, foreign investor rights, and government procurement.  Right now the inclusion of these inappropriate issues in the TPP is a wide open question. Greater congressional involvement in the negotiating process could help ensure that we are negotiating for an agreement with higher standards.

(Thanks to Flickr user Focx for the image)

January 08, 2010

New Year’s Resolutions for the Obama Administration

With a number of important and high profile trade battles to be fought this year that will have far-reaching impacts on the U.S economy and domestic policy, we thought we’d suggest some New Year’s resolutions for president Obama to adopt on U.S. trade policy.

These resolutions are solutions that the administration needs to commit to in 2010, based on what's likely to move in the trade sphere this year. They hold President Obama to his campaign promise to deliver trade policy reform, and they’ll also help to fix the economy and keep good jobs in America.

The resolutions are:

  1. Push to modify World Trade Organization (WTO) limitations on domestic financial services regulation, in light of the economic crisis. Go here for details.
  2. Conduct a comprehensive review of trade agreement policy as promised during the campaign
  3. Announce formal new trade agreement approach that brings trade pacts into congruence with the administration’s domestic priorities and goals
  4. Pass climate legislation with meaningful border equality measures
  5. Pass second major stimulus bill with robust Buy America provisions to create jobs
  6. Pass food safety bill with serious import safety protections
  7. Use the Trans-Pacific Partnership talks to devise a replacement for the NAFTA model; we either need a new way or no deal
  8. Renegotiate remaining Bush trade agreements with South Korea, Colombia, & Panama to fix NAFTA model problems and bring them in line with the TRADE Act.
  9. Give the WTO’s “Doha Round” agenda a much needed burial and develop a new agenda related today's challenges aimed at fixing WTO problems, from financial services deregulation to limits on climate crisis redress space
  10. Fight for a China trade policy that supports jobs and also ensures product and food safety for both countries

Obama has already resolved to do a lot of these, but just as with most New Year’s resolutions, he’s somewhat fallen off the wagon.  We’re here to help him resolve anew and stick to it!

January 05, 2010

Trade Theory Textbook Goes in the Trash

Peter Morici, Chief Economist at the U.S. International Trade Commission from 1993 to 1995 (those dark days of NAFTA implementation), has a new op-ed out today, entitled “Why Free Trade is Failing America”. A lot has changed since his tenure at the USITC. He's now a professor at the University of Maryland and he recognizes that the assumptions underpinning arguments for trade liberalization sometimes never hold true:

No economic policy could better serve Americans than genuine free trade but open trade policies are failing Americans.

Free trade is a compelling idea. Let each nation do more of what it does best, and specialization will raise productivity and incomes.

Americans are not sharing in those benefits because President Barack Obama, like President George W. Bush, permits China and others to cheat on the rules, unchallenged, to the detriment of the U.S. interests he was elected to champion…

Unfortunately, U.S. imports exceed exports by another $400 billion, and workers released from making those products go into non-trade-competing industries, such as retailing, in which productivity is at least 50% lower. This slashes gross domestic product by about $200 billion, overwhelming the gains from trade, and requires workers displaced by imports to accept lower wages.

October 05, 2009

Check Out Rep. Levin's Guide on the Chinese Tire Case

As the media continues to cover the Obama administration’s recent decision to impose tariffs on tire imports from China, Congressman Sandy Levin has released a very useful guide covering the primary issues and arguments involved in the dispute - it is especially helpful in terms of distinguishing fact from fiction in the case.

October 21, 2008

Melamine Scare Goes Adult

2823877464_ecb76e0205_3 It's official. It's not just kids who are endangered by the China melamine scare, adults are now at risk too, in their most, uhm, adult activities.

According to Marie Claire magazine, Britain's novelty shop Ann Summers has had to pull some of its most popular edible sex toys off the shelf because they contain many times the allowable amount of melamine. The guilty culprit? A Chinese manufacturer named, wait for it, Le Bang. I think that is about as much juice as I can offer on a family-oriented blog like our own, so you'll have to go the original source if you want more details.

As we wrote last holiday season, one of the main reasons that corporations have offshored so much production to China in the WTO era is to avoid U.S.-style product liability laws. The NYT reports on how
this lack of product safety is affecting consumers within China:

The first sign of trouble was powder in the baby’s urine. Then there was blood. By the time the parents took their son to the hospital, he had no urine at all.

Kidney stones were the problem, doctors told the parents. The baby died on May 1 in the hospital, just two weeks after the first symptoms appeared. His name was Yi Kaixuan. He was 6 months old.

The parents filed a lawsuit on Monday in the arid northwest province of Gansu, where the family lives, asking for compensation from Sanlu Group, the maker of the powdered baby formula that Kaixuan had been drinking. It seemed like a clear-cut liability case; since last month, Sanlu has been at the center of China’s biggest contaminated food crisis in years. But as in two other courts dealing with related lawsuits, judges have so far declined to hear the case...

Chinese officials, under pressure to promote fast rates of economic growth and to enforce social stability, routinely favor producers over consumers. Product liability lawsuits remain difficult to file and harder still to win, especially if the company involved is state-owned or has close connections to the government...

“This is a product liability case that in a Western country would turn into a class-action lawsuit,” Professor Zhang said. In China, he said, “they don’t want to see so many people getting involved in one lawsuit. This might threaten social stability.”

August 29, 2008

VT Legislator Reacts to Interference on E-waste Bill

Ewaste_2 On July 3rd, we posted that two state bills in Maryland had seen interference from the People's Republic of China (PRC) before they had the opportunity to come to a vote, cited as "barriers to trade" in conflict with the U.S. commitments under the World Trade Organization (WTO). Since then, we have been updated on the developments of a similar case in Vermont and wanted to share.

State Senator Ginny Lyons (D-Chittenden County) recently issued a statement on August 12th responding to the correspondence she received from the PRC regarding her bill on electronic waste. This letter from the Chinese Government also referenced U.S. commitments under the WTO as reason for asking Lyons to "cancel" or "revise" her bill. To which Sen. Lyons responds:

"The People's Republic of China questions the authority of the Vermont legislature to enact legislation to protect human life and the environment. This attempted interference by the People's Republic of China in the democratic process in Vermont is alarming and threatens basic principles of our system of government. Common sense solutions to health issues at the state and local level should not be subject to international pressure."

She stresses that, "This is part of a disturbing trend toward undermining states's rights. It's simply not OK for other governments to feel that they have a right to intervene in our state legislative process in this way. It wouldn't matter whether the bill addressed by the Chinese government was about health care, workers' benefits, land use permitting, or in this case, electronic waste recycling, the underlying principle is the same: respect for democratic decision-making. And so, we have to let folks in Washington DC and in Beijing know that this is an unacceptable intrusion."

This statement follows the unanimous passage of Sen. Lyons' resolution on this issue by the National Conference of State Legislatures (NCSL) Labor and Economic Development Committee at their annual meeting in July. The resolution asks that, at minimum, USTR issue a statement to NCSL "affirming that states’ abilities to pass laws and regulations protecting human health and the environment should not be abridged, and that USTR will aggressively defend states’ regulatory powers as a matter of U.S. federalism."

The Forum on Democracy and Trade released a preliminary analysis of the allegations by the People's Republic of China claiming that Sen. Lyons' bill is inconsistent with the WTO Agreement on Technical Barriers to Trade (TBT). The analysis finds the following:

"The TBT Agreement, which states that "Members should ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade." Under this strict "necessity test," trade values arguably trump other public policy values unless there is no conceivable alternative policy that is less burdensome on trade."

And states in conclusion:

"As illustrated by this event, other countries could and are beginning to use the trade system to apply pressure to state legislatures and to impact the state legislative process. Since trade promotion authority has expired, states see an opportunity to evaluate the process for providing input on trade issues and to improve federal-state communication. A new system for improving communication between states, USTR, and Congress should be a strong priority for the next Congress and President to ensure that our democratic system of government is protected."

We wholeheartedly agree with the Forum's conclusion and hope that state legislators will act on this opportunity to improve their role in the process. (If you are a state legislator and would like to get involved in a working group devoted to these issues, please email: sedelman@citizen.org.)

August 01, 2008

No Gold Medal for U.S.-China Trade

Just in time for the Beijing Olympics, Rob Scott from the Economic Policy Institute put out a great paper that updates his numbers on how many jobs could have been supported with balanced China trade.

He figures that an additional 2.3 million jobs could have been supported, and he also looks at some of the wage effects of this trade imbalance: 

Because U.S. exports to China are much more commodity intensive (i.e., comprising products such as grains, steel scrap, and paper scrap) than Chinese imports (99% of which are manufactured products), average wages earned in jobs producing U.S. exports to China paid 4.4% less than the jobs displaced by imports from China. More than one-fourth of U.S. exports to China on a value basis were commodities.

His paper was released with the fine folks over at the Alliance for American Manufacturing.

July 03, 2008

Maryland v. The People's Republic of China

It began as an effort to protect the children of Maryland from unsafe toys. Now, thanks to a disgruntled Chinese government and WTO, Del. James Hubbard’s (D-Prince George's County) proposed legislation in the Maryland General Assembly on potentially harmful chemicals has entered the ranks of “barriers” to international trade.

Story

As you may remember, last year saw a slew of recalled Chinese toys, which were found to contain dangerously high levels of lead. Hubbard, dissatisfied with the Bush administration’s response, proposed a bill that would allow Maryland to monitor its own toys. The bill, which will clear Maryland store shelves of dangerous toys, did more than raise international eyebrows. From a recent article in the Washington Post, here’s how it went down:

The Office of the U.S. Trade Representative alerted the Chinese government, which sent a letter from Beijing to protest the bill as a barrier to trade. Lawmakers in Annapolis were unfazed and passed the bill, which takes effect next month.

Then came a four-page missive from the World Trade Organization's Committee on Technical Barriers to Trade -- in English and Chinese -- opposing another of Hubbard's bills, to ban a chemical compound called bisphenol A that is central to the plastics industry. Manufacturers in the United States and China use the compound in baby bottles and other products. With testimony on both sides, the bill did not pass out of a House committee.

The Chinese said there is "no specific scientific evidence" proving that products containing bisphenol A are hazardous to children.

Hubbard said he believes both complaints were prompted by lobbyists for the chemical industry, here in Washington.

"I truly feel the [chemical] industry and the toy industry are running to China and saying, 'You ought to oppose these bills, and if you don't you'll lose out on product sales in America,'" he said.

The WTO’s signature 'trade until proven deadly' threat justification was successful, and the bill didn’t make it out of a House committee. In an interview on the Kojo Nnamdi Show on Monday, Hubbard expressed his consternation: "This was a public health issue, not a trade issue."

In the past, international trade rules have stretched an intervening hand into state legislatures on a number of important issues, including health-related environmental regulations. Yet the WTO, not to mention Chinese government's attempts to preemptively intervene in a state's legislative process is taking their vested interest to another level.

Concerned that similar legislation would receive such undesired attention in Maine, the state's Citizen Trade Policy Commission issued a letter to the USTR which received this response. Hardly reassuring, their explanation is that the WTO notification system which "normally calls for us to notify proposed agency regulations" had "inadvertly included certain state legislative proposals." They assure it will not happen again in the future.

As states increasingly feel the yoke of international trade agreements in which they have had virtually no say, legislators from around the country are seeking new ways to work together to improve the process of state-federal consultation when it comes to trade policy-making.

Special thanks to Isaac Raisner for his contribution to this post.

May 16, 2008

Linda Sanchez v. Bart Simpson

Fair trade champion Rep. Linda Sanchez (D-Calif.) is pushing a bill that would grant U.S. consumers and states greater power to serve legal papers on foreign manufacturers that sell defective products in the U.S. market. As we documented last year, foreign producers can rarely be held liable for damages they cause U.S. consumers, a reality not helped by WTO rules and that has promoted offshoring of U.S. jobs and importation of unsafe products. As Ed Mierzwinski from PIRG put it in his testimony for Sanchez's subcommittee (also on our behalf):

By making it easier to hold foreign wrongdoers accountable, your bill would help consumers gain access to justice and also help equalize pressure on U.S. firms that may bear unequal treatment under our laws.

Of course, your bill importantly does not eliminate any responsibility or liability for U.S. manufacturers, importers, distributors, or retailers. It simply makes it easier for consumers to obtain redress from foreign manufacturers. All wrongdoers should always be held accountable.

Bartsimpsongeneratorphpmj8_2 Last year, for example, Mattel used what I call the Bart Simpson defense (“I wasn’t there, I didn’t do it, and it’s not my fault”) when it initially blamed a third-party Chinese supplier for failing to follow its lead paint requirements on a toy that was later recalled.8 Mattel, of course, under the Consumer Product Safety Act and the Federal Hazardous Substances Act, violated U.S. law by entering the banned hazardous substance into U.S. commerce. It trusted, but failed to verify. Mattel would still face liability even if one of its third-party foreign suppliers also did under your act...

Unfortunately, globalization has provided too many firms in the global supply chain with the wrong incentives: they want to cut corners, they want the cheapest supplier, they don’t do third party testing and they use cheaper, dangerous chemicals instead of safe ones. This has placed consumers worldwide at risk. By strengthening U.S. product safety laws and strengthening the ability of U.S. consumers to seek redress from more wrongdoers, actions by U.S. policymakers can benefit all consumers worldwide, since it will ultimately be more efficient for manufacturers and retailers to supply everyone to meet U.S. levels of safety rather than face U.S. levels of liability.

April 01, 2008

Trade On the Trail Tuesday

Over the weekend, the Boston Globe reported "Democrats ply wider range of economic woes: Free-trade focus shifts to consumer struggles." As a consumer group that has worked on trade since the early 1990s, I guess we didn't get the memo that the two issues were separate. In fact, our partners in the labor and fair trade movements have organized a whole series of events in Pennsylvania spotlighting consumers' concerns about imported toy safety (See here and here).

As we show in a recent report, trade deals like the World Trade Organization (WTO) and North American Free Trade Agreement (NAFTA) have grave implications for consumer safety. The deals contain provisions that set limits on import safety standards and inspection rates. The report explains how WTO and NAFTA investor protection rules have eliminated the risks normally associated with relocating to a developing country while instituting a system where U.S. public interest policies can be and have been challenged in foreign tribunals as "barriers to trade," with U.S. public policies being ruled against at the WTO more than 80 percent of the time. Additionally, this consumer issue is also a jobs issue with 74 percent of U.S. toys being produced in China, while wages there are as low as 36 cents an hour – half that of other developing countries and 2.5 percent that of U.S. toy workers.

NAFTA and the WTO have become shorthand for a whole system of international economic governance that serves the corporate – rather than consumer – interest. Candidates should be questioned about what specific steps they will take to challenge the WTO, which not only offshores our jobs, but outsources our consumer protections.

We'll be back on Thursday with more Trade on the Trail!

March 10, 2008

Fair trader replaces Denny Hastert in special election

Yep, a big surprise over the weekend as former Speaker Dennis Hastert (R-Ill.) - an anti-fair trader in 20-out-of-20 votes over nearly as many years - was replaced in a special election by Democrat Bill Foster in a very GOP-leaning district west of Chicago.

Foster, like so many of the candidates that have run for office in the last few years, campaigned heavily on critique of the trade status quo, even running paid ads on trade, which you can see here.

February 21, 2008

Green jobs, soft bigotries, big opportunities

Once in a rare while, an idea actually takes the nation by storm. It may not necessarily be a new idea, but it is articulated in a new and exciting way that captures the political imagination. Such an idea is the "green jobs" agenda, which attempts to conceive of a move to a green economy in a way that actually increases jobs and income, rather than taxing us back to preindustrial times. My new buddy Susan Helper described this set of ideas fairly concisely in a new paper for the Economic Policy Institute. Among the arguments she presents and summarizes:

  • A 2-3 degree Celsius increase in temperature could lead to mass species extinction and flooding; in order to avoid this and other consequences, carbon emissions (which lead to global warming) in developed countries must be reduced 80%. While this sounds very daunting, and indeed it is, there are relatively small investments that could be made in energy efficiency and renewable energy that can take us there. Thus the green jobs agenda.
  • At the same time, U.S. workers are hurting. Less than 10% of the workforce is currently in manufacturing, and key industries like the tooling industry are nowhere near where they need to be to move to a green economy. Thus, greening could potentially lead to more offshoring - not the nail in the coffin that the American worker needs after a generation of wage stagnation.
  • Despite that doom and gloom, manufacturing is still responsible for a majority of U.S. innovation, and U.S. manufacturing companies - especially when they empower their workers to self-manage - can have significant productivity advantages over more top-down competitors both domestic and international. They can also pay high wages.
  • Then, very helpfully, Sue shows how the "high-road" policies people like her and Dan Luria have been talking about for a long-time can and should dovetail with the green jobs agenda.

Sue's proposals have many good counterparts, and virtually every candidate and many many union and environmental groups are coming up with their own proposals.

But even an emergent discourse like green jobs can get hampered by inherited discourses, like that promoted by the boosters of our current NAFTA-WTO style trade policy. Former U.S. trade officials are arguing that we mustn't pursue any policies that are WTO-illegal, while even our good friends are feeling pressure to justify their policies in the lens of the WTO.

I don't know about you, but the first institution that pops in my head when I think of saving the planet is not the WORLD TRADE ORGANIZATION. I dunno, maybe it's because its judges have ruled against so many good environmental policies both here and abroad. By bending over backwards to claim WTO legality, I think we sell ourselves or the planet short on the discussion we need to be having about reinvigorating local democracy and economies.

Part of addressing the global warming crisis will involve immediate action to reduce some of the redundant trade that is taking place (where we ship the same heavy items back and forth across oceans), to correct global trade imbalances, and to empower policymakers and workers to take more control over their economic destiny. (This is what I think is what Sue is talking about in her proposals for everything from the shop floor to a national economic strategy.) I think the public is very ready to have this discussion, as can be seen from discussions of trade policy playing so prominently in the campaigns. I don't think we have to wait until 12 years to start addressing competitiveness issues either, as many of the proposals before Congress currently do. After all, much of the offshoring of U.S. production to Mexico and China happened in considerably shorter time periods.

In other words, we need to decide what is to be done, and then figure out how to overhaul the WTO to meet our targets, rather than starting from the unhelpful premise of ensuring WTO legality.

December 20, 2007

Import toy safety - where's Congress?

The Democrats rode back to power last November thanks to fairly unified opposition to more NAFTA style agreements. Then, this year, with the imported toy safety crisis, there's been increased calls for overhauling of our 1970s toy safety regulatory policy, premised on a reality when most toys where made domestically.

We already know how a slim minority of the House Dems and a frightening majority of the Senate Dems caved on the first issue, by helping pass Bush's NAFTA expansion to Peru. Of those running for president, only Kucinich and Paul managed to vote right, while everyone else - including Biden, Dodd, Clinton, Hunter, McCain, and Obama - didn't manage to even show up to vote. (Additionally, Tancredo voted wrong.)

Now, it seems they're poised to cave on the second as well. Last night, just a couple of minutes before close of business, the House passed 407-0 a Consumer Product Safety Commission bill that does practically nothing on import safety. (If you want to see what "something" looks like, and why the Wall Street Journal gave us some luv and called us " a hard-liner among consumer groups",  see the recommendations at the end of our latest report and after the jump.)

As far as I know, Rep. Jan Schakowsky (D-Ill) was the only member to even acknowledge the shortcoming:

"I hope we can make this bill even stronger. Even with added resources authorized from the bill, a major improvement from the levels requested by President Bush, we could do better, particularly when it comes to monitoring imports. I support measures to add mandatory premarketing testing and other important things."

Now, the bill goes on to the Senate, where there's slightly stronger but still inadequate bill that has been reported out of the Senate Commerce Committee. As The Hill reported,

Industry lobbyists favored the House version, which some consumer groups said didn’t go far enough to protect consumers...

According to a report released Wednesday by the consumer group Public Citizen, however, neither the House measure nor the tougher Senate version will address one of the main culprits in the wave of toy recalls this year: trade policies that have driven domestic toy manufacturers to move their operations overseas.

'Nuff said. Another case unfortunately of siding with industry over meaningful solutions to the problems facing middle class Americans. (see our full recommendations after the jump.)

Not everyone is as shortsighted, however. As Sen. Bob Casey (D-Pa.) said at today's Pa. news conference on our report,

Sen. Casey is backing a bill in the U.S. Senate that would reform the Consumer Product Safety Commission. However he admits that is only part of the problem. He says changes need to be made when it comes to America’s trade policies because from steel to chocolate, Pennsylvania has been hit hard by companies moving overseas.

 (Disclosure: Global Trade Watch has no preference among the candidates.)

Continue reading "Import toy safety - where's Congress?" »

November 08, 2007

Date-Rape Drug Found in Chinese Toys

We'll get back to our regularly scheduled Peru FTA liveblog in an hour or two according to Majority Leader Hoyer, but this Wall Street Journal find was too shocking to put off: (sorry, not linkable, although CNN is.)

More than four million Chinese-made toys sold in the U.S. as Aqua Dots are being recalled after reports surfaced that children swallowed beads containing a chemical found to mimic the effects of the so-called date-rape drug.

The Consumer Product Safety Commission said it has received two reports of children swallowing Aqua Dots and slipping into comas. Both children are now fine, the commission said. At least three children have been hospitalized in Australia, where the product is called Bindeez, after ingesting beads from the toy... Wal-Mart Stores Inc. listed the product as one of its "Top 12 Toys of Christmas."

Why don't we start targeting China for 50%+ inspection rates, you ask? A little something called the WTO, which has rules on so-called "national treatment" and other provisions that limit U.S. ability to target problem countries. The FTA with Peru, which has the world's largest food catch business after China and many health violations, further locks in these rules for Peru, and gives firms operating there the right to sue our government for our tax dollars if they don't like our food inspection regime, or other public interest policies.

August 29, 2007

Mattel haltingly tries to self-correct, as WTO-nourished outsourcing mania continues

The Times had this interesting story this morning, again raising questions of exactly where the buck stops for consumer protection in the global economy, and whether corporations can meaningfully self-correct in this rotten system they helped build:

Mattel makes its best-known toys, like Barbie dolls, in its own 12 factories. But even as it has increased the share of toys it makes itself to about half, it still relies on roughly 30 to 40 vendors to make the other half. Mattel now realizes it was not watching those companies closely enough, executives here said.

Mattel vetted the contractors, but it did not fully understand the extent to which some had in turn subcontracted to other companies — which in turn had subcontracted to even more. Mattel required its vendors to list subcontractors, so Mattel could visit them, but Mattel is investigating whether that procedure has been followed. A number of companies whose factories Mattel had never visited may have had a hand in making the toys that were shipped around the world...

Mattel executives in Hong Kong are trying to figure out how many subcontractors became part of its lineup...

“There aren’t many companies that own their own factories,” Mr. Eckert said in an interview in his office, “and there aren’t many companies that manufacture outside of China.”

Mattel closed its last American factory, originally part of the Fisher-Price division, in 2002. The bulk of its products have long been made in Asia.

Indeed, as this graph I put together below shows, since the worst boy band ever helped pass China PNTR, China (with all the accompanying safety/transparency problems common to authoritarian states) is rapidly overtaking all other countries (especially North American and Western European countries) in U.S. toy imports.

China_toy_share_2

This comes on the same day as a report about rising Chinese wages, which American companies have tried to suppress.

July 02, 2007

The iPod supply chain, or why a China focus is insufficient

As we've noted before, there are plenty of problems with China trade. Some in the debate however choose to focus only on "their [currency] prices," as opposed to "our [currency] prices," or on China as opposed to the unfair WTO-style rules of the game.

Hal Varian's recent NYT column on the i-Pod's tangled supply chain pointed out a fact that should make it clear that we cannot eliminate the U.S. trade deficit or solve manufacturing problems just by cracking down on China:

Even though Chinese workers contribute only about 1 percent of the value of the iPod, the export of a finished iPod to the United States directly contributes about $150 to our bilateral trade deficit with the Chinese.

This is because all the parts come from elsewhere in Asia, and only the final assembly is done in China. Granted, the super low Chinese wages account for part of the reason why such a low percentage of the end value "comes" from China - with higher wages, we should see a higher Chinese share (assuming Apple did not just simply seek out a lower cost locale, which of course they would.)

So, we could eliminate the Chinese trade deficit, only to have U.S. manufacturing still face the crippling effects of an overvalued dollar, and the trade deficit simply shift to other parts of Asia. Rather than playing whack-a-mole around the globe, couldn't we just get to the root causes of the problem (i.e. the flawed rules of the game; absence of forward-looking U.S. policy)?

Thanks to the folks at IELP for pointing this out.

June 30, 2007

Unsafe food in China show results of pressure to keep costs low

This week, the New York Times reported that China closed 180 plants in a food safety crackdown...

After weeks of insisting that food here is largely safe, regulators in China said Tuesday that they had recently closed 180 food plants and that inspectors had uncovered more than 23,000 food safety violations. The nationwide crackdown, which began in December, also found that many small food makers were using industrial chemicals, dyes and other illegal ingredients in making a range of food products, everything from candy to seafood. Regulators said 33,000 law enforcement officials combed the nation and turned up illegal food making dens, counterfeit bottled water, fake soy sauce, banned food additives and illegal meat processing plants. "These are not isolated cases," Han Yi, director of the administration's quality control and inspection department told the state-run media.

If this so-called "crackdown," which appears to be a thinly veiled PR stunt rather than a real effort to deal with the consequences of the enormous pressures to keep costs low - coming at the expense of our food safety - closed down so many shops, just imagine how many shut downs we would have with REAL and ENFORCEABLE food safety rules. It is important to note that this is NOT a "Chinese" problem, but a global problem manifesting itself today in China, and in many other countries where we simply hear less about it because the volume of imports in the U.S. is not as great.

June 11, 2007

China case illustrates food safety issues in a globalized economy

Right on the heels of the tainted Chinese pet food episode and rising fears of contaminated food imports from China, it now appears that China is playing the same cards against the United States, claiming that some U.S. health supplements and raisins failed to meet Chinese safety regulations.

Regardless of whether or not you think this move by China results from retaliatory political showmanship or genuine, rising concern about food safety in the wake of the corresponding furor among the U.S. public, this kind of quid-pro-quo blame game illustrates a point that fair trade activists have been making for years.  That is, replacing a locally controlled food supply with a globalized food market operating under the current rules of the game (under which tight food safety standards or bans are attacked as "barriers to trade") creates a downward pressure on food safety standards worldwide and takes away communities' rights to determine what is in the food they eat.  Of course, this is in addition to the economic and social effects of global trade rules that favor massively industrialized food producers, and the unintended economic side effects of a tightly interconnected global economy (like the effect of a Chinese pork shortage on inflation in the developed West).

You don't have to look far for examples, from Europe's ban on artificial beef hormones ruled WTO-illegal, to food imports in the United States not being subject to U.S. inspection standards yet receiving USDA stamped approval anyway, to Saudi Arabia's reluctance to enter the WTO because of concerns that they would not be able to prevent the importation of pork under WTO market access rules.

A helpful concept in this debate is the idea of subsidiarity: regarding food, the principle of subsidiarity would mandate that to whatever extent local farmers and producers can meet the needs of their community, the rules should encourage them to do so, instead of subsidizing massive levels of trade for trade's sake (or for the sake of profits for multinational industrialized food producers).  This idea is explained in greater detail by the International Forum on Globalization in their book Alternatives to Economic Globalization.

June 05, 2007

Cut-Throat Capitalism: A Pirate's Paradise

Today, the New York Times again called attention to the dangerous fake and falsified products that are being exported to the U.S. and around the world from China. The most imminent threats have been from products in people food and pet food, but everything from fake car parts, cosmetics, and Philips light bulbs to counterfeit electrical cables and phony Viagra have a history of production in the country.

The insightful question that adds an edge to this article, however, diverts from China-bashing and rather implores us to consider the larger framework in which countries operate in the global economy:

"This is cut-throat market capitalism," said Wenran Jiang, a specialist in China who teaches at the University of Alberta. "But the question has to be asked: is this uniquely Chinese or is there simply a lack of regulation in the market?"

"We have to bear in mind they probably don't think about the consequences at all," said Steve Tsang, a China specialist who teaches at Oxford University. "They're probably only thinking of making a fast buck."

What happens when deregulation runs rampant? This is just a preview. More to come on specific products to avoid that are readily available to the American consumer.

May 03, 2007

What If?! The U.S. Had Balanced Trade With China??

When I was growing up, one of my favorite comic books was Marvel Comics' "What If?!" series. The basic premise of the series was to explore what would have happened had certain comic books heroes died sooner (or lived longer) than they did in the comics' normal running narratives. "What If?!" also386pxwhatif1 occasionally delved into non-comics history, exploring alternative histories if World War II had turned out differently, and the like. In short, it was a pretty fun (and pretty heady) Saturday night plan for a nerdy 10 year old.

Our friends over at the Economic Policy Institute have a long-running series of trade policy papers that are very much in the best of the "What If?!" vein, except they have the advantage of being not about guys running around in spandex but about REAL STUFF.

In his latest paper on U.S.-China trade, EPI's Rob Scott looks at how many more U.S. manufacturing jobs could have been supported had the U.S. had balanced trade with China over the 1997-2006 period, rather than the over $237 billion trade deficit we have currently. He puts the number at a whopping 2,166,000 jobs - the bulk of that for the years since Congress granted "permanent normal trade relations" to China at the end of the Clinton administration. California, Texas, New York, Illinois and Pennsylvania missed out on the most job opportunities, while New Hampshire, North Carolina, California, Massachusetts and Rhode Island lost out on the most job opportunities as a share of its total employment. Check out the paper to see how your state stacks up.

Rob's "What If?!" work is very valuable, because balanced trade should be the norm to which we compare the current economic nightmare. In the words of my old prof Ajit Singh,

an efficient manufacturing sector is one that “not only satisfies the demands of consumers at home at least cost, but is also able to sell enough of its products abroad to pay for nation’s import requirements.” He adds the qualification that these objectives should be met at “socially acceptable levels of output, employment and the exchange rate.” See Ajit Singh, “Manufacturing and deindustrialization,” in John Eatwell, et. al., The New Palgrave: A Dictionary of Economics, Volume 3, (London: Macmillan, 1987.)

Knowing that over 2 million more good U.S. manufacturing jobs could have been created in a world of balanced China trade, how could anyone say that our current trade policies are "socially acceptable"?? To say so would sound like some comic book bunk.

April 10, 2007

Rag-Tag Arguments over at the Forbes Business Bash

Journalists are an interesting bunch. We got a call from a reporter writing this piece for Forbes last week, who claimed to not really know the focus of the piece. Little did we know or she indicate that we would become the straw men in the standard claptrap argument about China's supposed "neo-liberal" success story.

But, hey, that's ok. While we don't speak up every time someone characterizes us as "business-bashing" or "rag-tag," this time it seemed important to correct a few matters for the record.

Continue reading "Rag-Tag Arguments over at the Forbes Business Bash" »

April 03, 2007

What to do about China?

Today, Global Labor Strategies posted an excellent consideration of Chinese labor rights and China's role in the global economy, and what a progressive outlook on the Chinese economy might look like. The concluding section is particularly cogent:

Workers, communities, and countries throughout the world are confronting the challenges posed by the emergence of China as a global economic powerhouse. About 25% of the global work force is now Chinese. Indeed, China has become the focal point for many Americans' feelings of insecurities in the global economy. [...]

Some in the labor movement and Congress have begun to recognize that simply criticizing the Chinese state fails to address the dominate role of global corporations in the global economy. Roughly 66% of the increase in Chinese exports in the past 12 years can be attributed to non-Chinese owned global companies and their joint ventures. Foreign owned global corporations account for 60% of Chinese exports to the US. Indeed, if the US retail giant Wal-Mart were a country it would be China’s 8th largest trading partner. The "Chinese threat" is less about trade with China than it is about trade with Wal-Mart and GE. Global corporations move to China to lower labor costs -- and they use those lower labor costs as a lever to drive down wages and working conditions for workers in other countries, and even within China itself.

Obviously, the China issue is only going to get bigger, and it would serve progressives well to start thinking about what a fair and just vision of the global economy might look like with regards to the world's biggest labor pool. Global Labor Strategies has taken the lead in following Chinese labor issues, so those interested should definitely keep an eye on their work.

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