Global Trade Pact Won’t Be Cheered by All in U.S. : Commerce: Two Pennsylvania firms epitomize fear of foreign competition. Anti-dumping laws urged.
When U.S. Trade Representative Mickey Kantor and officials of 124 other nations gather in Morocco today to sign the most far-reaching trade agreement ever written, don’t expect a hearty cheer to rise with the searing heat of molten steel from the floor of the Bethlehem Steel factory.
And don’t look for an appreciative nod of gratitude in neighboring Allentown, where the spick-and-span, climate-controlled workrooms of the AT&T; microelectronics plant turn 100-pound ingots of silicon into thousands and thousands of computer chips every day.
Although Bethlehem and AT&T; are at opposite ends of the U.S. industrial spectrum, they have some important things in common: dependence on international sales and stiff competition from foreign manufacturers. And both grumble that the new trade pact will help their foreign rivals and cut into their own business overseas.
Their complaints may not be serious enough to turn the politically powerful steel and semiconductor industries into sworn opponents of the agreement, initialed by negotiators from every corner of the globe in December after eight years of bitter, divisive talks.
But they go to the heart of trade politics as it is practiced in the 1990s and reflect the narrow, winding path that the Clinton Administration must follow as it sends to Congress an international trade plan, which, in its vast scope, will dwarf the North American Free Trade Agreement--only narrowly ratified by Congress last autumn.
Approval by Congress is the only obstacle still standing in the way of the global trade agreement. In the end, Congress is widely expected to accept the pact if President Clinton can come up with a way to make up for the $11 billion or so in import taxes that would be lost over the next five years as a result of tariff reductions.
But as the White House prepares to make its case to the House and Senate, says former Rep. William Frenzel, a Minnesota Republican who helped the Administration guide NAFTA through Congress, “all of the people with interests at stake are trying to get something better. Even those who will profit enormously are trying to get one more little thing for themselves.”
What the steel and semiconductor industries are trying to get is legislation declaring in no uncertain terms that the United States reserves the right to take legal action against foreign competitors that dump products on the U.S. market at lower cost than they charge at home.
The vehicle for such language would be the bill that Congress passes to implement the new trade pact. Alan Wolfe, a trade lawyer representing the steel and semiconductor industries, said that the precise wording of the implementing bill is crucial. Until the two industries see the bill, he said, they can only say that they conditionally support the international accord.
The trade agreement, completed in Geneva, would slash import taxes around the globe, open markets for food and consumer goods and extend the rules of international trade to the growing business of cross-border financial services.
From a global standpoint, that means “more trade, more investment, more jobs and larger income growth for all,” said Peter Sutherland, director general of the General Agreement on Tariffs and Trade, the Geneva-based organization that supervises international trade rules. “Economic operators across the globe will benefit. Producers and consumers, investors and traders everywhere will gain.”
In the United States, proponents say, the trade pact would boost the gross domestic product--the measure of the nation’s goods and services--by anywhere from $100 billion to $200 billion, an increase of 1.5% to 3%.
Although those figures are questioned by some--economist Thea Lee of the Economic Policy Institute in Washington said such numbers “seem completely outrageous”--few question that the trade pact will produce a significant increase in global economic activity. And few, if any, industries got everything they wanted from the Geneva negotiations, although some are clear winners.
Computer manufacturers, aerospace companies and retailers appear to be among big winners. Pharmaceutical manufacturers, whose patents have been ripped off by foreign companies, are looking forward to protection for the fruits of their intellectual labors.
The probable losers include such struggling, labor-intensive industries as textile manufacturing, which fears that the loss of protective tariffs will doom it to extinction in the United States within a generation or less.
Somewhere in the middle are semiconductors and steel.
Bethlehem Steel, despite converting to a high-tech, robot-dependent operation, represents the heart of U.S. industrial history, where strong-muscled men work amid flame, smoke and the roar of blast furnaces operating at 2,300 degrees Fahrenheit.
AT&T;’s semiconductor plant, barely five miles to the west, represents the clean, new industry born out of U.S. creativity and a swiftly growing demand for computer-driven machinery around the world.
For all their differences, the steel and computer chip manufacturers agree that the new rules of international trade will strip away their protection against foreign products that are dumped on the U.S. market at a loss (to drive U.S. competitors out of business) or at prices subsidized by foreign governments.
The U.S. steel industry is worried that it will be cheated out of the fruits of the last decade of wrenching adjustment as it modernized its plants and shed thousands of jobs.
“Today we are the low-cost, high-quality producer in the market,” Bethlehem Chairman Curtis H. Barnette said in an interview.
Dumping has little impact on consumers, reducing the average cost of a car by no more than $12, U.S. steel companies maintain. But it can kill U.S. companies that must drop their prices to meet the foreign competition.
Frenzel, for one, is unsympathetic.
“The complaints of the steel companies have been echoing through the corridors of Congress for almost as long as we’ve been making steel,” said Frenzel, now a guest scholar at Washington’s Brookings Institution.
If the trade agreement makes it easier for steel manufacturers to file anti-dumping suits, he said, the chief effect will be to shelter them from competition--a sure-fire formula for industrial flabbiness.
As for the U.S. semiconductor industry, it has been battling the Japanese practically ever since scientists launched the modern electronics revolution by learning to etch complicated circuits on tiny silicon chips.
In the mid-1980s, the vertical conglomerates in Japan that produced a particular semiconductor known as a dynamic random-access memory chip flooded the U.S. market with their tiny products priced at below cost.
To fight back, Micron Semiconductor of Boise, Ida., cut its work force in half, cut salaries and eliminated benefits, Chairman Steven R. Appleton said in a recent appearance before the Senate Finance Committee.
“We had state-of-the-art technology, high-quality, low-cost manufacturing and a dedicated work force, and yet we could not contend with Japanese prices,” he said.
In the end, the Japanese prices were low enough to knock nine of 11 U.S. companies out of this segment of the market, which the Japanese companies now dominate. It was only through eventual lawsuits filed under U.S. anti-dumping legislation that Micron was able to fight back, now employing more than 5,000 people at restored wages and benefits, Appleton said.
“A major . . . goal of Japan and its satellites was weakening anti-dumping enforcement,” Appleton told the committee. “We will not allow this to happen. In drafting implementing legislation, this committee must adopt the standard that U.S. law be as strong as the new code permits.”
The alterations in the international anti-dumping codes are written in the arcane, technical language of trade law dealing with pricing, production costs, standards of complaints and profits.
“The litigators describe it as death by a thousand cuts. The cumulative effect of all the small technical changes make it extremely difficult to file an anti-dumping case,” said Daryl Hatano, vice president for international trade and government affairs of the Semiconductor Industry Assn.
Still, said John Boidock, executive director of the Alliance for GATT Now, a multi-industry lobbying group, satisfactory legislation can protect the semiconductor and steel industries.
In Allentown, that means the 3,000 workers at the AT&T; microelectronics plant can continue turning out thousands of chips destined for answering machines, cellular telephones and telephone switching networks.
And in Bethlehem, where the steelwork’s employment is down to 3,500 from about 10,000 in the early 1980s, 1 million tons of steel will continue to roll out of the mills each year.
