Trade Debate Shows Force of Social Issues

In the end, it was about far more than business with Beijing: The fierce struggle over U.S. economic ties to China has transformed a larger national debate on the global economy and its human fallout for years to come.

Though Wednesday’s House vote approving permanent normal trade relations with China was widely interpreted as a blow to labor, human rights and environmental groups, their coalition succeeded in elevating issues of justice in the workplace and such politically explosive matters as human rights to a central role in trade policy. It is a change, many believe, that inevitably will broaden America’s approach to the global economy, with various social considerations--once marginal--taking a higher priority than ever before.

In particular, Congress shattered precedent by linking its approval of major trade legislation to creation of a commission that would monitor China’s human rights conduct.

“You need to try to shape globalization,” declared Rep. Sander M. Levin (D-Mich.), who first pushed the idea of a human rights panel. “You don’t stand in its way, but you don’t simply open the door and say, ‘Come what may.’ You have to wrestle with it and work with it.”

Such thinking, Levin added in an interview, will extend beyond the particulars of the China matter and “relates to what we do in the future” on trade issues.

To be sure, Wednesday’s vote was a smashing victory for pro-trade forces who have suffered years of frustration on Capitol Hill. Chinese officials last year agreed to knock down a plethora of barriers to trade, investment and other business activity by foreign firms. American companies would have been denied those benefits if Congress had chosen not to establish normal economic ties with Beijing.

Yet in assessing the outcome, political analysts were struck by the ferocity of the debate and the clear agony felt by many lawmakers caught between furious, competing pressures. Organized labor led the opposition to normal trade ties with China, warning that 872,000 American jobs would be sacrificed over 10 years as U.S. businesses seize new opportunities in a nation of cheap wages and other low costs.

For its part, corporate America mounted its largest-ever trade campaign. Business leaders argued in the halls of Congress and carefully targeted congressional districts that American workers actually will benefit as U.S. industry profits from growing sales to a potentially gigantic Chinese marketplace. The supercharged nature of global trade concerns was only underscored by the fact that the boisterous debate unfolded in a time of widespread prosperity and low unemployment in the United States.

“This is the most contested trade battle I’ve ever seen,” said Franklin J. Vargo, international vice president of the National Assn. of Manufacturers and a veteran of 34 years in the U.S. Commerce Department.

For all China’s uniqueness, many previous trade battles have reflected a broader backlash against global capitalism, a loosely tied protest movement that includes elements of organized labor, advocates of human rights and animal rights, environmentalists, and consumer groups. Its more radical participants brought chaos to Seattle during last year’s meeting of the World Trade Organization and tried to shut down the spring meetings of the World Bank and the International Monetary Fund in Washington.

Anti-globalization activists noted Wednesday that, while their side lost the vote, trade advocates were compelled to modify the China proposal with special safeguards to capture the support they needed for victory.

“You’re seeing the last gasp of the corporate-dominated approach to trade and globalization,” argued Scott Nova, director of Citizens Trade Campaign, a grass-roots effort for trade reforms.

In a bid to answer the criticisms, especially from organized labor, the White House agreed to form a “rapid response” team of specialists to monitor China’s compliance with its trade pledges. It announced the creation of a new deputy assistant secretary post in the Commerce Department to further examine Beijing’s compliance with international rules and added a job in the office of the U.S. trade representative to focus more broadly on labor concerns.

While critics dismissed all these steps as toothless symbolism, others said that they added up to a significant statement of labor concerns as a U.S. priority in trade dealings. In the past, for instance, forced labor and sweatshop conditions were barely considered by trade policymakers who spent their time dealing with tariffs and quotas. In the future, however, such matters will be considered far more routinely.

“They [labor] almost won” the China battle, said Greg Mastel, a global economic specialist at the New America Foundation, a Washington-based think tank that supports new ways of approaching public policy questions. “They demonstrated that they’re a serious player and they’re likely to become more so in the future.”

In an interview, U.S. Trade Representative Charlene Barshefsky said that passage of the China bill may stimulate other ongoing efforts, such as establishing normal trade relations with Vietnam, negotiating trade in financial services and telecommunications with the European Union and launching a new round of global trade talks--an effort that failed in Seattle last December. At the same time, she agreed that certain issues raised by trade critics, such as the WTO’s aloofness to labor concerns and its lack of openness, now are official U.S. priorities.

“These are issues that are important issues and legitimate ones--and will continue to be addressed, particularly at the global level,” Barshefsky said.

By all accounts, a key to passing the bill was a series of measures sponsored by Levin and Rep. Doug Bereuter (R-Neb.), ultimately accepted by the Republican leadership, that was a cautious attempt to confront the dilemma of broadening ties with a nation that lacks democratic institutions.

The Levin-Bereuter approach would impose added safeguards to protect American workers from job-threatening surges of Chinese imports and also would establish new procedures to ensure that China complies with its trade promises. Some experts were especially struck by the congressional-executive commission to monitor human rights conduct in China, modeled on a Helsinki panel that watched for human rights abuses in Eastern Europe during the latter years of the Cold War.

Indeed, there is no way to know how such a precedent would be applied, perhaps to different nations and perhaps focused on areas other than human rights.

“It will be quite surprising if this precedent is not followed in new trade agreements,” observed Gary C. Hufbauer, a senior fellow at the free enterprise-oriented Institute for International Economics, based in Washington, and a longtime observer of trade policy. “We’ve created a new animal here.”

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Terms of the Deal

Though it is a leading U.S. trade partner, China’s trade status must be approved annually by Congress. Wednesday’s House vote would eliminate that annual review. This is a prerequisite for implementing a landmark U.S.-China trade deal reached in November that opens Chinese markets to more U.S. products. Here is a look at that agreement:

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Overview

Chinese tariffs are cut to an average of 9.4% overall, from an average of 24.6%, and to an average of 7.1% on key products, such as fiber-optic cable.

China drops quotas, licenses and other barriers to U.S. imports, such as severe distribution limits.

China eliminates quotas on U.S. priority products upon admission to the WTO and remaining quotas no later than 2005.

A special mechanism is set up to address import surges from China that threaten U.S. market disruption.

China eliminates local content rules, which have required that goods built or assembled in China contain Chinese components.

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Agriculture

China drops its overall average tariff to 17.5% for U.S. farm products from 22% by 2004. Some examples:

Wine:

Current tariff: 65 %

Tariff in 2004: 20

Cheese:

Current tariff: 50%

Tariff in 2004: 12

Citrus:

Current tariff: 40%

Tariff in 2004: 12

Almonds:

Current tariff: 30%

Tariff in 2004: 10

Pork:

Current tariff: 20%

Tariff in 2004: 12

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China permits expanded imports of bulk commodities, such as wheat, corn, cotton, barley and rice; eliminates export subsidies on agricultural products; and permits the import and distribution of farm products without going through a state-owned enterprise.

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Motion Pictures

China will increase annual imports of foreign films to 20 from the current 10 each year beginning next year.

China reduces tariffs on films and increases foreigners’ right to own and build movie theaters in China.

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Telecommunications

For the first time, foreigners can supply e-mail, voicemail, online information and database services, fax services and paging services, analog and digital cellular services and personal communication services.

China phases out geographic restrictions for offering paging and Internet service in two years and mobile voice and data services in five years.

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Computer Products

China eliminates tariffs, which now average 13%, on semiconductors, computers, software and related products by 2005.

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Autos

Tariffs on automobiles will decrease to 25% from the current 80% to 100% levels by July 2006.

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Banking

Foreign banks are allowed for the first time to do business with Chinese businesses in the Chinese currency, the yuan, starting in two years.

Severe geographic restrictions are removed after five years.

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Textiles and Apparel

China lowers its tariffs on textiles and apparel products to 11.7% from the current average of 25.4% by 2005.

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Sources: Congressional Quarterly; China Trade Relations Working Group; Times files

Researched by NONA YATES / Los Angeles Times