f you're looking to start a debate, just start asking people about U.S. international trade policies.
When it comes to free trade agreements, fast-track negotiating authority or policies toward China, some say they either are making U.S. manufacturers strong in a globalized business environment or catapulting U.S. manufacturing capacity and jobs across the Pacific Ocean. It just depends on which group you represent.
Aside from general consensus that China's aggressive stance on foreign trade must be curbed, there are virtually no points of agreement in between.
Labor unions and smaller U.S. manufacturers claim the free trade policies started under President Clinton and still pursued by the Bush administration constitute a giveaway to foreign competition.
The total U.S. trade deficit reached $763.6 billion in 2006, up more than 6.5 percent from 2005's $716.7 billion, according to the U.S. Business and Industry Council, which supports small manufacturers in their efforts to preserve U.S. manufacturing facilities and reduce the trade deficit.
``If President Bush deserves blank-check trade negotiating authority from Congress with this record, then Paris Hilton deserves to be Girl Scout of the Year,'' said Alan Tonelson, a research fellow with the USBIC Educational Foundation.
But measured against countries with which the U.S. has free trade agreements, the U.S. actually had a trade surplus, according to Franklin Vargo, vice president of international economic affairs with the National Association of Manufacturers, which represents large multinational corporations as well as smaller manufacturers.
``It was only $600 million-a negligible sum compared with the deficit, but still it's there,'' Vargo said. In countries with which the U.S. has free trade agreements, he added, U.S. goods enter duty-free, whereas in other countries the duties levied against U.S. goods average about 14 percent.
China: the main problem
Nearly half of the U.S. trade deficit is with China, and just about everyone agrees that something needs to be done about China's trade policies, its undervalued currency and its disregard for the rules of the World Trade Organization. Exactly what is to be done, however, is a point of marked and often heated disagreement.
The NAM, for example, found a near-rebellion on its hands when its Executive Committee decided during the last Congressional session to oppose the Chinese Currency Act. The bill, co-sponsored by Reps. Tim Ryan, D-Ohio, and Duncan Hunter, R-Calif., aims to force China to stop evaluating the yuan at the artificially low rate of 8.28 to the U.S. dollar.
On Sept. 28, 2006, the NAM Executive Committee-most of whose members come from large multinational corporations-voted 55-25 to oppose the legislation, on the grounds that its provisions violated the rules of the WTO. The vote came despite the protests of the NAM's Domestic Manufacturers Group that the bill did no such thing.
``(The Chinese Currency Act) is an important, carefully crafted and well-reasoned effort to build on the clear intent and developing precedent of WTO law to eliminate trade-distorting subsidies,'' stated a Sept. 21 letter from representatives of the Domestic Manufacturers Group to John Engler, NAM president and CEO. ``The currency policy now practiced by China and some other trading partners is the type of export subsidy WTO agreements are meant to prohibit.''
David Frengel, vice president of government affairs for Cabot, Pa.-based precision machinery maker Penn United Technology Inc. and coordinator of the Domestic Manufacturers Group, said he hopes the NAM will drop its opposition to the Chinese Currency Act in this Congress. Hunter and Ryan have made changes to the bill, he said, designed to answer concerns about the WTO.
``We're not anti-globalization, but it ought to be under the rule of law,'' Frengel said.
Vargo, however, said the NAM will not change its position on the bill. ``The administration is trying to strengthen the hand of reformers in China against hard-liners, and we fear (the Chinese Currency Act) would strengthen the hard-liners' hands,'' he said.
According to Vargo, there is no way for the U.S. to legislate a currency re-evaluation in China. That can only be accomplished by negotiation, he said. However, the NAM does favor government action in other China trade areas, such as authorizing countervailing duty actions against Chinese manufacturers that accept direct subsidies or unfair tax breaks from the Chinese government.
``A Chinese manufacturer can write off 40 percent of its equipment purchases if they come from a Chinese equipment maker,'' he said. ``If the equipment was made in the U.S., the write-off is zero. That is flagrantly designed to favor domestic over imported goods.''
Difference of opinion
The split within the NAM on the Chinese Currency Act reflects the larger controversy among economists and business groups. The USBIC, for example, ranks passage of the Chinese Currency Act as one of its two top priorities, along with the U.S. imposing a ``variable trade equalization tariff'' on imports from countries running a trade surplus of 10 percent or more of total bilateral trade with the U.S.
However, economists such as Douglas A. Irwin, Robert C. Maxwell professor of Arts and Sciences within the Dartmouth College Department of Economics, are dubious about the currency bill.
``I think it's good only in the sense that the administration can use it as a bargaining chip,'' Irwin said. ``It would be a very bad thing if it became law and required the U.S. to impose trade barriers against China.''
Generally, labor unions side with the USBIC and the smaller manufacturers on trade issues. The United Steelworkers and its parent, the AFL-CIO, oppose free trade agreements and fast track authority on the grounds that they promote inequality in labor and environmental policy in other countries.
``If you violate intellectual property rules, you face fines and loss of trade,'' said Holly Hart, legislative director for the USW. ``But if you violate labor or environmental laws, it's a slap on the wrist. The lower the standards are for environmental, safety and health regulations and workers' rights in a country, the greater the incentive for multinational corporations to locate there.''
Others such as Irwin, though, argue that environmental and labor parity are impossible to negotiate in free trade agreements. ``If the U.S. insists on enforcing higher labor standards in developing countries, the developing countries simply won't want to talk to us,'' he said. ``They take it as a way of keeping their products out of the U.S.''
Furthermore, free trade agreements can improve the environment in developing countries, because multinationals tend to import their best practices wherever they set up facilities, Irwin said.