http://www.americaneconomicalert.org/vi ... od_ID=1966


William R. Hawkins
Friday, June 10, 2005

In the June 8 issue of The Washington Times, Jeffrey Sparshott reported that Rep. Bill Thomas, chairman of the House Ways and Means committee, “speaking at a U.S. Chamber of Commerce breakfast, downplayed China's contribution to U.S. trade woes, but said that
congressional leaders may have to back efforts to confront the country in order to win votes on other trade issues, such as CAFTA.�

For some time, CAFTA [Central America Free Trade Agreement] advocates have been abandoning untenable claims that the tiny economies of the region will spur significant U.S. exports. The Bush Administration now claims CAFTA will create a trade bloc to fend off Chinese imports. That this is an opportunistic argument, rather than a sincere one, is shown not only by chairman Thomas’ devious statement, but by a pattern of actions meant to protect Beijing.

The Pentagon’s annual report on China’s military modernization (largely financed by its trade surplus and the transfer of technology from America and Europe) was supposed to be released in March, but has been delayed as the State Department and other agencies try to water it down. The U.S. Treasury refuses to officially declare that Beijing is manipulating its currency, as that would mandate serious negotiations. The Commerce Department opposes challenging China at the World Trade Organization. On May 27, the U.S. Trade Representative rejected a petition by 12 Senators and 18 House members to launch a formal trade investigation into the impact of Chinese currency practices.

President Bush came into office correctly calling China a “strategic competitor.� But then President Clinton had also come into office concerned about China, but changed his tune under corporate pressure. As former Clinton Commerce official Jeffrey Garten wrote of this transformation [The Big Ten: The Big Emerging Markets, 1997], “I saw no issue which raised more concern and emotion in the business community....not only were business leaders totally united, with no nuanced differences that I could see, but they were passionate in arguing that the United States was heading down a dangerous road in confronting China.�

Their motive was not really what was best for the country, however, but only what was dangerous for their business interests. As Garten noted, “Many of the Fortune 100 had placed large bets on China.� In the real world of geopolitics, betting on China means betting against the United States.

Not only have factories and jobs been outsourced to China in recent years, public policy making has also been outsourced to private interests who think they can profit from building Chinese power, without regard for the larger consequences to American security. This is an outrage that should shock every American who trusts that government officials will uphold their oaths, do their jobs, and put their country first. Until the White House regains control and recasts priorities in their proper order, its arguments on trade policy are not going to be credible. One of the main reasons that CAFTA is in legislative trouble is that so many members of Congress are tired of a decade of rosy scenarios about “free trade� and globalization that have turned into a black hole of rising deficits, closing factories, and declining job opportunities.

CAFTA is more of the same hokum. I recently had the opportunity to debate a CAFTA advocate on the Jim Bohannon show, which is nationally syndicated on the Westwood One radio network. My opponent was Juan Carlos Pereira, the executive director of Pro-Nicaragua, a quasi-government agency “dedicated to support foreign investors seeking offshore opportunities in Nicaragua.� Pereira was the perfect representative of CAFTA’s true purpose as an outsourcing pact meant to shift more jobs and production from the United States to Central America. In his Washington Times op-ed that prompted the debate, he stated that “competitive labor, logistics and other basic costs, as well as an enviable location just a couple hours flying time from the United States, position Central America as a competitive export platform for the U.S. market.�

This export platform will not just attract American transplants, but foreign rivals as well. Pereira cited “a Japanese-Mexican joint venture between Yazaki Corp. and Mexico's Xignux group� making auto parts in Nicaragua for export to the United States. CAFTA has loop-holes that allow outside foreign firms free access to the U.S. market in competition with American companies.

Pro-Nicaragua, on its website, explicitly offers low wage labor as a major attraction. It markets the advantage of “fully loaded wages and benefits: $0.67 per hour (average market wage)� and a rate of “underemployment: 45 percent� to assure investors that once hired, workers will not leave for better jobs elsewhere, because there are none. A labor force ripe for exploitation – come and get ’em! Latin peasants are much more attractive to the Chamber of Commerce than are unhappy American workers, who expect to enjoy a civilized, middle class life.

While much of the CAFTA debate has revolved around textiles and sugar, Pro-Nicaragua is hoping that a wider range of manufacturing will be lured south. Light industry, assembly work, and auto parts are given particular attention. At one point in our radio debate, Pereira alleged that factory work was something U.S. citizens no longer wanted to do. What nonsense! No American factory – certainly none belonging to members of the USBIC, has been forced to close its doors because the firm could not find people eager for the good pay and benefits of industrial jobs.

From Bill Thomas to Juan Carlos Pereira, the pro-CAFTA lobby is growing ever more desperate to foist its failed policies on the American people (again) through a combination of political subterfuge and corporate payoffs. But with the trade deficit hitting $617 billion last year and currently on track to top $725 billion this year; there is a growing fear among the general public of a financial collapse from rising debts and pressure on the dollar. One would think that with major firms like General Motors laying off 25,000 more workers – after being reduced by foreign rivals to junk bond status, Washington could not afford to ignore reality much longer. But to date, one would be wrong.

CAFTA’s passage will only make matters worse. CAFTA’s defeat, however, will hopefully force the Bush Administration and the free traders in Congress and the media to rethink our approach to international economic policies. As a matter of priority, American public policy must refocus the attention of business on developing U.S. capabilities to the full, rather than allowing rogue firms to collude with China and other rivals to build wealth and power overseas at eh expense of domestic manufacturers and their employees.




William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.