If China trade opens, who gains?
If it passes the Senate this week, cellphone marketers would be among winners, industrial workers the losers.
BALTIMORE — On one side of Baltimore harbor, Ellicott Machine Corp. is putting the final touches on a package of heavy-duty dredging equipment to make Chinese ports navigable. Sales to China, says chief executive Peter Bowe, are a key to the future for the company, which once made equipment to dredge the Panama Canal.
Across the harbor, Ronald Allowatt sees it differently. "The more we compete with people making 20 cents an hour, the more we're going to be out of work," says the president of the United Steelworkers Local 2610.
As Congress prepares to vote - perhaps as early as Wednesday - on permanently normalizing trade with China, these contrasting views frame a national debate over whether the action will help or hurt the US economy.
To those who see globalization as an irresistible force, pulling 1.2 billion Chinese into the world market can only open possibilities for US businesses. Others say the US economy is so big, relative to the amount of additional goods sailing for China, that the overall effect will be small - and possibly not worth the loss of hundreds of thousands of American jobs.
"It's all baloney. The [export] numbers are not worth anything," says Clyde Prestowitz of the Economic Strategy Institute, a Washington think tank. Even if the US doubles its exports, he says, the new business will have a negligible impact on the $8 trillion American economy.
Important sectors of the work world, meanwhile, are polarized over the China trade vote. Unions, led by the AFL-CIO, say imports of Chinese goods, everything from toys and shoes to light electrical machinery, will put its members on the unemployment line. They have an ally in the textile industry, which says it could lose more than 150,000 jobs.
"There are a lot of industries that ship parts made in the US to China and then re-export it [from there], such as telecommunications, semiconductors, and hardware," says Bill Rhodes, an investment strategist who's seen a list of US companies that plan to relocate plants to China. "Now they'll close those factories, and the whole item will be manufactured in China," says Mr. Rhodes, chief investment strategist for the Williams Capital Group, a New York investment bank.
But some captains of industry dream of vast new opportunities. Citrus farmers envision a huge new market for orange juice. The telecommunications industry sees big potential for cellular phones. Lawyers and insurance companies talk about setting up offices in the hot spots of Chinese commerce. The US government reasons that because China will be required to reduce tariffs on many products, export opportunities will expand.
If Congress approves the trade bill, estimates are the move could pare the US trade deficit with China, which is running at $60 billion annually, second only to Japan. Goldman Sachs, a New York investment bank, estimates US exports will grow to $27.8 billion in 2005, compared with $13.1 billion in 1999. Because China already has normal trade relations with the US (but its trade status must be approved every year), US imports won't change much, Goldman Sachs estimates.
"I don't think China's entry into the World Trade Organization or PNTR [permanent normal trade relations] is going to significantly shrink the trade deficit with China," says Bates Gill of the Brookings Institution. But improving the structural relationship between the two nations, he adds, is important. China's "trade will be rules based, which should make it a more responsible actor."
Likewise, Mr. Prestowitz says giving China permanent normal trade relations matters to individual companies and economic sectors that hope to export. For example, Boeing Co., a major exporter, worries each year about Congress's vote on China's trade status.
"The Chinese tell them, 'You're not reliable,' " says Prestowitz. Europe's Airbus Industries, "which does not have to worry about this, is considered reliable. If this passed, then we're on a more level playing field with the Europeans and Japanese."
But US textile firms see themselves getting squeezed. Gail Raimon, an industry spokeswoman, says a recent survey found that if PNTR passes, imports will triple over 1999 levels and domestic shipments of apparel will plunge by $7.6 billion. "We
already have problems with China," she moans, noting that China already tries to beat its quotas by "smuggling."
The issue resonates with many US workers, who saw their livelihoods hurt by the North American Free Trade Agreement. Marguerite Currie of Burlington, N.J., packs office chairs for Stylex Inc., and is currently an intern in the Washington office of her union, the United Steelworkers of America. Formerly a seamstress, she left that line of work when 10 factories in her area moved to Mexico.
At Bethlehem Steel's Sparrows Point plant in Baltimore, where Mr. Allowatt is union president, workers worry that even this efficient, high-tech facility won't be able to compete with the developing world much longer. "It used to take 10 man-hours to make a ton of steel. Our plant takes three man-hours," says Joe Rosel, a colleague of Allowatt's. But "I don't think that advantage is sustainable over time."
Across the harbor, Mr. Bowe of Ellicott International, says he'd hire more steelworkers tomorrow if he got more China business. The firm needs machinists, assemblers, and fabrication fitters to fill international orders, which make up 70 percent of its $50 million annual sales. The jobs, he says, can pay $50,000 a year including overtime.
Mr. Rosel, though, is not persuaded by the promise of selling to the Chinese. "If people are making 40 cents an hour, how are they going to buy American products?"
(c) Copyright 2000. The Christian Science Publishing Society