Why some US industries don't welcome freer trade

Many American companies are being hit by a combination of Ninja-type blows, including recession and a muscular dollar, which leads to bargains on imported goods.

"US industries are hurting more from imports today than they have in the past decade," says Robert Scott, an economist at the Economic Policy Institute, a Washington think tank. "It has reached a crisis point."

Companies that account for two-thirds of total US steel-making capacity are in bankruptcy.

More than 50,000 workers in the American textile industry have been laid off in the past 18 months. That leaves less than 450,000 in the whole US industry. Textile firms call the situation the worst since right after the Great Depression.

Other US producers face import pressures as a result of cheap lumber, tomatoes, and wheat shipped in from Canada.

Frank Vargo, trade economist at the National Association of Manufacturers (NAM) in Washington, says he's getting calls from member firms about imports of inexpensive machine tools, mold-making equipment, and other items from China.

Mr. Scott sees much import competition as "unfair," and he would welcome some protective measures. Otherwise, he says, US industry will be "hollowed out," left without competitive manufacturing companies.

It is an election year, and politicians in Washington are paying more attention to the mounting trade pressures.

The Bush administration rhetoric is loud on the side of freer trade in a global economy. It did manage to get another world trade round launched at a ministerial meeting of the World Trade Organization in Doha, Qatar, in November.

A month later, it won by a single vote in the House what is now called Trade Promotion Authority. Under TPA, Congress limits itself to either approving or disapproving any international trade deal. It cannot alter the details of the deal. This provision can facilitate negotiations.

And earlier this month President Bush offered to negotiate free trade agreements with five countries in Central America.

But there is "some degree of inconsistency" in the administration on trade policies, says Charlene Barshefsky, top trade negotiator for President Clinton.

Though she doesn't regard the administration to be a protectionist one, the walk doesn't always follow the talk.

Pakistan President Pervez Musharraf, for example, didn't get the expanded access to the US market for its apparel and textiles exports that he sought as a reward for helping out in the war on terrorism.

The administration also put high duties on Canadian lumber and hot-house tomatoes.

"There is a political focus in this," says Ambassador Barshefsky, who is now with a Washington law firm.

In the case of steel, Mr. Bush must make a major decision by March 6. Last October, the International Trade Commission in Washington determined after a study that imports in 16 out of 33 steel-product categories were causing or will cause substantial injury to American-made steel firms. Three of the six commissioners recommended tariff increases of 20 percent. Another called for import quotas. Bush must choose a remedy.

The steel industry also wants Washington to take over its burden of paying of retirement benefits for 600,000 former steel workers. Over time, the government's cost would be $12 billion.

In Western Europe, some governments assumed these retired-worker costs for steel companies more than a decade ago.

The US industry will have a hard sell in Congress to get rid of its retirement costs. But Scott notes that the votes of workers in steel companies and their suppliers are important in such politically key states as Pennsylvania, Ohio, Indiana, and Florida, where many retirees settle. "That is a huge political force," he says.

The Senate isn't expected to take up TPA legislation (formerly known as "fast track") until well after Bush has made his important steel decision.

Observers expect TPA to pass there with a large majority. But with the Democrats in control of that house, the bill will almost certainly include "trade adjustment" provisions to help workers harmed by imports.

In addition, the Senate bill may put a greater emphasis on labor rights abroad and insist on greater consultation with Congress during treaty negotiations.

NAM's Mr. Vargo agrees on the need for adjustment assistance. Freer trade offers all Americans the benefits of cheaper and better imports. Its "costs" shouldn't be put alone on the shoulders of workers who lose their jobs.

The Senate TPA bill will need to go to a conference committee with the House to sort out differences. Then it will need final approval by the House.

Barshefsky figures the extra Senate provisions could win additional Democratic votes in the House. But they might also lose some votes of Republicans if they regard the provisions as costly for the government and burdensome to business.

"Something will be worked out," maintains Vargo.

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