Wyden’s “China Chase” Debases the Debate Over Fair Trade Policies

By Tim Nesbitt of Portland, Oregon. Tim is the president of the Oregon AFL-CIO. Previously, Tim contributed "The shortest-lived commitment to schools ever".

Just when we thought we had heard every truth-defying reason for approving another job-destroying trade deal, Oregon Senator Ron Wyden came up with an incredible new argument on the Senate floor last Thursday when he tried to justify his vote for the Central American Free Trade Agreement (CAFTA).

Wyden admitted that CAFTA was “not well-conceived.” But then he used China as the reason to vote for it.

“The Chinese would love the opportunity to get an economic toehold in our backyard,” said the Senator, who went on to predict that China would rush to sell its products to the CAFTA countries if Congress turned down the deal.

Call it the “China chase.” If we don’t get there first, the Chinese will.

But Wyden’s formulation is all wrong. First, if we extend another flawed trade deal to Central America, we’ll be the losers. Second, the competition with China is closer to home – in our own factories. Third, we’re falling behind in that competition – thanks to votes cast by Wyden and his colleagues five years ago. And, worst of all, Wyden’s concocted “China chase” is a ready-made rationalization for any bad trade deal that comes to the Congress for approval. We deserve a lot better than this.

To begin with, Wyden should have known that we have little to gain and a lot to lose under CAFTA. That agreement is almost a carbon copy of the North American Free Trade Agreement (NAFTA). And, Wyden was one of NAFTA’s staunchest proponents, promising that expanded trade with Mexico would create a booming market for our exports. The U.S. Chamber of Commerce predicted that NAFTA would generate 170,000 new jobs for American workers. Instead, we lost almost 900,000 jobs under NAFTA, according to the Economic Policy Institute.

It’s not by accident that trade deals like NAFTA promise jobs but deliver layoffs; they are designed to do exactly that. Just look at what they provide – new opportunities to move production overseas, access to lower-paid workers, fewer barriers to ship products made abroad back to the U.S. and protection for profits earned beyond our borders.

But there was Wyden on the Senate floor last week invoking the same old myths for CAFTA that he and other free traders used to justify NAFTA in 1993 – that it would boost exports to new markets and thereby support good jobs here at home. Fool us twice, shame on us.

CAFTA won’t be any different from NAFTA. Some 40% of the citizens of the CAFTA countries earn less than two dollars a day. What these countries offer to U.S. businesses is not a consumer market, but a labor-market – a low-cost labor market whose governments are desperate for jobs on any terms.

Even so, China isn’t angling to set up shop in Central America. Look at Mexico. Low-wage factories in Mexico are now losing jobs to even lower-wage plants in China. And the Chinese are unlikely to care much about gaining access to the low-income CAFTA market, when they can continue to profit handsomely by expanding their exports to U.S. consumers.

Wyden was wrong about the “China chase” extending to Central America. The real race with China is playing out here. But, Wyden never mentioned the origins of that competition – nor the fact that he gave China a running start with a vote that he cast in 2000.

Here’s the story. In order for China to join the World Trade Organization (WTO), it needed to secure the renewal of its preferential trading status with the U.S. That required a vote of Congress. Supporters of the China deal used the old NAFTA argument – that American workers would benefit from opening up China’s markets to U.S. manufacturers. And the House of Representatives voted for the deal. But, one day after that vote, on May 25, 2000, The Wall Street Journal led with a revealing report on its front page, under this headline: “Congress’s vote primes U.S. firms to boost investments in China – Debate focused on exports, but for many companies, going local is the goal.” The story went on to say, “while the debate in Washington focused mainly on the probable lift for U.S. exports to China, many U.S. multinationals have something different in mind. ‘This deal is about investment, not exports,’ says Joseph Quinlan, an economist with Morgan Stanley Dean Witter.”

Thus the truth came out about the hidden agenda behind preferential trading status for China. Yet, four months later, Wyden voted in the Senate to complete the trade deal for China, which opened the door to that country’s membership in the WTO. In effect, Wyden and his colleagues waved a starter’s flag for what quickly turned into an accelerated race to the bottom. In the years that followed, manufacturers like Hewlett-Packard moved more of their factories to China, and retailers like Wal-Mart began squeezing their suppliers to deliver more products at “the China price.” The result was massive job losses in the U.S., as corporations shut down operations here, moved production to China and used low-wage workers to make the goods they sold back to the lucrative U.S. market.

And now Wyden warns us about China as “an economic juggernaut.”

So what’s left of Wyden’s arguments for CAFTA? Nothing but more bitter lessons for the future.

Lesson #1: When it comes to more trade agreements like CAFTA, we have little to gain from deals that are designed to facilitate investment overseas at the expense of jobs here at home. CAFTA is NAFTA all over again. We should learn from the mistakes of NAFTA instead of repeating them

Lesson #2: When it comes to China, we have nothing to fear more than our own flawed trade policies which have given that country an unfair advantage in the global marketplace. Wyden voted to give China a leg up in the race to the bottom, so he should be careful when he tries to use that country as a whipping boy.

But here’s the most important lesson of all: Wyden’s “China chase” is not just a misleading ploy; it’s a false choice. The real choice we have is to stop entering into flawed trade deals that are designed to advance the business plans of multinational corporations at the expense of jobs and a better standard of living for working people on both sides of our borders.

We can design trade agreements that support good jobs here at home and better jobs abroad if we put that goal front and center in our trade negotiations. That’s the real choice we have, not the false choice that Ron Wyden wants us to believe we have.