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Furor Grows Over China: AFL-CIO Files 301 Claim With More in the Wings

The election-year debate over the outsourcing of U.S. jobs just got more intense — and the apparel industry is taking center stage.

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WASHINGTON — The election-year debate over the outsourcing of U.S. jobs just got more intense — and the apparel industry is taking center stage.

Fueling the flames was Tuesday’s filing against China by the AFL-CIO of a petition under Section 301 of the Trade Act of 1974 with the Office of the U.S. Trade Representative, marking the first time such a case has been used to challenge another country’s labor laws.

And that’s not all — a coalition of manufacturing trade associations, including the National Association of Manufacturers and the American Textile Manufacturers Institute, plans to file a second Section 301 case in two weeks. That petition will focus on China’s alleged currency manipulation. The ATMI claims China devalues its currency by as much as 40 percent, resulting in substantially lower retail prices.

Until now, only U.S. businesses have used Section 301, and then only against unfair commercial practices such as failure to enforce intellectual property rights of investors, according to the AFL-CIO.

The AFL-CIO, the nation’s largest labor union with 13 million members, alleged in its petition that China represses workers’ rights, which in turn drives down wages by 47.4 to 85.6 percent, lowers the price of exports by 10.6 to 43.6 percent and ultimately results in the loss of U.S. manufacturing jobs. Since President Bush took office in January 2001, the U.S. has lost 2.8 million manufacturing jobs, and the number of manufacturing jobs in the U.S. has now declined for 43 consecutive months.

“One of the causes of this job loss is a global trading system that fails to protect workers’ rights, and it translates into a powerful inducement for capital flight, overseas production by U.S. industries and loss of market share by domestic producers,” said Richard L. Trumka, secretary-treasurer of the AFL-CIO, at a press conference here. “We’re taking this action because the Chinese government’s persistent pattern of violating international standards of workers’ rights is inflicting great hardship on working families in both our countries.”

Responding to the petition, a USTR spokeswoman said it would be “inappropriate to comment” until officials have had time to review it thoroughly.

“The U.S. is a leader in promoting internationally recognized labor standards and human rights globally, especially in countries where those standards are not fully upheld,” the USTR spokeswoman said. “We are committed to aggressively enforcing our trade laws to ensure that U.S. companies can compete on a level playing field.”
The Bush administration will have 45 days to determine whether to accept the AFL-CIO petition and launch an investigation into China’s labor practices. If the administration takes the case, it will have up to one year to investigate and decide on an action.

If it doesn’t take the case, said Thea Lee, the AFL-CIO’s assistant director for international economics, “We’ll make it a campaign issue.”

Officials at the Chinese Embassy here did not return phone calls seeking comment.

The Bush administration has come under intense fire from Democrats over the outsourcing of U.S. jobs and what they claim are weak labor standards in free-trade pacts the administration has negotiated.

Sen. John Kerry, the prospective Democratic presidential nominee, who has been endorsed by the AFL-CIO, has fired away at the President and made job losses a major campaign issue. He has also promised to institute a 120-day review of existing trade agreements to strengthen labor and environmental provisions if he wins the presidency.

Although Kerry’s campaign did not return phone calls, the Senator told the New York Times in its Tuesday edition that he is sympathetic to the union’s complaint. He said he would make workers’ rights in the U.S. and overseas a “fundamental part of American trade policy.”

Critics of the petition claim Bush would have nothing to gain by taking on the case and imposing sanctions. He won’t win the union vote in the presidential election, they said, and any sanctions could strain relations with China.

Bruce Raynor, president of the apparel, textile and hotel workers’ union UNITE/HERE, said the overriding reasons for Bush to review the case and impose sanctions are job loss and protection of workers’ rights, not union votes.

“When companies lay off thousands of workers, they are laying off union and nonunion workers,” Raynor said. “Job loss is not a question of union workers or union institutions. It cuts across all boundaries. George Bush, by not acting here, stands to become very vulnerable on this issue if he will do nothing on behalf of American workers.”

The AFL-CIO charged in the petition that China has already taken 727,000 jobs from the U.S.
The union is calling on President Bush to impose trade sanctions on China ranging from 10 to 77 percent to offset the wage advantages, to seek a binding agreement with China to ensure it protects workers’ rights and to enter into no new trade agreements unless the World Trade Organization requires its members to enforce workers’ rights.

China has been at the center of a maelstrom of controversy over its trade practices, and the domestic textile industry has turned up the heat on the Bush administration to curb imports and stem the flow of job losses. The only action the Bush administration has taken against China so far has been the imposition of safeguard quotas placed on three apparel and textile import categories at the end of 2003.

China is expected to dominate global apparel and textile commerce when all quotas are eliminated at the end of the year, and many associations are desperately trying to have quotas extended. Domestic textile and apparel groups around the globe, fearful of China’s global might, have taken the unusual step of creating a coalition to lobby countries to put the issue of quota elimination on the agenda at the World Trade Organization, although the move is considered a long shot.

Domestic textile groups, which have had China in their crosshairs for several months, hailed the AFL-CIO’s petition, noting that something needs to be done to stem the flow of job losses, while importers and retailers denounced it, claiming the cases create too many uncertainties in the sourcing picture.

“It is recognized by all parties that China does not trade fairly, and yet the unwillingness of the U.S. government to take aggressive actions on account of unfair trade practices leaves the administration vulnerable on this issue,” said Cass Johnson, acting president of the ATMI.

He acknowledged that the union’s petition is broadly defined and covers new ground, which will make it tougher to get the administration to take action.

“While this may not be the answer in itself, it could lead to the [reevaluation] of what to do with China and raise the issue of China further in the public eye,” Johnson said.

Erik Autor, vice president and international trade counsel at the National Retail Federation, which opposes restraints on China, said he is doubtful the Bush administration will act on the petition.
“The administration has been trying to convince China to negotiate a broader restraint agreement on textiles and apparel, and they have said ‘no’ so far,” said Autor. “I can’t see them doing a wholesale restructuring of their labor laws and regulations just because the U.S. unions want it.”
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