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July 1, 2007

In Search of a Coalition

Diverse constituencies try to find common ground in the fight to preserve domestic manufacturing.

Peter Navarro, the California professor and China warrior du jour, is blunt when he talks about the state of the political opposition to the most egregious Chinese trade practices.

The problem, he says, is that groups trying to draw attention to the China problem keep talking about only those aspects of the situation that are of interest to them.

“Each group talks about its special message,” says Navarro, who is an associate professor of economics and public policy at the Paul Merage School of Business at the University of California, Irvine. “You don’t see the Sierra Club talking jobs.” To succeed, he said, the various groups with a China problem need to broaden their vision.

“You need to bring everyone in to fight policy wars,” he says.

So who are these scattered potential allies?

  • First on our list comes domestic manufacturers, who want China to play by all of the rules that it accepted when it joined the World Trade Organization (WTO). This means eliminating the subsidies, free infrastructure, sweetheart loans, favorable taxes, artificially undervalued currency and other practices that contribute to China’s competitive advantage.
  • Next is the American Federation of Labor-Congress of Industrial Organizations (AFL-CIO), which, in its continuous efforts to preserve high-paying jobs, argues that Chinese workers are underpaid, overworked and subjected to unsafe working conditions that would not be tolerated in North America.
  • Add to the list the many environmental groups that have lately become concerned about the health-threatening levels of pollution that darkens Chinese air and contaminates its drinking water. Beijing has become one of the world’s most polluted cities, and haze from China’s factories wafts across the Pacific to the Western United States.
  • Then there are groups that protect human rights. With good reason, they note China’s Communist government doesn’t provide the personal protections and rights that those who live in the West have come to take for granted. The tanks of Tiananmen Square come to mind as the central image for these groups.

Navarro’s contention—probably a good one—is that as long as these groups continue to talk only about their primary issues, the opposition to China will forever be splintered and ineffective.

STRANGE BEDFELLOWS

That makes sense, which is why there have been nascent attempts at cross-interest coalition-building during the past year. Some interest groups that either were adversaries or shared little common ground have focused on the problems posed by China’s rapid emergence.

Last year, for example, the Sierra Club teamed with the United Steelworkers of America (USW) to form the Blue-Green Alliance to promote policies that provide jobs and a clean environment. The Sierra Club filed a petition in a trade case in which the Commerce Department found China competed unfairly in the coated paper market.

“We hadn’t done much in [the field of] countervailing duties,” says Margrete Strand Rangnes, program director for the Sierra Club’s Responsible Trade Program. The Sierra Club argued that China, to make paper, used trees that were illegally harvested in Indonesia.

Interesting as the Blue-Green Alliance is, Washington insiders say it is unlikely that diverse representatives of industry, labor and public interest groups will ever be able to build a tent large enough to cover their disparate interests. A more likely model is a set of overlapping and complementary alliances that form on the basis of specific common goals.

“There will be shifting coalitions, not one monolith,” says Scott N. Paul, executive director of the Alliance for American Manufacturing (AAM), a venture of the USW and several metals producers.

For example, Lincoln, Nebraska-based Organization for Competitive Markets, a nonprofit representing family farmers and ranchers, which opposes international trade agreements that increase the market power of global agribusiness, earlier this year launched an alliance with representatives of manufacturers, the Coalition for a Prosperous America. The coalition aims to curb unfair trade practices and imbalances that result from bilateral trade agreements to address problems posed by the growing trade deficit.

The Coalition for a Prosperous America wants to take aim at “those who take their operations to China because they can make more money and ignore that their grandkids will get it in the neck,” says Fred Stokes, executive director of the Organization for Competitive Markets.

Coalition board members include industry consultant Robert Johns, the recently retired Nucor Corp. executive who headed the steelmaker’s trade policy; Jock Nash, a Washington, D.C., labor attorney representing the domestic textile industry; and David Frengel, director of government affairs at Pennsylvania-based Penn United Technology Inc. Frengel and Penn United are active in the Domestic Manufacturing Group, an ad hoc set of members of the National Association of Manufacturers (NAM) who push the association to respond to trade matters in the interest of domestic companies, and not just of multinationals.

Another new group is the American Producers Coalition, which includes metals, plastics, textiles and organized labor. It seeks funding for an education and lobbying program to support an overhaul of U.S. tax and energy policies. The effort is an offshoot of the China Currency Coalition, which has sought legislation to rectify the harm to manufacturers caused by China’s undervalued currency. The American Producers Coalition is spearheaded by David “Skip” Hartquist, senior partner at Kelly Drye Collier Shannon in Washington, D.C., and counsel to the China Currency Coalition; and Charles Blum, a longtime lobbyist on trade and competitiveness issues who is on the boards of the currency coalition and the Coalition for a Prosperous America. Blum also has lobbied on behalf of MSCI, the publisher of Forward.

The group has drawn particular inspiration from economist Ralph E. Gomory, president of the Alfred P. Sloan Foundation who has completed research that shows globalization inevitably leads to conflicts among nations (see “Fresh Take on Trade”).

Organized labor joined hands with industry earlier this year in the nonprofit research and education initiative, Alliance for American Manufacturing. The venture was established by recent United Steelworkers of America contracts with metals companies including Mittal Steel USA, Allegheny Technologies Inc. and AK Steel Corp. The group has since expanded outside steel to include aluminum giant Alcoa Inc. and Goodyear Rubber & Tire Co.

Paul says the Alliance for American Manufacturing hopes to “set the table” so that the next president will make the right policy choices to help restore U.S. manufacturing competitiveness.

FORMIDABLE OBSTACLES

Even with some amount of coalition-building, initiatives that challenge China’s undervalued currency—as well as future campaigns to overhaul tax and energy policy to benefit domestic manufacturers—face big obstacles.

The ability to manufacture goods at low cost has benefited the earnings of multinationals. Wal-Mart and other retailers have prospered by selling low-cost consumer products made in China. The National Retail Federation is on record as saying it would oppose reforms such as value-added taxes that would increase the cost of imports.

Meanwhile, the manufacturing community itself is divided between large multinationals and smaller domestic manufacturers. That conflict has played out at NAM, which has been cautious, at best, on the problem of currency manipulation (see “Who Represents Domestic Manufacturers,” Forward, May/June 2006).

Moreover, it is the multinationals—the companies with the deepest pockets—that are the biggest contributors to Congress members.

“I have no illusion how much money is arrayed against us,” says Bob Baugh, director of the AFL-CIO Industrial Union Council in Washington, D.C., which has worked with the China Currency Coalition and tdiplomatic pressure was the preferred way to deal with such abuses. Baugh says the AFL-CIO reached out to human rights and labor rights groups for review and advice.

THE LIMITS OF COALITION-BUILDING

For some, the idea of a grand coalition is still in its infancy. Bill Heenan, president of the Steel Recycling Institute, an arm of AISI, says he works to convince environmentalists that the worst pollution problems aren’t in the U.S. but abroad. He cites World Bank data that shows the most polluted cities are Delhi and Kolkata, India, and Cairo, Egypt, based on micrograms of particulate matter. The most polluted U.S. city—Los Angeles—is only No. 66 on the list.

“You can’t date and marry on the first date,” says Heenan, referring to the process of linking up with environmentalists. “You have to court first, then maybe get pinned.”

Others say broad coalitions can be a detriment when it comes to crafting specific legislation. “If you have too many players on a wide range of issues, the process can become too political and nothing gets done,” says Rich Carter, spokesman for U.S. Rep. Don Manzullo, a Rockford, Illinois, Republican who champions the cause of domestic manufacturers.

Nevertheless, it’s clear that the threat to manufacturing posed by unfettered free trade is causing industry, labor and policy advocates to consider new approaches.

“You have to have a strategy,” Baugh says. “As mad as I get at China, they have a strategy.”