Friday, June 09, 2006

Trade, Labor, & Capt. Kirk

China is the trade bogey man du jour. It used to be non-union shops, then the rural south, then Mexico and the giant sucking sound that turned out to be more of a gurgle. Now, labor's big issue is China. And, it has every right to be worried. Manufacturing and retailing in America is looking for low cost suppliers of parts and merchandise because that is what rational business people do. It is almost unavoidable that in a free market sales will go to the low cost provider of products of equal quality and availability. It is the result of comparative advantages. I sell my plumber legal services because he can't write a will. He fixes my drain because I would kill myself trying to do it. It all works out for everyone's advantage. As long as we play by the rules.

On Thursday, the AFL-CIO filed a petition with the U.S. International Trade Commission alleging that China keeps its prices the lowest in the world not through comparative advantage but through a system of officially sanctioned labor abuses. According to the petition summary "The Chinese government's labor repression lowers manufacturing wages by 47.4 percent to 85.6 percent and it reduces the price (or overall cost) of Chinese manufactured exports by 10.6 percent to 43.6 percent."

The AFL-CIO petition is based on Section 301 of the Trade Act of 1974 and asserts that China's labor abuses amount to unfair trade practices, which the President has the power to offset with an appropriate trade remedy. Usually, the remedy is an offsetting duty on goods from the offending country.

Under the terms of the law, the AFL-CIO needs to show that China has engaged in unreasonable trade practices that burden the U.S. economy. The failure to provide internationally recognized labor rights is stated in the law to be an unreasonable trade practrice.

According to the petition, China fails to meet its obligations by:
  • Denying freedom of association and collective bargaining
  • Exploiting child labor
  • Exploiting forced labor
  • Failing to enforce wage standards
  • Failing to enforce occupational safety standards
The Petition further alleges that these actions burden U.S. commerce by suppressing Chinese manufacturing costs and, therefore, creating an unfair advantage to Chinese goods.

The AFL-CIO filed a similar petition two years ago. At that time, ITC failed to commence an investigation because the Bush Administration position that it would work to improve these conditions through active engagement with the Chinese. According to the AFL-CIO, that has not happened and U.S. jobs have been lost.

Can you tell I am torn about this? No one should want to save a couple bucks by buying jeans from prisoners or children. I would gladly pay a reasonable cost increase if I knew that the differential flowed to the workers. But, maybe it does. There are contrarian economic views on globalization and even on the so-called "sweatshop."

For example, in this article posted by Mark Thoma at Economist's View provides some of the upside. Mainly, the arguments are that the factories owned by foreign companies or those that sell to foreign buyers tend to have higher paid workers who may receive better training, better health care, and safer working conditions. There are lots of reasons for this including the fact that big multinationals invest in technology to produce efficient and safe plants. Also, multinationals simply don't want the bad publicity of being caught withyoungg girls chained to sewing machines making their t-shirts.

That is not to defend China in particular. It is more a statement on the issue of globalization in general. The question is whether the Chinese are not meeting their obligations with respect to labor standards, or failing to meet those standards our law demands, and, as a result, having a negative impact on the U.S. economy.

I would not place any bets on the government initiating an investigation. The ITC has 45 days in which to make a decision.

And that relates to Capt. Kirk how? It doesn't. But this funny article from the New York Times does. It seems that someone lost track of a shipment of Star Trek props that were traveling as part of a museum exhibit. As a result, it got held up in Customs and, as these things do, ended up on the auction block. Paramount Pictures, the mothership for Star Trek, tried to get the stuff back but was too late. The 84 containers of unidentified missing objects sold for $4,700. I'd pay that much just for the mugato suit.

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