Clinton’s Trade Choice

posted by
on February 7, 2005

Those with some interest in where the U.S. Democratic Party stands today on free trade should try to follow a two-day conference this week in Phnom Penh. Bill Clinton will address the meeting by videoconference on Thursday and should give some indication of where the fault line lies in his party regarding this matter. Not for the first time, the former president straddles both wings of the U.S. Democrats.

The little-known conference has a ho-hum name — Seizing the Global Opportunity: A Growth Strategy for Cambodia in an Era of Free Trade — but will also attract other big names, including President James Wolfensohn of the World Bank, one of its sponsors. It will look at Cambodia’s uncertain future as an exporter of garments. But what it says about the future direction of America’s trade debate may be more interesting.

Will Mr. Clinton side with pro-trade New Democrats who make the moral and economic case that rich countries like the United States should dismantle their remaining barriers to imports of clothing from the Third World? Or will he side with Old Democrats like John Sweeney, leader of the AFL-CIO union federation and a die-hard protectionist who has never seen a tariff that he dislikes? Stay tuned, as the former president declined to respond to an invitation to reveal in advance what he will tell the folks who will convene in Phnom Penh.

Whatever political signals Mr. Clinton sends will be watched closely far beyond Cambodia. In Washington, D.C., trade aficionados will be looking for insights into where the Democrats — still licking their wounds from their electoral failures last year — are headed on trade policy. In 2004 they went down with John Kerry, who stuck to the unimaginative Old Democrat protectionist line. But Democrats are trying to reinvent themselves this year. Government officials and clothing exporters in such impoverished countries as Bangladesh, Sri Lanka, and Indonesia will be looking for indications as to whether they might be affected by Cambodia’s willingness to serve as a showcase for the “workers rights” agenda of the U.S. labor movement and its Democratic allies in Washington, D.C.

During his presidency, Mr. Clinton cut a deal on behalf of the unions, in which Cambodia agreed to open its clothing factories to international labor inspectors, in return for generous quotas that guaranteed access to U.S. markets. The experiment worked, at least up to a point. Brand name investors like Nike and the Gap came in, eager to buy “social responsibility” brownie buttons to fend off their vociferous anti-globalist critics. Cambodia’s exports of clothing expanded from the negligible in the late 1990s to the impressive. In 2003 (the last year for which reliable numbers are available), 200-plus Cambodian garment factories employing more than 200,000 workers exported $1.2 billion worth of clothing to the United States.

But now that those quotas have expired for all members of the World Trade Organization as of Jan. 1, the otherwise competitively challenged Cambodia is hoping it can hold on to its niche market by selling “politically correct” clothes that will pass the anti-sweatshop test and keep its big-name foreign investors interested. Both Nike and the Gap plan to send executives to Phnom Penh this week.

Much of the credit for the conference in Phnom Penh would go to a Washington lobbyist named Karen Tramontano, who also heads a D.C.-based non-profit called the Global Fairness Initiative. Ms. Tramontano, who draws no salary from the organization she launched two years ago, is a former chief of staff to the AFL-CIO’s John Sweeney, and from 1997-2000 was a senior presidential adviser for labor issues in the Clinton White House. Mr. Clinton chairs the Global Fairness Initiative, and Mr. Sweeney sits on the board and is listed as treasurer. The outfit has put out the word that it is looking for “fresh ideas” to promote “free trade” with “ethical standards.”

“The Global Fairness Initiative does not shrink from difficult challenges,” the organization’s fund-raising appeal declares. “Our very purpose is to take on the toughest issues in globalization.” Ms. Tramontano, who also advises the International Labor Organization, sung the praises of Mr. Clinton’s Cambodia experiment in a recent op-ed column for the Washington Post. “Because of the anti-sweatshop movement and the campaign against child labor, many retailers are looking to buy goods in countries that can provide `brand security,’ affording protection against charges of social irresponsibility,” the Democratic operative wrote.

But when I asked her about the Global Fairness Initiative’s views on the impact of high U.S. tariffs on clothing and shoes upon poor countries like Cambodia, Ms. Tremonton declined to take the bait. “GFI is not in the business of taking positions,” she explained. “We try to approach situations and issues as an honest broker, bringing all the stakeholders to the issue.”

Within the Democratic Party, the other major “stakeholders” are found at the Progressive Policy Institute, the think tank for the party’s pro-trade New Democrat wing. (“Call them the pro-corporate wing,” quips dryly Thea Lea, the AFL-CIO’s top international trade economist.) By whatever label, the PPI has long been regarded as a major ideas factory for Mr. Clinton. And when those ideas turn to clothing tariffs, the New Democrats make a compelling moral and economic case that they should be eliminated. No wonder.

U.S. tariffs on various items of clothing that poor countries like Bangladesh and Cambodia sell to rich countries like America hover in the 15% range, to more than twice that. By contrast, the U.S. hardly taxes higher-end imports from rich countries like Singapore and France — everything from airplanes and computers to surgical equipment. Singapore’s exports are taxed at 0.6%, France pays 1.1%, while Bangladesh and Cambodia respectively pay 14.1% and 15.8%, on average. All together, struggling Asian countries are hit with U.S. tariff rates as much as 30 times higher than those for the likes of Singapore, Japan, and the Europeans.

Translated into human terms, the statistics are burdensome on Third World working women who are trying to sew their way out of poverty. They also hit lower-end American consumers in the form of higher prices for the clothes on their backs: single mothers spend a larger proportion of their income on clothes than executives. “In short, the facts are rather devastating,” observes Edward Gresser, the director of PPI’s project on trade who has authored a series of rather devastating analyses on the topic in the last three years.

“These inequitable tariffs should be eliminated,” asserts Mr. Gresser. Who could disagree?

Well, for openers, too many ostensibly pro-free trade Republicans on Capitol Hill to name in one line. Appeasing the politically powerful U.S. textile lobby — which vehemently plans to hide behind protectionist tariff walls in perpetuity — is a bipartisan sport in Washington.

U.S. President George W. Bush has an equally Clintonesque position. On one hand, the president has a record of pandering to domestic textile interests; on the other, his outgoing U.S. trade negotiator, Robert Zoellick, has called for the elimination of all industrial tariffs. While that would include clothing tariffs, Mr. Bush hasn’t exactly been sounding this particular free-trade trumpet.

Mr. Clinton might consider challenging his successor with a variation of the line that Ronald Reagan once hurled at the Soviet Union’s Mikhail Gorbachev on the Berlin Wall. “Tear down those tariff walls,” Mr. Clinton could declare.