Yearly Archives: 2010

Barack Obama and the Ironies of “Economic Patriotism”

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One way to better understand what’s really going on with U.S. trade politics — as opposed to what politicians and their backers say is happening at any given moment — is to appreciate the many ironies. Especially the ironies of Buy American trade policies that have failed to deliver as promised by President Barack Obama and two top union leaders who worked overtime in 2008 to put their man in the Oval Office, AFL-CIO President Rich Trumka and Leo Gerard, the president of the United Steelworkers. These are perhaps the three most ardent advocates of economic nationalism in America. Aiming to please the pro-tariff labor wing of his Democratic Party, Obama has put the AFL-CIO’s trade agenda front-and-center. This is the first irony. A president who promised to change lobby-driven business as usual in Washington has basically turned over his international trade policies (and much else) to the labor lobby.

“I don’t want to buy stuff from someplace else,” Obama declared in a Sept. 6, 2010 Labor Day appearance in Milwaukee that set the tone as the Democrats prepared for the Nov. 2 midterm elections. “I want to grow our exports so that we’re selling to someplace else — products that say ‘Made in the U.S.A.'” Sharing the stage, the AFL-CIO’s Trumka agreed, railing against unpatriotic corporations that ship jobs overseas, offering that the elections would be about “economic patriotism.” Elsewhere on Labor Day, USW President Gerard — a man who last year accused Washington international trade lawyers whose clients import tires from China of being “traitors” to their country — called for “punishing predator countries” like China that “subvert fair trade.”

The unions pulled out all the usual stops to influence the Nov. 2 voting. “USW activists distributed 1.6 million leaflets at work sites, while making 745,240 phone calls in union halls across America to active and retired members,” Gerard boasted in a statement on election day. “In addition, local union volunteers knocked on more than 350,000 doors in the final weeks of the campaign where our members live.”(Here is another irony. Gerard is a Canadian citizen, a native of Ontario. Last year the USW chief told reporter Ann Belser of the Pittsburgh Post-Gazette that he refuses to become an American, for fear of losing his Canadian health care. Gerard declines further comment for this article.) Continue reading →

Charlie the Tuna’s Troubles in Pago Pago

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As if Thailand didn’t already have enough troubles, now comes an influential U.S. congressman who wants to attack one of the bright spots in the Southeast Asian nation’s economy: its thriving seafood-exports. Last year, Thai exports of canned tuna to the U.S. reached $360 million, a 19 percent increase from 2008, according to the UN’s Food and Agriculture Organization. In the view of Rep. Eni Faleomavaega, this is “unfair” trade that deserves to be rolled back with stiff U.S. anti-dumping tariffs. Faleomavaega is a Democrat who represents the U.S. territory of American Samoa. While he doesn’t get a vote, the lawmaker is nevertheless a force to be reckoned with. Known for his gregariousness, Faleomavaega once told the Comedy Channel’s Stephen Colbert that “I tattoo my butt,” explaining with a grin that he was only conforming to Samoan cultural traditions. More importantly, Faleomavaega chairs the House Foreign Affairs Committee’s subcommittee for Asia and the Pacific. Educated at Brigham Young University, Faleomavaega earned a law degree from the University of Houston. He has important friends on the Hill, including fellow Mormons like Sen. Majority Leader Harry Reid (D-NV) and Utah Republican Orrin Hatch, a senior member of the powerful Finance Committee which has jurisdiction over trade.

It’s not that the gentleman from Pago Pago has evidence that the Thais are guilty of anything other than being very good in competing in the global tuna trade. Far from it. But Faleomavaega does have ample evidence that the tuna industry in his American Samoa — a dot in the South Pacific, about half-way between Hawaii and New Zealand — is collapsing and has no viable future. Canned tuna has long been the backbone of American Samoa’s economy. The other half of the territory’s economy is comprised of various forms of federal welfare dispensed by the U.S. government, the largest employer in Pago Pago. The federal largesse includes generous tax breaks, hurricane disaster-relief monies, Medicaid, Nutrition Assistance Block Grants, and so on. “[T]he tuna canneries and federal financial aid accounted for virtually all of the economic growth in American Samoa between 1975 and 2005,” according to a 2008 report submitted to the American Samoa government by U.S. consultant Malcolm McPhee. The territory’s annual per-capita income of about $8,000 is “about one-fifth the US average,” McPhee noted. “American Samoa has the lowest per capita income in the entire US system including 3141 counties, 50 states and the other US territories.”

American Samoa’s poor performance illustrates that bad economic policies — in this case, so obviously bad that they would be quickly understood and discredited in any Econ 101 classroom — have consequences. Beyond the basic economics lessons, American Samoa’s unfortunate economic plight has ramifications that go far beyond remote South Pacific fishing grounds. The fight over tuna tariffs and access to U.S. markets is being closely watched by other important U.S. trading partners from Asia to Latin America. For those who study tuna tariffs, national security issues are never far from the surface. Muslim tuna workers in the southern Philippines, for instance, have long protested that they have been disadvantaged because Uncle Sam gives preferences to otherwise uncompetitive American Samoans that are withheld from Filipinos. And diplomats from Ecuador have stressed to U.S. officials in recent years that the tuna trade is an important national security priority for them — one alternative to narco-trafficking. Charlie the Tuna is a political fish — swimming in seas where economic favors granted or withheld can affect bottom lines, not to mention real lives in global tuna canneries.

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Charlie the Tuna’s economic woes

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Some hard numbers highlight the decline of the canned tuna industry in American Samoa, an economically depressed U.S. territory in Polynesia. In 2007, the U.S. Congress passed legislation gradually raising the minimum wage for American Samoa cannery workers from USD 3.26-per-hour to USD 7.25, the same level as the U.S. mainland, by 2014. Currently, it stands at USD 5.26.

The territory’s two tuna canneries have reacted predictably. Chicken of the Sea, which had been operating in American Samoa for a half-century, shut down its Pago Pago cannery, moving some 2,000 workers to other tuna-exporting nations like Thailand, where workers are still paid less than USD 1 per hour. StarKist quickly dropped plans to produce tuna in pouches in American Samoa, which would have added 300 new jobs. Now, StarKist’s cannery in Pago Pago, which had employed some 3,000 workers two years ago, is down to about 1,700 — and is phasing out another 600 to 800 jobs by year’s end. As the canneries had long constituted the backbone of American Samoa’s economy, the territory is reeling.

U.S. Rep. Eni Faleomavaega, American Samoa’s non-voting representative in the U.S. Congress, blames “unfair” foreign competition from low-wage tuna-exporting nations. The lawmaker has been pressing for a USD 25 million subsidy package to keep StarKist in Pago Pago, while accusing StarKist’s two major competitors of being “un-American.” Both Chicken of the Sea and Bumble Bee, Faleomavaega has complained, “have adopted a business model of exploiting cheap foreign labor to clean their fish while employing skeletal crews of 200 employees or less in small U.S. operations in Georgia, Puerto Rico and California to package the final product.” Faleomavaega is calling for a U.S. antidumping investigation that could slap on punitive tariffs on canned tuna exports from Thailand, aimed mainly at Thai Union, which owns Chicken of the Sea. The congressman says the tariffs would help save American jobs.

While nobody would blame any politician who fights for his constituents, a closer look at who is really “American” in the eyes of the bureaucrats who administer the U.S. antidumping laws indicates that this is not a simple matter. And Faleomavaega’s complaints about the adverse impact that foreign minimum-wage rates have for American jobs are undercut by a little economic research, as American Samoa itself has long been living off comparatively lower minimum-wage rates that, undeniably, pulled several thousand jobs away from the U.S. mainland. In sum, while StarKist’s Charlie the Tuna is a true American icon, he might perhaps be a little confused about his real nationality these days.

Let’s look first at who might be considered a true American according to the U.S. antidumping regime. StarKist, which has headquarters in Pittsburgh and employs about 70 Americans in the United States, is owned by Korea’s Dongwon Industries Co. Ltd. While no tuna company was willing to be interviewed for this article, it is unlikely that StarKist, which also exports canned tuna from its operations in Thailand to the United States, would support the imposition of antidumping tariffs on that country. Moreover, even though Thai Union’s Chicken of the Sea has opened a USD 20 million canned-tuna facility in Lyons, Ga., which directly employs some 200 Americans, for purposes of the antidumping laws these employees could be excluded from the definition of the American tuna industry. And even Bumble Bee, which is American-owned and employs several hundred domestic tuna jobs in southern California and Puerto Rico, might not be considered “American” enough. Bumble Bee imports tuna loins from countries like Fiji and also has tuna operations in Thailand.

What about those dwindling “American” jobs in Pago Pago? American Samoans, strictly speaking, are U.S. nationals, not U.S. citizens. And according to a 2008 report to the American Samoan government by consultant Malcolm McPhee, “80 percent of the employees in fish processing are foreign workers,” many from the neighboring independent nation of Samoa, where wage rates are several times lower. The foreign workers, McPhee observed, came to American Samoa “in search of higher pay.”

Published statistics from the U.S. Department of Labor reveal what has been going on. The U.S. Congress used to set the minimum wage lower for the Samoans than for other U.S. territories and the mainland. In 1974, the minimum wage for Puerto Rico and the U.S. mainland was USD 2-per-hour, compared to USD 1.42 in Pago Pago. By 1998, the minimum wage for the Puerto Ricans and Americans had been raised to USD 5.15, thus giving American Samoa, then at USD 3.17-per-hour, a comparative wage advantage. By 2001, the American canneries (except for Bumble Bee’s remaining two in California and Puerto Rico) had all fled the United States for American Samoa and other lower-wage countries. Now, with Chicken of the Sea’s new cannery in Georgia, there are three — none of them “American” enough in Faleomavaega’s eyes.

As a U.S. territory, American Samoa has been able to export its tuna duty-free to the mainland, while other tuna exporting countries have had to pay U.S. tariffs on canned tuna, which average about 9 percent, depending upon whether the tuna is packed in water or oil. But in recent years Congress has also given some other countries the same duty-free access to U.S. markets. StarKist, for example, now exports to the United States tuna packed in pouches by some 2,500 workers in Ecuador, paying no tariffs. Bumble Bee’s tuna that is canned in the United States is made from loins that are processed in low-wage countries like Fiji; loins are virtually duty free.

The American Samoan economy has long been propped up by artificial tariffs and wage rates that were supposed to shelter Samoans from the global economy. But now, American Samoa is facing the consequences of trying to live on an economic diet that is unsustainable in the long run.