Businesses warily eye Democrats’ trade position

Reuters | Fri Apr 18, 2008

Businesses warily eye Democrats’ trade position

By Nick Carey - Analysis

DETROIT (Reuters) — As the race to select a Democratic presidential nominee drags on, corporate chieftains and some trade groups are raising concerns about the candidates’ free trade positions.

Free trade — which many Americans blame for manufacturing job losses — has been a recurrent theme of the Democratic contest. Sens. Barack Obama of Illinois and Hillary Clinton of New York have wooed blue-collar workers, promising to renegotiate the North American Free Trade Agreement and oppose a free trade deal with Colombia.

The candidates’ comments about what they call trade inequities have scared off some corporate free-traders.

"We are very concerned at the rhetoric from the Democrats on trade," said Fred Smith, founder and chief executive of package delivery giant FedEx Corp. "Rhetoric like that is not helpful to the United States and is not borne out by any credible economist that I am aware of."

Smith is co-chairman of the national finance committee of presumptive Republican presidential nominee Sen. John McCain of Arizona.

The Democrat-controlled House of Representatives voted last week to delay action on the agreement with Colombia indefinitely. U.S, labor and human rights groups have opposed the pact, saying Colombia has not done enough to stop killings of trade unionists.

Both Obama and Clinton have also promised to get tough with China on trade and currency policies that they say have hurt U.S. companies and workers. The candidates, and other members of their party, have raised concerns about trying to compete in a climate where workers are paid so much less in China and other countries than in the United States.

But some executives warned that moving toward more protectionist policies would harm American companies.

"The worst-case scenario is an inward turn, a protectionist turn by the United States government," said Jim Owens, CEO of machinery maker Caterpillar Inc. "I think that would be catastrophically bad for huge multinationals that are winning in the international marketplace."

For his part, Owens praised McCain’s free-trade stand. "He believes we can compete and win globally."

Executives argue that global trade has bolstered U.S. economic growth for years and provided cheap goods for American consumers. They admit this caused job losses for some workers, but say education and training programs would be more productive than what they call protectionism.

TWO SIDES OF THE ARGUMENT

Others in the manufacturing sector disagree with CEOs like Owens and say U.S. trade policy is in need of change.

Scott Paul, director of the Alliance for American Manufacturing — a group representing some U.S. manufacturers and the United Steelworkers — said that free trade and China’s undervalued currency in particular were "a clear problem."

Earlier this week, the AAM held a manufacturing forum for presidential candidates in Pittsburgh, where Obama and Clinton both addressed their concerns about competing with China. McCain did not attend.

Paul said it was wrong to characterize calls to improve trade agreements as protectionist. "The American people want to see a president that stands for a trade policy that’s actually going to help Americans," he said.

The AAM is primarily critical of what it calls China’s illegal currency manipulation and unsafe imports. The group cites an October study from the left-leaning think tank Economic Policy Institute stating that since China joined the World Trade Organization in 2001, U.S. production that would have supported 1.8 million jobs had been lost.

Obama and Clinton have criticized NAFTA, saying it has hurt the U.S. manufacturing base.

"It’s very unfortunate to see NAFTA has been turned into a political football," said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers, a trade group with 14,000 members.

Caterpillar’s Owens said NAFTA had enhanced the United States’ ability to compete in the world market.

"Think about how many more millions of Mexicans would have crossed the border if we kept them starving down there rather than trading with them," he added.

FedEx’s Smith and Scott Davis, CEO of rival package delivery company United Parcel Service Inc, say some parts of the U.S. economy have suffered in recent years, but blaming free trade is not the solution.

"There have clearly been localized pain and job losses," Davis said. "But focusing on retraining and education for the future would be more productive."

He added, however, that if a Democrat wins the election in November, the new president would probably soften his or her stance on trade.

"Once in the White House," Davis said, "I expect they will see that globalization is a reality and that it would not be in our interest to restrict free trade."

(Editing by Patrick Fitzgibbons and Lisa Von Ahn)

source: Reuters