Asia Times: Asia in the crosshairs of US trade policy


	June 1, 2001	atimes.com

Global Economy

Asia in the crosshairs of US trade policy
By Tim Shorrock

WASHINGTON - Asian countries that trade heavily with the United States are about to come under intense scrutiny in Washington, where trade policy is quickly moving to the top of the political agenda.

Over the next month, Congress will consider a raft of trade issues that, directly or indirectly, will affect Asian economies and exports for years to come. They include taking action on President George W Bush's request this week to extend normal trade relations with China, approval of a bilateral trade agreement with Vietnam negotiated by the Clinton administration, proposals to change US trade laws to better help industries affected by illegal dumping, and consideration of a possible free trade agreement with South Korea.

Congress will also vote on authorizing "fast-track" trade negotiating authority for Bush, who is anxious to expand the North American Free Trade Agreement (Nafta) to South America - an action that could increase trade pressures on Asia and other regions outside of the Americas.

Of these, the vote on extending normal trade status to China may be the most contentious because of the recent standoff with Beijing over the US spy plane that collided with a Chinese fighter jet near Hainan Island. But few analysts believe that the anti-China coalition of liberal Democrats and conservative Republicans has the votes to defeat Bush's request, made on Tuesday at a speech in Los Angeles.

"I think it will pass," said Alan Tonelson, a trade activist with the US Business and Industry Council Educational Foundation, which opposes normal trade with China. "We have very little hope unless there's a major Chinese provocation."

Politically, the most pressing issue before Congress and the Bush administration may be the crisis facing the US steel industry. Since the Asian financial crisis of mid-1997 to 1999, US steel producers have been hit by a record number of bankruptcies and layoffs. As a result, lawmakers from Pennsylvania, West Virginia, Ohio and other steel-manufacturing states have mounted an unprecedented effort to pressure the White House to take action to curb steel imports and provide loans and other financial help to US producers.

Because South Korea and Japan were responsible for the largest import surges in 1999 and 2000, Asian exports will be hit the hardest if the Bush administration succumbs to the pressure and initiates a Section 201 investigation, which would likely result in broad quotas and tariffs on steel. Section 201 is a provision from a 1970s trade law designed to protect vulnerable industries from dangerous surges of imports.

"The Asian flu knocked out the bottom of the market, and the last three years we've had the highest imports in US history," said Duane R Dunham, president and CEO of US-based Bethlehem Steel Corp, who joined other steel executives in a meeting last week with top Bush trade officials to discuss the situation. "There's a real sense of urgency in Washington over this issue."

Industry insiders believe the Bush administration will decide by June 15 whether or not to seek the Section 201 investigation. If it doesn't, the alternative is likely to be a request to South Korea, Japan and other major producers for multilateral negotiations on steel.

All of this takes place against the backdrop of the unexpected power shift in the US Senate, where the Democrats are about to take control as a result of last week's decision by Senator James M Jeffords of Vermont to leave the Republican Party and vote with the Democrats.

The Democrats' new majority status means that Senator Max Baucus, Democrat-Montana, a trade hardliner toward Japan, will take the helm of the Senate Finance Committee, which has jurisdiction over trade policy. Baucus is far more sympathetic to labor and industry concerns about steel and anti-dumping rules than his predecessor, Senator Charles Grassley, Republican-Iowa, and supports Congressional efforts to initiate a Section 201 action on steel if the Bush administration demurs.

Even more profound for Asia is the growing perception in Washington that Nafta has created an integrated market that now stands unified in opposition to unfairly traded imports from Asia and other regions outside of North America. That shift is most apparent in the steel industry, where the terms "Nafta region" and "Nafta governments" have become part of the lexicon of US corporate executives who once railed about cheap imports from Mexico and subsidized steel from Canada.

"This industry now thinks in terms of a Nafta region, and we're very aware of our common interests," said Andrew G Sharkey, president and CEO of the American Iron and Steel Institute. "Dumping from outside of Naftais getting worse."

Sharkey spoke at a press conference during an unprecedented gathering of steel industry leaders and government officials from the United States, Canada and Mexico. During those meetings, which took place in mid-May, executives from the three countries agreed to "speak with one voice" in negotiations leading for a Free Trade Area of the Americas and on unfairly traded steel imports.

"Nafta steel producers are engulfed by a crisis not of our making, and it's time for our governments to act in a coordinated way to attack the root causes of this crisis," said Guillermo Vogel, chairman of a Mexican steel industry association. Dunham added that "trade-distorting practices have turned the US and entire Nafta region into the world's steel dumping ground." When asked to identify a subsidized company, the executives pointed to South Korea's Hanbo Steel, which has been the object of strident criticism in Washington for receiving millions of dollars in subsidies from the Korean government.

The opposition to the steel industry's push for import curbs is being organized by the American Institute for Imported Steel, a coalition of importers and steel users funded in part by the Japan Iron and Steel Exporters Association. At a Washington forum on the steel industry last week, David Phelps, the executive director of the institute, criticized the industry and the steelworkers union for their "relentless anti-dumping trade filings" and argued that imports are high because steel consumers have pushed consumption to record levels.

"Trade protection does not create competitive industries," he said. "Thirty years of protection to create a competitive steel industry has failed."

According to a study released by another import group, the Consuming Industries Trade Action Coalition, the steel quotas likely to result from a Section 201 investigation would cost US consumers nearly US$3 billion and cost more jobs than they would preserve.

Steel exports to the US market from just one Asian country, South Korea, would drop to 1.3 million tons from 2.3 million tons in 2000 if import curbs are imposed, according to a report from Samsung Securities quoted in the Korea Herald. Korean imports grew at an annual rate of 13.5 percent from 1995 to 2000, giving South Korea the highest growth rate among major exporters, the Samsung study said.

Here is a summary of other key Asian-related trade issues before Congress:

* China. The Bush administration was forced to ask Congress to vote again on permanent normal trade with China because Beijing has not completed its negotiations to enter the World Trade Organization. In his speech on China this week, Bush said "Open trade is a force for freedom in China, a force for stability in Asia, and a force for prosperity in the United States." In that speech, he also asked Congress to approve the trade agreement with Vietnam, concluded last year by the Clinton administration.

* Vietnam. Representative Phil Crane, Republican-Illinois, chairman of the House Ways and Means Committee, plans to introduce the US-Vietnam trade pact after Congress approves legislation granting Bush trade promotion authority. The delay has angered the bipartisan coalition that supports the agreement as well as the Vietnamese government, which warned recently that further delays in the agreement would harm business and diplomatic relations. The agreement is opposed by the AFL-CIO and some human rights groups.

* US-Korea Free Trade Agreement. The International Trade Commission has been studying the feasibility of a free trade agreement (FTA) with South Korea, following a request from Congress, and will complete its study in September. At a public hearing on May 17, several major US industries, including makers of automobiles, textiles, shoes and cosmetics, said they would oppose an FTA. But the idea has won some support in Congress: On May 23, Senator Baucus, soon to take the reins of the Senate Finance Committee, introduced legislation that would give the Bush administration authority to negotiate an FTA with South Korea, Australia and New Zealand. "An FTA [with Korea]," he said, "would help lock in Korea's economic and political progress, and would also be an important part of our strategic interests in Asia."

* WTO rules. As the Bush administration gears up to negotiate new trade agreements and push for multilateral talks at the WTO, it is coming under strong pressure from trading partners, including South Korea, Japan, Thailand and Indonesia, that argue that that US anti-dumping and countervailing duty laws, as well as tools such as Section 201, violate US commitments to the WTO. In response, Congress is considering several pieces of legislation that would ensure the administration doesn't give up US trade laws in future negotiations. In May, 61 Senators signed a letter, drafted by Senator Baucus, making the case for maintaining the US laws. "Each of these laws is fully consistent with US obligations under the WTO and other trade agreements," the letter said. "Moreover, these laws actually promote free trade by countering practices that both distort trade and are condemned by international trading rules. They are part of a political bargain struck with Congress and the American people under which the United States has pursued market opening trade agreements in the past."

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