HOUSE VOTES YES ON CHINA TRADE BILL

Byline: Joanna Ramey

WASHINGTON — In an historic move that scores a big victory for business, the House voted Wednesday to grant China normal trade relations status on a permanent basis.
The action is a step toward opening the world’s largest consumer market to U.S. goods, and is considered a boon to retailers and textile and apparel importers, who’ve been agitating for the change.
“It’s long overdue,” said Julia Hughes, vice president of international trade for the U.S. Association of Importers of Textiles and Apparel, of the 237-197 House vote, which is also a key step in China’s pending membership in the 135-member World Trade Organization.
As early as Monday, supporters of the China bill were uncertain they had enough votes. The final tally “really showed the power of the business community when we get united behind a major trade issue,” said Erik Autor, vice president and international trade counsel with the National Retail Federation.
The decision in the House followed a day of fervent debate marked by waves of applause, underscoring the emotion behind the issue. The vote came after months of acrimony on Capitol Hill over the implications of China’s WTO membership for the U.S. economy and jobs, as well as for the improvement of human and worker rights in China.
Granting permanent normal trade relations, or PNTR, is considered needed for U.S. companies to benefit from lowered Chinese trade barriers when China joins the WTO. Without the change, China could cry discrimination and keep its markets closed and tariffs high for U.S. concerns.
In granting PNTR, the House voted to end the annual review of China’s trade status, which gives China access to the lower U.S. tariffs enjoyed by most U.S. trading partners. The anti-PNTR camp argued the annual review is needed as a means to review China’s human rights records and as a cudgel for reform.
Passage of PNTR in the House was decried by the U.S. textile industry.
The vote “is clearly a blow to the U.S. textile industry and its 550,000 employees,” said Roger Chastain, president of the American Textile Manufacturers Institute, in a statement. Chastain is also president and chief operating officer of Mt. Vernon Mills Inc., Greenville, S.C.
The textile industry opposes China’s WTO accession because, under a deal negotiated with the U.S. last fall, global quotas on Chinese textiles and apparel imports will be phased out by Jan. 1, 2005, along with those of other WTO members. The ATMI sought a longer quota phase-out for China and now estimates textile and industry-related jobs will be lost after China joins the WTO, even with a special Chinese textile import surge protection in place through 2008.
The USITA’s Hughes said the textile industry and labor’s concerns over increased Chinese imports are overblown and “based on experience of the 1980s, when the U.S. first opened its markets to China,” after President Carter in 1979 officially recognized China as a trading partner. China quickly became the top foreign supplier of textiles and apparel.
That changed after the North American Free Trade Agreement went into effect in 1994, and after apparel-tariff liberalizing legislation for Caribbean Basin suppliers in the mid-1980s, Hughes said.
China now is ranked eighth as a textile supplier with 3.8 percent of the market, while Canada and Mexico are ranked first and second, respectively, with a combined 30.4 percent of the import market. China is the third largest apparel source with 6.25 percent of the import market behind first-place Mexico and second-place Honduras, with a combined 23 percent of the market.
In the end, PNTR proponents were able to secure enough Democrat votes for victory — 73 — and keep enough Republicans — 164 — in the fold. This is the second big trade vote in Congress in a month, following passage of the apparel-duty-dropping Africa-Caribbean Basin trade bill. Congress hadn’t passed a major trade bill in almost six years.
PNTR, a priority of the Clinton administration, divided House Democrats, under pressure from organized labor in this election year to vote against the measure. Complicating organized labor’s opposition is its desire to have Democrats take control of the House come September.
Ann Hoffman, legislative director for the apparel union UNITE, said Wednesday’s vote in the House “shows the power of unlimited money” on behalf of the business lobby.
She doesn’t know whether UNITE members will oppose Democrats who voted for PNTR, although the union “will try very hard to get our members to vote for people who stayed with us.”
“This is an issue of principle,” she said. “It is an issue on which we are right, and it’s an issue we expected our friends [in the House] to be with us, and they knew that.”
Retailers said PNTR passage in the House is a relief. If it clears the Senate — where approval is expected as early as next month — stores won’t have to worry about whether China’s trade status might be rejected.
Congress has voted on China’s trade status for 20 years and though it’s never been rejected, the uncertainty has always been worrisome, said Jonathan Gold, director of international trade policy with the International Mass Retail Association.
“When normal trade status comes up, retailers are in the midst of buying for the Christmas season and they are always nervous about how to price goods” from China, Gold said. Absent normal trade status, tariffs on Chinese goods would jump from an average of 4 percent to more than 60 percent.
Another benefit to retailers of seeing PNTR pass: under the China-WTO agreement the Chinese will allow foreigners to operate wholesale and distribution businesses, which are now controlled by the state. This should be good news to companies like Wal Mart, which has six Supercenters and Sam’s Clubs in China, with plans to expand.