Not your father's China trade

The most populous country in the world is redefining the rules in the global manufacturing game

By Todd Crowell

In the final analysis, it comes down to people, millions and millions of people - 1.3 billion people by the official count, unofficially probably closer to 1.5 billion people. "First and foremost, [China's] huge population changes the fundamental rules," says Ted C. Fishman, the author of "China Inc."

These millions are drawn to factory towns nobody in America has heard of that are larger than Chicago. These towns have become the new Ruhr Valley, the new Pittsburgh-Detroit, soon perhaps the new Silicon Valley. Three shoe factories in the city of Dongguan alone employ a quarter of a million workers.

No industry is safe from the inexorable pressure of these workers - from cheap, simple Christmas-tree ornaments, made by the nimble fingers of thousands of women who haven't the faintest idea what an angel is, to sophisticated electronics components, car parts, and machine tools. Soon Chinese cars will begin to appear in American showrooms (or maybe Wal-Mart).

Of course, to simply say China has a lot of people is to state the obvious. The issue is how China has marshaled this enormous workforce to create the world's fastest-growing economy. This is the subject of Fishman's excellent and very readable new book, which deftly combines anecdotes and analysis to help us understand China's economic miracle.

Basically, the Chinese Communists broke centuries of feudalism to mold this inchoate mass of people into a disciplined workforce. Then the economic reforms set in motion by Deng Xiaoping in 1979 unleashed the pent-up entrepreneurial spirit of the Chinese people, producing a workforce that has become irresistible to the world's manufacturers.

Strangely, the still nominal Communists who run China have succeeded in turning Marxism on its head. Classical Marxism holds that capitalism is the final stage of human development before communism. In China, communism has become the final stage before the full fruition of capitalism.

When Japan Inc. seemed poised to conquer the world, the iconic image of Japan's economic prowess was the fully automated automobile factory, robotic arms looking like arms of a giant praying mantis, sparks flying, not a human anywhere in sight. The iconic image of China Inc. is a row of young women, all wearing identical blue uniforms, hunched over an assembly line in an electronic-components factory, like an endless chorus line. Not a robot in sight.

Who needs robots when every day brings more and more recruits to the labor force from the countryside, more cogs, if you will, in the giant Chinese manufacturing machine, a vast floating population of migrant workers advancing on China's cities that is larger in itself than the entire American workforce? Therein lies the challenge for America and the rest of the world.

In retrospect it was not so difficult for America to meet Japan's challenge. Japan never based its competitive advantage on armies of low-paid workers alone, or its marketing strategy simply on price. Basically, Japan competed by raising standards of quality and productivity.

That gave America an opening for a comeback. Quality can be improved, productivity raised, robots replicated. It mainly took determination and capital. But how, short of annexing Mexico (which would still leave China three times as populous), do you compete with China's endless supply of workers?

Alas, the author offers few answers. China's millions, of course, are a potential market for US and other countries' products, and the number of people with the wherewithal to buy things is large and rapidly growing. But for many US manufacturers, the Chinese market is a double-edged sword, Fishman says.

Any exporter faces the prospect that its technology will be assiduously studied, dissected, and replicated at a much lower cost. This doesn't even take into account outright piracy. As Fishman points out, piracy of computer operating software not only robs Microsoft (which seems strangely tolerant about it) but also gives industries that use computers an advantage across the board.

The term "economic miracle" has been overworked since the end of World War II. First came the "German miracle," then the Japanese miracle, then the Asian Tigers miracle. But the rise of China in the past 20 years has truly been miraculous.

One can cite the usual statistics, such as years of consistent 7 to 9 percent annual growth, but the fundamental fact is that China in recent years has lifted more people out of poverty than has any other country in the world, anytime, anywhere. That, of course, is good news for China. For the rest of the world it is a mixed blessing, posing a supreme challenge for the 21st century.

• Todd Crowell is a Seattle-based economics writer with experience in Asia.

US farm trade under pressure

Known as the world's breadbasket, the US now faces rising food imports and competition in export markets.

By Katherine Dillin | Contributor to The Christian Science Monitor

WASHINGTON – Wander down the aisles of most American grocery stores and you'll find a surprising choice of foods from foreign countries - ripe blackberries from Mexico, capers from Morocco, hearts of palm from Costa Rica, sweet peppers from South Africa. The list goes on.

While all these foreign imports may be a boon for consumers, they're one reason the once-huge US agricultural trade surplus is rapidly deflating. It's down from $9.6 billion just last year to only a projected $1 billion in 2005, raising the possibility of a deficit in the future.

How could the world's breadbasket be staggering when it comes to a traditional strength like the American farm? The question comes at an awkward moment as overall US trade deficits hit record highs of more than $600 billion a year.

The answer is a culinary tale involving changing consumer tastes, expanding global farm output, and the subsidies governments offer a politically sensitive industry.

"We're not doing enough to combat [foreign] protectionism," says Rep. Bob Goodlatte (R) of Virginia, chairman of the House Committee on Agriculture. He says other countries are raising barriers that make it harder for American farmers to sell their products abroad.

At home, American shoppers also share the blame. People enjoy - and buy - lots of foreign foods. "Our economy is growing, incomes are rising," says Parr Rosson, director of the Center for North American Studies at Texas A&M University. "As a consequence our imports have risen ... particularly in fruits and vegetables we like to have fresh year-round."

Last year, $62.3 billion in farm exports left the US, a number forecast to drop to $59 billion in 2005. Conversely, $52.7 billion in imports arrived in 2004 and are predicted to be up to $58 billion this year.

Representative Goodlatte runs through a list of reasons.

First, there are tariffs. The "United States imposes tariffs on food coming to our country that average 12 percent. The worldwide average is 62 percent."

Second, developed countries, particularly Japan and the European Union, subsidize their farmers at far higher levels than America. "Even though our agricultural production is higher and our population is lower, we actually have a trade deficit with Europe in agriculture, in part because of all these tariffs and subsidies," he says.

While subsidies can distort commerce, many experts see trade in general as beneficial. "If we didn't import oil, what do you think we'd be paying for oil today?" asks Mr. Rosson at Texas A&M. "You need to think of imports [as] ... sending a signal to domestic industry they need to compete or become more productive."

One agricultural industry -cheese - has long run an export deficit, but the industry insists it hasn't hurt them. "We have a healthy relationship with [foreign cheese makers].... They are the 'origin' cheeses. They've given the American consumer their palette," says John Umhoefer, executive director of the Wisconsin Cheese Makers Association in Madison.

Still, the rapid decline in the US dollar relative to other currencies should be boosting US exports and dampening imports. Why doesn't that happen? Rosson says, "Companies make deals well in advance ... and as long as that pipeline is full ... it takes [a year to 18 months] for that change to ripple through the system."

Gary Adams, chief economist with the National Cotton Council of America in Memphis, Tenn., offers another take: "As the dollar weakens or depreciates,... that does tend to support our ability to export.... [B]ut one other wrinkle is if China is your destination for your product, then movement of your dollar isn't affecting things so much because China's [currency] is pegged to the US dollar."

The top three destinations for raw US cotton fiber are Mexico, China, and Turkey. The cotton industry has been shipping more and more of its raw fiber out of the country as US mills close.

America's "biggest complaint" is over nontariff trade barriers, Goodlatte says.

The European Union "block[s] some of our major exports on what we think are unscientific and spurious reasons that really you'd have to think of as more protectionist than based on science." Prime examples are genetically modified corn and soybeans, he says.

The farmers' own representatives in Washington - the American Farm Bureau Federation - don't seem as concerned. "The things that we're importing tend not to compete with what [we're] growing in the US," says Megan Provost, trade economist with the federation.

Still, American government policies could add new worries for farms. In addition to its goal of reducing subsidies, especially for rice and cotton, the Bush administration would move $300 million from the US foreign food aid program to the US Agency for International Development. "This would allow USAID to buy food products overseas for foreign aid, rather than from US farmers," according to The Washington Times. Goodlatte says that would breach a "contract" with US farmers. America, with 6 percent of the world's population, some years provides 60 percent of the food aid, he adds.

Behind the 'fair trade' label

by Pieternel Gruppen

The fair trade logo has become an increasingly regular sight on supermarket shelves in recent years, and many customers are now familiar with the concept.

Still, opinions vary about what fair trade really means. Some consumers won't buy their trainers if they're put together by children's hands; others feel coffee farmers should get a fair price for their beans.

Environmental concerns and acceptable working conditions are also commonly associated with fair trade.

Many different definitions and interpretations exist, and there is no general standard to determine how "fairly traded" the T-shirt or coffee pack that you buy really is. It all depends on the definition that producers wish to apply. And often, that definition is not made explicit to consumers. It's because Fair Trade is not a registered brand. And so, consumers may buy a product because they see the words 'fair trade', but there is no guarantee that that it deserves that label.

Setting standards
To ensure that both producers and consumers get a fair deal, several quality mark organisations have sprung up. Chief among them in the Netherlands is the Max Havelaar Foundation, which has set a number of conditions for fair trade.

Manufacturers, for example, will only be granted the use of the Max Havelaar hallmark if they guarantee acceptable working conditions, meet environmental standards and allow their workers to organise themselves. In addition, they have to guarantee a fair price for their products.

"We are supporting the weakest groups in trade," a Max Havelaar spokesman explains. "It's fair because at least they get a price which is covering their own production costs, a sustainable price."

Verification
Farmers will receive an additional bonus which they are obliged to invest in social projects, like setting up schools or improving sanitation. So far, Max Havelaar has awarded certificates for bananas, coffee, tea, chocolate, honey, fruit and fruit juices. These commodities are easy to verify because production lines are short, says Joris Oldenziel of the Centre for Research on Multinational Corporations (SOMO).

"For larger commodities, like coffee and bananas, there are quite well-developed systems for checking if the minimum standards are guaranteed. But when it comes, for example, to handicraft, it's a bit more difficult because they work with middlemen and there is no direct contact with the individual craftsmen. So, they still have to develop better methods for monitoring and verifying whether the wages and the prices the craftsmen get for their products are fair, or whether the money stays with the middlemen."

Products that involve a whole string of middlemen are difficult to verify. That does not only apply to handicraft, but also to clothing. A T-shirt goes a long way - from cotton plantation via sewing workshop to wholesalers - before it's finally sold in a fashion shop. Conditions in a clothing factory may meet fair trade standards, but how about the workers harvesting the cotton crop?

Professionalism
At present, fair trade organisations are not equipped to monitor all the steps in the production process. This has prompted a great deal of media criticism in recent years, which in turn has led to moves to make fair trade groups operate more professionally.

SOMO's Joris Oldzenziel says the fair trade movement should at least be credited for putting the issue on the global agenda. He also believes big companies should take over the initiative:

"I think that most people would agree that the fair trade model, as it exists now, will probably not get more than a 10 percent market share. So, what about the other 90 percent?"

Big business
SOMO and other organisations recognise that, ultimately, the fair trade concept won't succeed without the support of big business. And that's where consumers come in, because companies will be more sensitive to the issue when consumer demand picks up.

Delighting in the dollar's decline

Foreign visitors find bargains abound in S.F, other tourist areas

Birgitta Forsberg, Chronicle Staff Writer

While Federal Reserve Chairman Alan Greenspan is worried about the weak dollar, it has been a boon for foreign visitors and San Francisco's tourism industry.

The precipitous drop of the dollar against the euro and other major currencies has increased the buying power of foreign tourists. Hotels are seeing more overseas guests, and business at shops and restaurants has picked up.

"I'm definitely saving quite a lot," said Richard Smith, a British tourist who's been on a shopping binge during his two- to three-month tour of the United States. "I bought clothes, electronic items and a lot of beer. And I've been on a lot of tours. I'm able to see a lot more (because) the value of the (British) pound to the dollar makes it so cheap.

"I bought four iPods, one laptop, CDs, a CD player, two digital cameras and DVDs. I'm thinking about buying a camcorder. I met a lot of English people in New York and they were shopping in droves."

The weak dollar -- mainly the result of this country's growing budget and trade deficits -- has benefited American exporters, making their goods cheaper abroad. The slippage has been dramatic, with the dollar having lost 4. 3 percent of its value against the euro in the past 12 months, and 34 percent in the past 36 months.

The erosion of the dollar, though, is drawing tourists to this country in growing numbers. "There has been a significant uptick in the U.S. tourism industry because of the dollar's relative weakness to the euro, but the biggest pickup is in New York and southern Florida," said Thomas Callahan, chief executive officer of PKF Consulting, a firm that monitors the hotel and travel industry.

"It's a long way from Europe to San Francisco. We see an increase here, too, but to a lesser degree."

Tourism rebounding

The influx of foreign visitors is welcome news for San Francisco's tourism industry, which has been on the mend after Sept. 11, the SARS outbreak and the Iraq war, which shook air travelers for some time. The most recent data from the city's Convention & Visitors Bureau notes that 14.4 million domestic and international visitors, including Bay Area visitors, spent $6.03 billion in 2003. Of that total, there were 2.15 million foreign visitors who spent more than $536 million.

Although the bureau's 2004 data won't be available for a few months, David Bratton, its research director, said the overseas visitor count should be up significantly over what it was in 2003.

And the weak dollar is a big reason for the rise. "Four or five years ago, one euro was worth 89 cents. Now it's worth $1.30," said Jon Handlery, the owner of the Handlery Union Square hotel.

"It's extremely attractive for Europeans to come here, and the same goes for Australians and New Zealanders." Handlery cited Air New Zealand's direct flights from Auckland to San Francisco that began July 1 as a boost to business.

"And Iceland Air is starting a direct flight in May, which will be good for the Scandinavian market," he said.

San Francisco International Airport said the number of international passengers grew by 14 percent to 6.9 million during the first 11 months of 2004 compared with the same period in 2003.

Niki Leondakis, chief operating officer at Kimpton Hotels, said the group's hotels had seen a 127 percent gain in international tourism in 2004 compared with 2003. The biggest increases were seen in the number of visitors from France, followed by Germany, Britain, Australia and Japan.

"We definitely see an increase," she said. "Our Grand Cafe at the Hotel Monaco (on Geary Street) has seen its late-night business pick up, which the staff attributes to European travelers who are late-night diners.

"As long as the euro is strong, we project this (trend) will continue during 2005 and into 2006."

Occupancy rates up

According to Smith Travel Research, hotel occupancy in the San Francisco- San Mateo area was 68 percent in 2004, compared with 62.8 percent in 2003. At the same time, the average daily room rate edged up to $117.96 in 2004, compared with $116.68 in 2003.

The presence of foreign visitors has also been felt in the Napa Valley. "We have absolutely seen a big increase in our foreign visitors and also in foreign journalists who are writing about us," said Diana Gerlach, hospitality operations manager at Beringer Vineyards. "We see people from India, the Philippines and China."

For Gerlach, that's a welcome change. "Visitor traffic has been soft for the last three, four years, and for U.S. visitors, the trend is still flat," she said.

The weak dollar has made U.S. goods a bargain. "I'm going to buy clothes and maybe a digital camera," said Kuo Hui-yu, who had just arrived from Taiwan for a weeklong stay in San Francisco and plans to shop and sightsee.

"The dollar's exchange rate is quite good for us. It would have influenced us to buy more had we been able to carry more," added Helen Crowe, a British tourist who is passing through San Francisco on part of a four-week world tour.

For some businesses, though, foreign tourists have been hard to come by. That's understandable, because January is traditionally a slow time of the year for the tourism industry. The Blue & Gold Fleet said it doesn't have very many sightseers braving the rain and cold to go on a cruise.

"For us on the boats, the weather is a factor. It's usually up and down this time of year," said Robert Knigge, vice president of sales and marketing for Blue & Gold. "We saw an increase in international travelers of around 10 to 12 percent last year compared with 2003. But this year it has so far been flat compared with last year."

Japantown waiting

Several shopkeepers and restaurant owners in Japantown also said they haven't seen many foreign tourists. They said Japanese tourists travel extensively from late April to early May during "golden week," the festive period of national holidays in which schools, government offices and stores are closed. They also expect business will pick up when overseas tours come through during the summer.

Callahan of PKF Consulting predicted the increased number of international travelers will be visible when the warm weather arrives. "(Europeans ) will typically travel in the summer months, so we will see the real benefit from June to August," he said.

Unfortunately, most foreign visitors are not big spenders. "We mainly see budget-oriented tourists," Callahan said.

Tina Chen, who owns Tina's Jewelry on Powell Street, said that although there have been a lot of overseas tourists at her store, they haven't generated more business. "Eighty percent of the people that came into the store yesterday were foreigners," she said. "But only 20 percent were spending money, and they mostly bought small things.

"Last year, more local people came in, but many have lost their jobs and may not have extra money to buy luxury things. People have champagne taste but only soft-drink money."

Bush opts for costly bash in wartime

FDR scaled back event, but there's no clear precedent

Edward Epstein, Chronicle Washington Bureau

Jubilant Republicans are descending on a nippy Washington for President Bush's second inaugural on Thursday, an affair of celebrations and protest, pomp and a predicted high temperature of 35 degrees.

Beneath the festivities surrounding the 55th presidential inauguration, there is a current of unease. Washington is capital of a nation at war, with 150,000 Americans serving in Iraq and 18,000 in Afghanistan. So far, more than 1,500 military personnel have been killed in the two countries, with more than 10,000 wounded.

Some critics have suggested scaling back Thursday's inaugural, which will cost $40 million in privately raised funds for the parties, parade, dinners and entertainment events. It will cost tens of millions of dollars more in public money for an unprecedented security effort that will involve about 6, 000 people who will cordon off a large chunk of downtown.

"Precedent suggests that inaugural festivities should be muted -- if not canceled -- in wartime,'' Rep. Anthony Weiner, D-New York City, wrote to Bush last week. He suggested putting some of the money toward helping the troops.

Weiner, who is mulling a run for mayor of New York, cited the example of an ailing President Franklin D. Roosevelt, who in January 1945 limited his inaugural celebration in the midst of World War II to a simple ceremony on the White House balcony, followed by a spartan buffet lunch featuring chicken salad, pound cake and coffee.

However, there is no clear precedent for whether wartime inaugurals should be gala or solemn.

In 1865, crowds overran the White House for President Abraham Lincoln's second inauguration as the Civil War was drawing to a close. In 1953, President Dwight D. Eisenhower's first inaugural was the biggest staged up to that time, and President Richard M. Nixon's 1969 and 1973 inaugurals -- held amid the divisive Vietnam War -- weren't scaled down.

"These are sober times. ... The image that is most troubling is of a president in black tie holding a champagne flute at a time when so many soldiers are eating out of a plastic pouch while getting shot at in Iraq," Weiner added.

About 60 protests are planned for the inaugural, representing a variety of anti-war, anti-Bush, anti-capitalist, pro-environment, pro-abortion rights and pro-civil liberties causes. One group sued last week, claiming that the National Park Service is unduly limiting protesters' access to Pennsylvania Avenue, widely known as "America's main street.''

Access to the bleachers set up along Pennsylvania will be restricted to those who have bought tickets from the private Presidential Inaugural Committee, or the committee's guests.

The White House has rejected the idea of truncating the three-day inaugural plans, which call for a patriotic pageant called "American Heroes --

A Salute to Those Who Serve" today at the indoor MCI Center, Washington's downtown arena; a youth concert at the D.C. Armory featuring Hillary Duff; fireworks on Wednesday evening; a two-hour parade on Pennsylvania Avenue after the ceremony on the Capitol's west front at noon Thursday; and nine inaugural balls that evening.

"They're a ceremony of our history. They're a ritual of our government. I think it's really important to have the inauguration every time,'' first lady Laura Bush told a reporters' roundtable in the White House last Friday.

Her view was seconded by 77-year-old Charlie Brotman, who on Thursday will handle the announcing duties at the inaugural parade for the 13th consecutive time. It's an unpaid job that Brotman, former public address announcer for the Washington Senators, said he has gladly undertaken since Eisenhower's second parade in 1957.

"Let's continue our normal lives as best we can,'' said Brotman, who will be stationed atop the reviewing stand erected across Pennsylvania Avenue from the White House. From there, he serves as the president's eyes and ears, alerting the president in his heated reviewing stand to what marching units and floats are coming his way.

"It's just a few hours of entertainment. The war isn't going to stop tomorrow,'' he said.

The entertainment has already started in Washington, and by the time Thursday comes, local hotels will be jammed with an estimated 100,000 visitors.

At Political Americana, a collectibles shop on Pennsylvania, trinkets marking the second inauguration of Bush and Vice President Dick Cheney fill the shelves. There's a $4 "You're Hired'' button featuring Bush and millionaire Donald Trump, star of NBC's reality series "The Apprentice.''

A Navy blue golf towel carrying the inaugural logo sells for $12.99, and a coffee mug bearing the likenesses of the president and vice president goes for the same price.

Bush has told inaugural organizers that he wants Thursday's parade to last no more than two hours, a formidable task because it will feature about 11,000 participants in six dozen military units, color guards, marching bands and floats from around the country spread out over a route of 1.7 miles.

Based on his experience, Brotman is skeptical it can be done. "Two hours? Yeah, I hear that every four years,'' he said.

Lifting of import quotas a blow to garment factories

Bay Area apparel industry tattered by overseas competition -- immigrant workers try to start over after layoffs

Vanessa Hua, Chronicle Staff Writer

Jenny Kwong sewed up a lacy green gown as Cantonese music blasted in the background one recent evening.

Falling business had forced the San Francisco factory owner back behind the sewing machine. What her workers produced covered the rent on the factory. To turn a profit, she herself needed to sew, Kwong said with a sharp laugh.

Kwong is caught in the relentless decline of the Bay Area garment industry. For years, local factories have closed and jobs melted away as production shifted to cheaper places around the world. Today, the Bay Area is home to an estimated 3,500 garment workers, down from a peak of 30,000 in 1990.

In the latest blow to the local industry, a global system of quotas expired on Jan. 1 that had restricted the international flow of garments made in China, India and 146 other nations belonging to the World Trade Organization.

The lifting of import quotas could accelerate the loss of local jobs, say factory owners and community activists. Within the next couple of years, the Bay Area could lose more than half of its remaining garment jobs, which many Chinese immigrant women have long depended on for their livelihood.

Those women -- middle-aged or older, poorly educated and unable to speak English -- often don't know about retraining programs for workers who lose their jobs to increased imports, and have few opportunities even with that help.

"This is the death knell," said Katie Quan, chair of Center for Labor Research and Education at UC Berkeley and a former garment union leader. "The elimination of quotas makes it extremely attractive to move everything off- shore."

Ironically, many local garment workers may lose their jobs to cheaper factories in China -- the homeland that they left to find a better life in the Bay Area. That economic powerhouse sets the standard for cheap, efficient and full-package production.

As the last barriers to imports fall, Kwong's business is in jeopardy. The 60-year-old woman studied fashion design in Hong Kong, where she ran her own bridal store before immigrating to the Bay Area. Here, she worked in a garment factory and on an electric assembly line and ran a dry-cleaning business before starting her own factory nearly two decades ago.

Now, more than half of her sewing machines are idle after she cut the payroll from about 20 to just eight workers. She said she feared the loss of the quotas: "We can't be cheaper than other countries."

The Bay Area garment industry has roots dating back to the Gold Rush, when immigrant Levi Strauss founded the company that made the world's first jeans and later became a major source of San Francisco's manufacturing jobs.

A decade ago, the North American Free Trade Agreement set off the steep decline of the nation's garment industry as clothing labels outsourced production to Mexico and other countries with cheaper labor. In 2002, Levi's shuttered six U.S. manufacturing plants, including its historic Valencia Street operation in San Francisco. The two remaining plants in San Antonio closed a year ago. Last year, the state Department of Industrial Relations listed 204 garment factories in San Francisco; in 1998, it listed 406.

In 2004, sewing machine operators in the San Francisco metropolitan area earned on average of only $357 per week, according to state Employment Development Department. Bay Area garment workers, many of them Chinese immigrants, must deal with long hours, piece-rate pay schedules and poor working conditions, labor activists say.

On top of offshore competition, San Francisco's increase of the minimum wage to $8.62, high rents and other operating expenses have led to many plant closures, factory owners say. Many of the remaining factories are small, employing 20 to 40 workers, who come in only when there are orders.

Workers in the city sew clothes and evening gowns for local designers such as Jessica McClintock, who say they keep their production local for greater control and fast turnaround; the U.S. military, whose clothes must be American-made; and other niche manufacturers.

Housed in rundown buildings, the factories are in the South of Market district, the Mission, Potrero Hill and other industrial areas in San Francisco.

The building at 972 Mission St. houses the Consulate of Jordan along with a handful of garment factories and a Web design firm.

Upstairs, under florescent lights, rows of middle-aged women in a factory hunched over sewing machines recently. Some wore homemade face masks, protection against the fabric particles. Their activity filled the air with a low hum.

"I can't speak English, so it will be hard to look for work," worker Lily Ng, 48, said in Cantonese as she sewed a trendy pink top.

In another factory on the same block, just one worker sewed, and another folded pants. Plastic bags stuffed with cloth scraps, crumpled paper and threads littered the floor amid empty sewing machines.

Every so often, a company buying sewing machines on the cheap to sell overseas calls her, said factory manager Cindy Huang. She has declined the offers, but she predicted that her factory could close within months.

No work is coming in, Huang said. She wore fuzzy blue slippers and fleece, bundled up in the cold, drafty factory.

"It's depressing, to work on something for so many years and watch it fall apart," Huang said in Mandarin. "It's good for China but bad for the people here."

The federal Trade Adjustment Assistance program, established in 1962, provides training and benefits to workers who are laid off because of increased imports from a foreign country. Congress has appropriated $220 million annually for this program.

Nationwide, factories making textiles, apparel and other fabric products were among the two hardest-hit industries in fiscal year 2004, according to the Department of Labor.

In 2003, the state informed 12,989 laid-off workers that they were eligible for these federal training and unemployment benefits -- more than five times the number in 1998.

Typically, only 20 percent of those eligible apply, said state Employment Development spokesman Kevin Callori.

"It may not be right for everyone," he said. "It depends on each person's situation and whether they feel the program will work for them."

In the 12-month period ending in June, graduates of the federal training and benefits program earned about 72 percent of their previous wages, and 62 percent found jobs within three months, according to the Department of Labor.

Critics say that applying for these benefits is complicated, involving approvals from state and federal agencies, and difficult for non-English speakers to navigate.

For example, the letter informing workers that they are eligible for the benefits is in English, although it lists help lines in other languages.

Some garment factories change their name before they close or may cut their checks through another company, creating paperwork confusion, community activists say. Other factories may not inform government agencies of all eligible workers. Some unemployed only learn about the federal benefits months later through word of mouth, the activists say.

In addition, the training programs offer few choices for limited-English speakers: cooking, janitorial work or in-home care, for example.

Because the benefits are tied to signing up and attending vocational programs, some immigrants may sit uncomprehending through classes conducted in English, said Gordon Mar, executive director of the Chinese Progressive Association, community organizers in San Francisco.

Afterward, workers often cannot find jobs related to their vocational training or can find only part-time jobs, he said.

Since fall, the association has fanned out to more than 70 garment factories in San Francisco, handing out flyers about its seminars on what workers can do if they lose their jobs.

Peng Mei-Ying immigrated here two decades ago. Unable to speak English, she had few job options and two children to raise. She became a garment worker, sewing eight hours a day for minimum wage. Her back ached all the time, and the detail work exhausted her.

The gowns she made were expensive and sexy -- not her style, said the short, solid woman. In her free time, she went for walks or stayed at home. "You need money to have hobbies," Peng, 48, said in Cantonese through a translator.

In March, Leeda Sewing Manufacturing, the San Francisco factory where she sewed bridal and evening gowns, folded.

Along with her husband, a retired restaurant worker, Peng lives in the Sunset District with her son, a cab driver, and her daughter, a college student. Peng, who receives about $610 per month in unemployment, said her relatives help with expenses.

In November, Peng began an 18-month program to learn English and professional care-giving provided by Self-Help for the Elderly. With only a middle school education, Peng has been out of the classroom for decades. She's forgotten how to write a lot of Chinese characters and never learned English.

"It feels like you can't learn anything," Peng said. "You think about what you don't know. It's so hard."

On a recent afternoon, association staffer Alex Tom helped a group of anxious garment workers fill out forms. The women, from the shuttered Kamei Garment Co., wrote in blocky, childlike letters.

The women asked for advice on what training programs to sign up for and how to prepare for interviews with state employment officials.

Take your time to decide, Peng advised her fellow former garment workers. They can't force you to choose.

Peng is enrolled in a new training program geared toward garment workers. Offered by City College at its campus in Chinatown, the program teaches English and care-giving, light housekeeping, and meal preparation.

In class, a dozen middle-aged Chinese women sat with notebooks on their desks, pink plastic lunch-bags at their feet, murmuring words such as "area code," "California," and "Happy Holidays."

"You need English not just to make a living. You need English to enjoy yourself, to travel and see the United States," said teacher Milton Owyang. "In one year's time, you'll have no limitations because you'll know how to ask where to go."

Student Huang Hui-Ming sat in the front row. At 59, Huang is reinventing herself again. In 1990, the math teacher immigrated from southern China with her husband. She wanted to tutor, but did not know enough English. She became a garment worker.

"There's no more garment industry. I have to do something to live," Huang said in Cantonese. "Everyone wants to know how far they can take their skills."

Poor Nations Put Premium on WTO's Survival

By Paul Blustein

Washington Post Staff Writer

GENEVA -- This time, there were no raised-fist salutes from trade ministers parading before TV cameras and remarkably little bombast about the tyranny of the wealthy. Instead, last week's global trade meeting ended with a series of mutually congratulatory news conferences, following agreement on a framework for advancing the World Trade Organization's Doha Round of negotiations.

The contrast could hardly have been starker with the WTO meeting last September in Cancun, Mexico, which broke down amid recriminations between rich and poor nations. And although explanations for last week's outcome are myriad, one factor probably accounts for the accord better than any other: the fear that a second consecutive failure would permanently cripple the WTO.

In the end, for all the fierceness of their differences over issues such as farm subsidies and tariffs on manufactured goods, the representatives of the WTO's 147 member countries stepped to the brink and saw that the abyss into which they might plunge was deeper and scarier than the leap they had taken in Cancun. Many fretted that the Doha Round, and conceivably the trade body itself, might not be able to withstand another Cancun-style blow.

Those concerns were particularly strong among developing countries, including some of the same Latin American, African and Asian nations that had celebrated their defiant stance at Cancun as a triumph over the arrogance of the United States and the European Union. Despite complaints that Washington and Brussels use their clout to tilt the terms of global trade in their own favor, developing countries are keenly aware that the WTO system protects the interests of poor lands, especially small ones, much better than if world trade were governed by regional blocs or by the equivalent of the law of the jungle.

The organization's director-general, Supachai Panitchpakdi, "made so many declarations that if this [Geneva meeting] fails, it's the end of everything in the WTO, and those messages are heard very loudly," said Celine Charveriat, head of the Geneva office of the aid agency Oxfam International, who was working closely with many of the poor-country delegations. "Right or wrong, those arguments were very important."

The WTO and its predecessor institution, the General Agreement on Tariffs and Trade, were designed to secure at least basic rights for poor and weak nations. WTO rules are arrived at by consensus, rather than votes weighted by economic power as at the International Monetary Fund and World Bank. Small members can -- and sometimes do -- file complaints against mighty powers for breaking the rules, and win judgments forcing bigger countries to change their offending conduct. One of the organization's fundamental principles is that member nations are not allowed to discriminate against the firms or products of other members (an important exception being for national security reasons, the justification the United States cites for its embargo of Cuba).

So although Charveriat, along with other advocates for the poor, was critical of the Geneva pact as providing too little to the developing world, she acknowledged that Third World governments had potent reasons for wanting to keep the WTO alive and well.

Partly that is because, with decisions requiring consensus, a single country may be able to obtain concessions by holding out against a broad deal. Moreover, worldwide negotiations offer the only opportunity for obtaining large-scale reductions in the billions of dollars in subsidies that the United States, European Union and other rich countries give their farmers. Farm subsidies often lead to gluts of supply and depressed world prices for crops, impoverishing farmers in developing countries, so reducing or eliminating them is a key goal of nations such as Brazil and South Africa in the Doha Round.

"Even if developing countries think the WTO needs radical reform," Charveriat said, "they know they have greater leverage in the WTO than in bilateral agreements," such as the proposed free-trade deal between the United States and Central American nations or the E.U.'s pending arrangement with South America. "They also know that subsidies are never on the table in bilateral agreements," because neither Washington nor the European Union, the two biggest subsidizers, will agree to slash their payments to farmers unless the other is doing so at the same time.

The desire to shore up the WTO was not the only reason for agreement in Geneva. One significant factor was the signal sent earlier this year by both the United States and the E.U. that they were prepared to be more forthcoming if other countries were willing to deal as well.

The E.U. offered some major concessions in advance, in particular a signal that if the Doha Round is completed it will phase out all its export subsidies for farm goods. Export subsidies are the most widely reviled type of aid to agriculture because they go directly for crops that are shipped into other countries' markets. The E.U. also gave up demands to expand WTO rules into new areas such as international investment, a proposal that developing countries viewed as pushing the organization too far.

For his part, U.S. Trade Representative Robert B. Zoellick sent a letter to all WTO members in January and visited numerous foreign capitals to convey the message that despite the political pressures of the U.S. election campaign, Washington genuinely wanted to try this year to restart the Doha Round, which was launched in November 2001 with an original deadline of Dec. 31, 2004. (That deadline is now well out of reach, trade officials agree.) At the same time, Zoellick was openly warning that if the Doha Round remained moribund, the United States would devote its trade energies to smaller pacts -- with Australia, Morocco, Thailand, Colombia and other nations interested in dealing bilaterally.

"What came after Cancun was the crude reality of statements by the United States, saying to countries, 'If you don't want to deal in the WTO, we will deal elsewhere,' " said Arancha Gonzalez, the spokeswoman for E.U. Trade Commissioner Pascal Lamy.

Zoellick and his aides were not shy during the gatherings last week about driving home the point that the WTO's future was on the line. "In a lot of the meetings, we said -- and others did, too -- 'If this thing falls apart, who knows when it will get started again? Who knows after two failures in a row?' " said a senior U.S. official. " 'Who knows whether this organization will be able to continue as a place where you can negotiate agreements?' "

That is not to say that participants were willing to sacrifice key interests for the sake of a deal. "It could have gone down," Zoellick said in a brief interview. "In fact, [Friday] I thought it might."

But Pedro de Camargo Neto, Brazil's former chief agricultural trade official, said with some exasperation, "Everyone felt we needed an agreement" because of the perception that the WTO would go over a cliff otherwise.

"They created the cliff -- it's a nonexisting cliff, in my opinion," said Camargo, who was here pressing his own country's delegation for a more ambitious agreement. "But it was a big factor."

So at his news conference, Zoellick, who after Cancun had blasted Brazil as one of the "can't do and won't do" countries, heaped praise on his Brazilian counterpart, Celso Amorim, for the "constructive" role he had played in Geneva.

Asked how he would now characterize Brazil and its allies, Zoellick replied, "I guess we 'did do.' So it's 'can done.' "

World trade gets new lease on life

Negotiators reached a series of compromises Sunday that could benefit African farmers.

By Abraham McLaughlin | Staff writer of The Christian Science Monitor

JOHANNESBURG, SOUTH AFRICA – Keep the bicycle moving - or it will fall over and crash.

That was the basic rationale behind a successful late-night negotiating session between members of the 147-nation World Trade Organization in Geneva this weekend that resulted in keeping complicated global trade talks rolling forward - and maybe even shifting into a higher gear.

It's the second time in the past year that the "bicycle" of talks - as trade observers call it - nearly stalled and tipped. The first was in Cancún, Mexico, in September, when developing countries stalked out of talks because of what they saw as intransigence on the part of rich traders like the US and Euorpe.

The new agreement is a promise by rich and poor nations to consider politically tough concessions - like lowering trade barriers and reducing subsidies to farmers - in the future. It means the 60-year tradition of global trade talks won't fall apart - good news for globalization's backers.

If the talks had imploded, observers warn, the world risked being plunged back into a time like the 1930s, when the American and global recessions were prolonged by an absence of international cooperation on trade. It also means serious trade talks will resume early next year, after the US election. And, in the meantime, it means Democratic presidential nominee John Kerry lost a foreign-policy issue with which to criticize President Bush.

"It's a real shot in the arm," says Peter Draper of the South African Institute for International Affairs here. It allows the WTO to put the current round of talks "into a state of suspension for six months" while the US has its election and the EU shuffles its trade staff. And, he says, "When things get back under way next year there will be a fairly solid framework from which to start."

Or, as EU trade commissioner Pascal Lamy put it: "I said in Cancún the WTO was in intensive care. Today not only is it out of hospital, it is up and running."

For all its tentative wording, the new trade deal does augur for dramatic movement in the future.

One major concession would mostly affect the European Union - home of massive subsidies to farmers: If the current round of talks is completed, the agreement reads, all subsidy payments to farmers for exported products will be eliminated "by a credible end date." Observers say this date could be around the year 2020.

Another potential concession, although vaguely worded, commits the US to aim for "ambitious" and "expeditious" cuts in subsidies to cotton farmers. Currently the US give some $3.9 billion in assistance to about 25,000 cotton farmers. The WTO recently ruled that this aid is illegal - though the US has been reluctant to change, because cotton farmers have big political clout.

African nations, particularly the four big West African cotton producers - Benin, Senegal, Burkina Faso, and Mali - agreed to back off on their demand for separate negotiations on cotton. In return they'll get extra assistance from institutions like the World Bank. "They were basically bought off," says Mr. Draper.

Another breakthrough: Poor nations agreed to move toward cutting - or at least capping - tariffs on agricultural and industrial goods. This is the main reason the US and EU are negotiating with poor countries, as it will provide millions of new customers for their exporters.

But some observers see the whole trade-talks milieu as having gotten so complicated that it obscures - and perhaps sabotages - real progress. Trade expert Michael Finger at Trinity University in San Antonio, Texas, has studied the topic for decades. He says he recently spent an entire day wading through a section of a recent agreement - and was no clearer on what it meant.

That, he says, hints that much of the impetus for the talks, at least for the US, is political, not economic. Mr. Finger figures US Trade Representative Robert Zoellick's marching orders were to just keep the talks alive.

"The moment the thing falls apart, that's a political negative," he says. Someone like Senator Kerry "can make a point in a political stump speech against an administration" that has let the world-trade regime collapse." But the price for the US of keeping the talks alive wasn't high, he says. The administration "hasn't lost any constituency" - like cotton farmers - "on this because none of it is legally binding."

Indeed one of the more telling phrases in the new document is this: "[A]dditional negotiations are required to reach agreement."

So the bicycle rolls on.

Trade pact draws focus on labor laws

Workers' rights get new attention

By Marion Lloyd, Globe Correspondent

SAN SALVADOR -- In a routine that varied little for seven years, Miriam Jurez, a 42-year-old single mother, rose at dawn and endured 12-hour days bent over a sewing machine at Doall Industries, where she and hundreds of other maquila, or factory, workers earned $142 a month pumping out clothing for Liz Claiborne and other famous US brands.

The longer she worked, the angrier she became.

''More than anything, we wanted them to enforce the law and to respect us," said Jurez, a former leftist guerrilla who lost her husband during the country's 12-year civil war. Her eyes flashed as she told how her bosses denied workers their rights, including medical care, overtime, and paid vacations. She also described verbal abuse by employers and said pregnant workers were often denied permission to see a doctor.

Last year, Jurez began talking to other workers about forming a union. But instead of improving conditions at the factory, she and several dozen other union organizers lost their jobs in May. Doall officials defended the firings, citing a slump in work orders at the Korean-owned factory, which is one of roughly 240 foreign-owned assembly plants operating in El Salvador's 15 free zones.

Jurez is one of hundreds of maquila workers who say their rights have been violated by employers who flout El Salvador's labor laws with impunity, complaints that are echoed by workers in countries throughout the region. Human rights groups have long bemoaned the failure of Central American governments to enforce their own labor laws, an issue that could delay implementation of the planned US-Central American Free Trade Agreement, or CAFTA.

A Liz Claiborne executive said the New York-based company had a local representative in El Salvador who monitored labor conditions at the factory, a practice the company follows in all countries where it contracts out clothing production.

''In many cases, we make good progress," said Roberta Karp, senior vice president for Liz Claiborne corporate affairs and the company's senior counsel. ''But in other cases, the progress is not enough." She noted that the company intervened in a factory dispute at another Doall plant in El Salvador in 1999, persuading the company to rehire several dozen fired workers.

That plant closed earlier this year, citing a slump in contracts. But Karp said company officials would have to investigate the recent firings at the Santa Tecla plant to see whether they were due to union issues or cost-cutting measures.

''It's got to be clear. It would be inappropriate for us to manage their business," she said.

Marlene Lpez, a labor lawyer who took Jurez's case to court, is convinced her client was fired for standing up for her rights in a country where power has traditionally been held by a tiny ruling elite. ''In El Salvador, the fact that companies violate the law by firing union workers isn't even news. Everyone knows it," said Lpez, who represents hundreds of maquila workers each year in cases alleging violations by their employers.

The problem of unenforced labor laws in Central America is receiving close attention in Washington, where CAFTA is becoming a campaign issue.

President Bush strongly supports the agreement, saying it will create thousands of new jobs for American workers and protect the textile industry from competition from China when global textile quotas are eliminated starting Jan. 1.

CAFTA, which would immediately eliminate tariffs among the United States and five Central American countries, was due to be in place by January. But it's not clear whether Bush will push for a potentially contentious vote in Congress before the November elections.

Critics of the agreement, including Senator John F. Kerry, say it does not do enough to protect workers' rights and would force US companies to compete with rivals in countries where labor laws are routinely ignored.

Alex Hong, a factory manager at Doall, denied his company discriminated against unions, two of which he said operate at the plant. ''We always act within the law," he said in a telephone interview, adding that all the fired workers received severance packages.

But Edwin Flores, the leader of one of the unions, said together they represent only 65 of the plant's 600 workers. He noted that as recently as January, the company was refusing workers' access to government health care.

Karp, the Liz Claiborne executive, said her company was alerted to the problem and persuaded management to start paying its health care dues.

''The companies do everything they can to keep unions small, and the Labor Ministry does what it can to help them," said Gilberto Garca, a leading Salvadoran labor activist who was invited to speak before the US Congress in March on labor abuses in his country.

Garca also contributed to a December report on abuses in El Salvador's maquilas by New York-based Human Rights Watch. The report, titled ''Deliberate Indifference," argued that ''because labor laws are weak and government enforcement is often begrudging or nonexistent, employers who flout the law have little worry that they will suffer significant consequences."

Government officials say the report, as well as another recent study by the British organization Oxfam, is biased and does not take into account recent improvements in labor conditions in the country.

''All they want is to cause damage to a sector that is creating a huge number of jobs," said Jorge Nieto, the country's labor minister. He said the government had worked closely with the International Labor Organization to modernize the country's labor codes and that ''our laws are as good as the most developed country."

Nieto cited a recent law making it a jailable offense for employers to withhold social security and health care payments by employees. Another prohibits employers from forcing prospective workers to take pregnancy tests.

Other officials argued that CAFTA would improve labor conditions by putting El Salvador and other Central American countries under a microscope.

''For us, it's not only about access to markets, but about consolidating the reforms we've implemented so far," said Miguel Lacayo, the country's Harvard-educated minister of economy. He said he hoped El Salvador would be able to move away from unskilled maquila-based jobs to skilled industries under CAFTA.

But labor activists argue that there is little to guarantee that the agreement won't perpetuate widespread abuses.

Lpez, the labor lawyer, took 500 cases to court last year and has filed another 100 cases so far this year on behalf of female maquila workers. Many of the cases involved women who lost their jobs after Carolina Apparel International, a subsidiary of North Carolina-based Rives Apparel International, closed its Salvadoran plant in December. The company, which produced clothing for famous US labels, left without paying several weeks' salary and severance packages to its 350 workers, she said.

The lawsuits are now in limbo, since there is no company representative left in the country to confront the charges. Attempts to get comment from the company were unsuccessful. Telephones at its head offices in High Point, N.C., have been disconnected.

Labor activists say that in some ways Salvadoran workers are worse off today than before the war. In his speech to members of congress, Garca cited figures showing that 2 percent of the country's 2.5 million workers are unionized, compared with 10 percent during the war.

''Before, labor leaders were fired, jailed, kidnapped, or killed. It was one of the causes of the civil war," said Joselito Acosta, a union leader who has spent two years fighting efforts by Pennsylvania Power and Light Global to annul a collective bargaining agreement at the company's Salvadoran subsidiary, DelSur.

The company finally backed down in February after Acosta and other labor leaders took their campaign to Washington and met with Representative James P. McGovern, Democrat of Massachusetts, and other members of Congress.

''Today, they don't kill you," Acosta said. ''They just fire you, because they know there will be 15 more people waiting to take your place."

Small coffee brewers try to redefine fair trade

By Tim Rogers | Contributor to The Christian Science Monitor

GRANADA, NICARAGUA – Fueled by a popular taste for lattes and cappuccinos and a growing consumer-awareness campaign, the fair-trade coffee movement has tens of thousands of Americans asking for a scoop of social justice with their morning coffee.

Fair-trade coffee - beans purchased from small farmers outside the US at well above the slumping market price - is hot in the java world: The amount of fair-trade coffee sold in the US nearly doubled last year.

But as the movement has expanded in recent years to include such brands as Starbucks, Green Mountain, Procter & Gamble, and Dunkin' Donuts, dissension is percolating among some smaller roasters. They claim that the large firms, which buy only a small percentage of fair-trade beans, are turning it into a marketing ploy rather than an effort to help farmers.

Now a move is underfoot to create a new model where smaller brewers purchasing 100 percent fair-trade coffee hope to distinguish themselves as the real deal among fair traders. The rift demonstrates how some small companies feel cheated by larger corporations for infringing on their market niche, even when all parties involved insist they are working toward the same goal.

Others say the mainstreaming of the movement has helped the cause.

"If a corporate giant roasts a million pounds of fair-trade coffee in one year, they are still doing far more than some of the smaller 100-percent roasters will in their entire history," stresses Paul Rice, CEO of TransFair USA, the group that audits the US fair-trade industry.

The fair-trade model seeks to ensure livable wages as well as environmental and cultural sustainability for small farmers in Latin America, Africa, and Asia by establishing a base purchase price of $1.26 per pound - about $.75 more than the current market price. Since TransFair formed in 1998, fair-trade coffee sales in the US have grown exponentially, totaling 19 million pounds last year, according to Mr. Rice.

Several smaller 100-percent fair-trade coffee roasters in the US have broken from the establishment in recent months, claiming they can do more to raise consumer awareness by going it alone.

On Friday, Larry's Beans of North Carolina split from TransFair, the company that holds the US trademark for the term, "Fair Trade Certified." At least three other smaller roasters - Just Coffee, Dean's Beans, and Cafe Campesino - have followed suit. All the details of their new association have yet to be worked out.

"Without people outside the increasingly corporate-friendly TransFair system pushing for the original vision of a better model, [the movement] will be watered down into nothingness," says Matt Earley, cofounder of Just Coffee in Madison, Wis.

Under the current system, chains like Starbucks can call themselves fair-trade friendly by purchasing just 1 to 2 percent of their coffee from certified growers.

Starbucks, which brews fair-trade coffee once a month as its "coffee of the day" in the company's 7,834 worldwide shops, and has bags of it for sale on its shelves, acknowledges that fair-trade beans are only a small percentage of its total purchase, but explains that there are other ways to ensure farmers are treated justly.

Sue Mecklenburg, vice president of business practices for Starbucks, says the company purchases all its beans - fair-trade certified or not - at an average price of $1.20 per pound. She says that last year the company bought 2.1 million pounds of fair-trade certified coffee, double the amount from the previous year, and sold 28 million cups of fair-trade coffee as its cup of the day in 2003.

"Starbucks doesn't purchase 100 percent of its coffee as fair-trade certified, but 100 percent of the coffee we buy is under conditions that are fair to farmers," she says, noting that fair-trade certified coffee is still a relatively small market, representing 670,000 smallholder family farmers, out of an estimated 25 million coffee farmers around the world.

Another sticking point inside the movement are the requirements for being certified. Germany's Fair Labeling Organization (FLO), which certifies all fair-trade coffee in the world, charges farmers $2,431 to certify plus an annual base of $607 for recertification and $.02 per 2.2 pounds of coffee sold under the fair-trade label.

Stuck in the middle of the controversy is the rural Nicaraguan coffee cooperative of El Porvenir, located on a 2,000-acre swath of land in the volcanic highlands. This village of 255 people produces a modest 45,000 pounds of organic coffee beans in a good year and has been trying for three years to get certified as fair trade by FLO.

Mike Woodard of the Nicaraguan ecumenical organization Jubilee House Community, says he helped the village fill out a certification questionnaire in 2001, but never received a response. FLO did not answer questions about why they have not visited the community, but spokesman Simen Sandberg says that seldom do they certify producers who harvest less than 44,000 pounds per year - almost the exact amount El Porvenir harvested last year.

Rice downplays criticisms that the movement sold out by inviting the multinational's on board. He says his mission is to get as many roasters and retailers involved as possible.

But some are still wary of the bigger brewers. Robert Everts, co-executive director of Massachusetts' Equal Exchange, the largest 100-percent retailer of fair-trade coffee in the US, applauds efforts to bring in larger firms, but says he stands with the defectors. He says that "the verdict is still out" whether the fair-trade establishment can support both the big and small roasters under the same tent.

China's Trade Boss

Vice-Premier Wu Yi has an iron will. She'll need it when she comes to Washington to lead talks

Among Beijing's chattering classes, Wu Yi is known as the Iron Lady -- a nickname she didn't earn by shying away from a challenge. In her youth, she was one of just a handful of women who attended the Beijing Petroleum Institute, earning a degree in engineering. Then early on she worked as a technician at the remote Lanzhou Oil Refinery, climbing through a clubby, male-dominated industry to become the ranking Communist Party official -- and de facto boss -- of the Yanshan Petrochemical Corp. by 1983.
Wu has since moved into the rough-and-tumble world of Chinese politics. She started out as a deputy mayor of Beijing, and today serves as a Vice-Premier and top trade negotiator -- the only woman in China's 24-member ruling Politburo. Key to her rise, according to those who know her: bull-headed stubbornness leavened with a quick wit and a directness that's rare at the pinnacle of Beijing power. "To her friends, she is very nice and enthusiastic," says Lin Shipei, a student adviser from Wu's university days who has kept in touch with her. "To her opponents, she is hard like iron."

That iron skin will serve Wu well as she prepares for her latest challenge. In mid-April, Wu is scheduled to lead trade talks with White House officials puffed up with election-year ire over lost jobs. The annual meeting of the U.S.-China Joint Commission on Commerce & Trade, once handled by lower-level officials, has been upgraded to the ministerial level, so she'll hold talks with Commerce Secretary Donald L. Evans and U.S. Trade Representative Robert B. Zoellick.

One reason for the increased urgency: A U.S. complaint before the World Trade Organization claiming that Beijing offers its semiconductor industry unfair protection. Other thorny issues on the agenda include concerns over rampant counterfeiting and piracy of everything from brake pads and windshields to Sex and the City DVDs and Viagra tablets; a tug-of-war over China's proprietary standards for electronic communication chips, which the U.S. fears would effectively shut foreigners out of the market; and concerns that the Chinese currency is way undervalued, giving the country's manufacturers an unfair advantage over foreign rivals. "There are some very significant issues between our two countries," says Robert Kapp, president of the U.S.-China Business Council in Washington. "And as far as trade issues, most of that is landing on Wu Yi's shoulders."

SPOILING FOR A FIGHT. The stakes in this tussle are high. Since last summer, a slew of high-level U.S. delegations have traveled to Beijing, and Vice President Dick Cheney is scheduled to do so on Apr. 13. But these officials haven't gotten much satisfaction. Washington has been looking for a much tougher stance on the growing scourge of piracy and counterfeiting than Beijing has offered, and has long raised concerns over regulations requiring foreign companies to share their technology with local partners in order to gain access to the Chinese market. Administration officials say they have already cut China enough slack as the country has moved to fulfill the commitments it made in joining the WTO. So when the 65-year-old Wu lands on the banks of the Potomac, she'll find that Washington is spoiling for a fight. "There is some point at which tolerance is exhausted," says Grant D. Aldonas, a Commerce Dept. under secretary who has often negotiated across the table from Wu.

China, of course, makes an easy target. Its trade surplus with the U.S. last year swelled to $124 billion, U.S. figures show, up from $103 billion a year earlier. And the strength of its manufacturing sector in everything from clothing to TVs means it's being blamed for the woes of U.S. workers. On Mar. 16, the AFL-CIO accused Beijing of tolerating abusive employment conditions -- including a ban on independent trade unions -- that give China an unfair trade advantage. The union's solution: punitive tariffs of up to 77% on Chinese imports -- an idea that is gaining support. "There isn't any question that there are abusive labor practices in China," says Senator Byron L. Dorgan, a North Dakota Democrat. "Do they affect American workers? Of course."

With such anger in the air, Wu will clearly have her hands full with the U.S. But she also has a tough constituency back home. Where American business leaders see unfair advantage, China Inc. sees a system designed to give it a fighting chance against oversize foreign rivals. Take China's policy of refunding most of the value-added tax imposed on locally produced semiconductors, which has sparked the WTO action. Although the same tax break is available to foreign companies making chips in China, they don't like it because they feel it's part of a campaign to force them to set up joint-venture production and transfer their technology. Chip imports don't get the same break. Chinese officials say the rule is fair because the money is earmarked for research and development. "The rebate is to protect our infant industry," says Li Ke, director of the information department at the China Semiconductor Industry Assn. "You cannot say this is a discriminatory tax policy."

Wu will be raising China's own trade concerns with Washington. One longtime beef: U.S. restrictions on the export to China of so-called dual-use technology -- goods that might serve military as well as civilian uses -- including high-speed computers and some encryption software. Nix the limits, Beijing says, and the trade deficit will shrink. More recently, the U.S. has slapped quotas, tariffs, and antidumping duties on a handful of Chinese exports, including color TVs and cotton bras, and is considering tariffs of more than 400% on wooden bedroom furniture. The restrictions, Wu will likely say, have to go. "These actions don't comply with WTO rules and are unfair to Chinese companies," says Li Yushi, vice-president of the Chinese Academy of International Trade & Economic Cooperation under the Commerce Ministry.

DEFUSING TENSIONS. Although widely popular, Wu has disappointed some of her constituents before. Some critics say that as a leader of China's delegation negotiating membership in the WTO, Wu sold out hard-pressed industries such as agriculture by agreeing to lower tariffs on grain, fruit, and vegetable imports. "Some of the compromises were unnecessary," says one graduate student of international relations at Beijing University. "Personally, I don't think too highly of her."

Like her or not, there is little debate over Wu's abilities. One thing that distinguishes her is her relatively modest upbringing. She doesn't hail from a politically powerful family and so has risen through the ranks on her own merits. She's no peasant, but her parents -- intellectuals in the central city of Wuhan -- lived far from the power circles of China's capital. With her degree in petroleum engineering, Wu paid her dues for 26 years in China's oil and gas sector, including three years in the remote western province of Gansu. Her no-nonsense approach caught the eye of former leader Deng Xiaoping, who promoted her to deputy mayor of Beijing in 1988, and deputy minister of trade in 1991. "Deng was looking for capable technocrats -- and she is certainly that," says Cheng Li, a professor of government at Hamilton College in Clinton, N.Y. Although she makes time for concerts at the Beijing Symphony and a weekly game of tennis, the unmarried Wu is "outspoken and works long hours," says Li.

It was as deputy trade minister that Wu really got noticed. Upon her appointment, she started leading delegations to Washington to hammer out agreements on policing knockoff goods and opening China's market to U.S. companies. In the early years, she earned a reputation for toughness to the point of intransigence. At the time, she was a "knowledgeable negotiator," says U.S. trade official Aldonas. "That means finding 19 different ways of reciting the same thing over and over again as you fend off demands from the U.S. until the decision can be made at a higher level."

But she also won acclaim for her ability to defuse tensions with her sometimes acid sense of humor. At one point, when U.S. negotiators were pressing the Chinese to crack down on pirates stealing from multinationals by selling counterfeit software and music, Wu countered that U.S. museums are full of cultural relics plundered from China. A bit of a red herring, perhaps, but the comment earned her plenty of admiration at home -- and the respect of U.S. officials. Although she uses an interpreter, she speaks enough English to understand much of what's being said and to throw in a phrase or two at key moments. And despite her reputation, Wu has a softer side, too. "The issues don't become personal with her," says Charlene Barshefsky, U.S. Trade Representative in the Clinton Administration, who negotiated with Wu over the terms of China's admission to the WTO. Barshefsky particularly recalls a hand-dyed scarf that Wu chose especially for her as a gift. "She can be tough as nails across the table, and then she does something quite thoughtful," Barshefsky says.

Wu's reputation for hard work and competence has pushed her ever-higher in the Chinese political firmament -- and won her jobs that extend far beyond trade. During last year's SARS crisis, President Hu Jintao and Premier Wen Jiabao tapped her to manage the response to the emergency, including mobilizing teams of health inspectors and coordinating a nationwide medical reporting system. For her trouble, she won the additional title of Health Minister, a position she still holds. Since then she has won praise for her effort to deal with problems ranging from HIV/AIDS to deteriorating health care in rural China. And she hasn't been afraid to take bold steps. For example, Wu Yi was the first top official to visit Gao Yaojie, an elderly doctor who first exposed how serious AIDS had become in rural China, and who had been put under temporary house arrest by nervous local leaders. "She is the sort of person who really gets things done," says one official with the Chinese Center for Disease Control & Prevention in Beijing.

But trade has always been Wu's real specialty -- and her work in that sphere is what may ultimately have the biggest effect on the future of China. Sure, both China and the U.S. will likely try to paint the Washington talks as a success, though passions are running high enough in this election year that it may be difficult for them to reach agreement. "Both sides will be very tough on all the issues," says Wang Yong, director of the Beijing University Center for International Political Economy.

But the U.S. is China's second-largest trading partner, so Beijing can ill afford to wage a trade war across the Pacific. Either way, the Iron Lady is surely steeled for the fight.


By Dexter Roberts in Beijing, with Paul Magnusson in Washington

Labor's Savvy Charge on China Trade

Labor's Savvy Charge on China Trade
In a landmark move, it wants the Bush Administration to decide if worker repression lets China price exports below true market value

Say this for the AFL-CIO: It knows how to put George Bush on the spot. As the Presidential campaign centered on jobs and foreign competition heats up, the labor federation fired what could be a potent election-year broadside: It asked the Bush Administration on Mar. 16 to decide whether worker repression lets China price its exports below their true market value, thus unfairly taking U.S. jobs.

The petition ensures that Bush must choose by late spring if it should anger China by launching a formal probe -- or alienate factory workers in such key battleground states as Pennsylvania and Ohio. This could be a tough decision, since the White House is hardly likely to agree to a labor case against China when it and most of Corporate America have argued for years that such issues should be handled by the International Labor Organization, not in trade pacts.

The Administration's initial response promised nothing, but it sounded as tough as possible: "We are committed to aggressively enforcing our trade laws to make sure American companies can compete on a level playing field," says U.S. Trade Representative spokesperson Richard Mills, who also says it's too early to comment on the merits of labor's filing.

LOGICAL LINK. Despite the politics, the AFL-CIO's 100-page brief marks a milestone of sorts in the debate over trade and labor rights. For years, labor and its allies have demanded that labor standards be included in trade pacts. But their complaints often have been dismissed as self-interested protectionism. Now, for the first time, labor's so-called fair traders have articulated a coherent intellectual position that makes a logical link between trade and labor rights.

Even some ardent free traders think the AFL-CIO's petition must be taken seriously. "You can't just dismiss it as protectionist. In a market economy, wages are set by the free interaction between workers and management, which doesn't exist in China," says William A. Reinsch, the President of the National Foreign Trade Council, which represents 300 large U.S. multinationals such as Boeing (BA ).

Labor's argument is so elementary that it's astonishing no one has ever spelled it out in such detail before. The brief contends that China's well-documented labor repression allows its factory owners to pay less than they would if the government enforced its own labor laws. These savings in turn lower the price of China's exports to the U.S., giving it an unfair trade advantage -- much as a direct government subsidy to a factory owner would do.

QUANTIFYING THE DAMAGE. So, the AFL-CIO isn't complaining that China's wages are low, but that its labor abuses push them even lower than they would be if the country had something closer to a free market. "We're not challenging China's comparative advantage [in cheap labor] but only the added increment of cost advantage it gains by violations of core worker rights," says Mark Barenberg, a Columbia University law professor who drafted the AFL-CIO filing.

His brief even tries to put a dollar value on the labor repression and the price subsidy it entails. Using four methods, it finds that China's failure to pay its own minimum wage or to allow independent unions lowers wages by 47% to 86%. This in turn reduces the price of China's exports by 11% to 44%.

While these numbers are only a guesstimate, the methods Barenberg employs are similar to those companies use to calculate the damage in more traditional dumping complaints. More important, though, is the notion that China's unwillingness to live up to its own labor standards itself constitutes an unfair trade practice. Sure, it's a politically loaded charge, but it may be difficult to ignore, especially in an election year.


By Aaron Bernstein in Washington, D.C.

It takes a global village

Free trade is racing ahead, but it's becoming a political weapon

David Armstrong, Chronicle Staff Writer

The issue of free trade is drawing withering fire in this year's election season, but candidates who blame U.S. job losses on the nation's trade pacts are oversimplifying the complexities of globalization, which goes forward with or without formal agreements.

That, at least, is the assessment some global business observers offer on free trade agreements, which are written arrangements between governments. A prominent case in point is the North American Free Trade Agreement, the 10- year-old pact among the United States, Canada and Mexico, which Democratic contender John Edwards said he would re-evaluate if he were elected president.

Edwards, the son of a South Carolina mill worker, is using his opposition to free trade to differentiate himself from President Bush, who is proposing more trade pacts, and Democratic front-runner John Kerry, who voted for NAFTA but denounced U.S. corporate executives who locate businesses abroad as Benedict Arnolds.

Organized labor and some political activists have long criticized trade agreements, saying they take away American jobs and contribute to poor working conditions in foreign countries.

And now in mainstream political circles, trade has been transformed from a preoccupation of policy wonks to fuel for fiery stump speeches. Campaign rhetoric aside, trade analysts say free trade agreements are blamed for creating problems and business conditions that actually exist independent of government pacts.

China, which has added thousands of low-paying manufacturing jobs as such work has left the United States, does not have a free trade agreement with Washington. Neither does India, which has recently emerged as a favorite of U. S. outsourcing operations in white-collar professions such as computer programming.

Moreover, the campaign-year politicization of trade is not being looked on favorably by America's major trading partners.

There could be some room for tweaking NAFTA to ensure it reflects current conditions, said Darcee Munroe, the senior trade commissioner at the Canadian Consulate Trade Office, in San Francisco. But re-opening NAFTA for sweeping changes is not an option for Canada, the United States' largest trading partner.

"Our government has no plans to pursue the renegotiation of NAFTA,'' she said. "From the Canadian perspective, it is in the interest of the three countries to maintain NAFTA as a very important instrument for economic growth. ''

Canada, Munroe said, has four bilateral trade pacts with other countries, none of which has ever been renegotiated after it was signed

In addition to NAFTA, the United States has four bilateral free trade agreements and is ready to negotiate more. Domestic political considerations, however, may stall, halt or significantly alter future agreements, which must be approved by Congress, experts say.

One case in point is a proposed trade agreement with Australia, which the Bush administration said will be submitted to Congress for a vote this year. U. S. Trade Representative Robert Zoellick, Washington's lead negotiator, hails the proposed pact with Australia, the United States' ninth-largest export market, as "by any standard a major accomplishment.''

Passing a trade agreement with Australia, which buys $13 billion per year in U.S. goods and services, would increase intellectual property protection, open markets to U.S. corn, soybeans and fruits and vegetables and "eliminate tariffs on more than 99 percent of U.S. manufactured goods on Day One,'' Zoellick said.

Now that trade has become nearly synonymous with job loss in American campaign rhetoric, Australian officials are careful to say that Americans jobs are not flowing into the land Down Under, with or without a trade pact.

"We certainly don't see ourselves as taking American jobs,'' said Robert Hunt, the senior investment commissioner in North America for the Australian government. U.S. companies, he said, benefit from increased round-the-clock efficiencies by planting Australian operations in the Asia-Pacific time zone and by starting joint ventures with well-educated Australians.

Due to Australia's high wages and relatively high cost of living, Hunt said, "foreign jobs don't typically migrate to Australia.''

Widespread concerns in the United States about lax environmental laws and weak labor standards don't apply to Australia, either, he said. "Australia actually has quite strict labor and strict environmental laws, on a par with U. S. law.''

In any case, trade analysts say, U.S. companies have long switched locations, even inside the United States, in search of lower costs and higher profit. The process began decades ago, when many blue-collar jobs left the Rust Belt of the Northeast and Midwest to cheaper, non-unionized Southern states.

"Free trade shoulders more of the blame for these changes than it should, '' said Bill Reich, president of the National Trade Council.

For example, "Sixty percent of the cut flowers in this country come from overseas,'' Reich said. "Thirty years ago, we didn't have an infrastructure that would allow that to happen. It's silly to blame a trade agreement for it. It's communication and transportation that allow that to happen.''

Still, Reich, whose group promotes increased international trade, acknowledged that the dislocation caused by the riptides of global commerce can hurt individuals who lose jobs and communities that lose businesses.

"The global economy is integrating very, very quickly,'' Reich said. "It's hard for people to adjust.''

Reich recommended increasing worker retraining, strengthening the public education system, and revamping the tax structure to "give incentives for businesses to stay here, not incentives for them to leave.''

Other observers say that labor and environmental concerns raised by critics of globalization could result in future free trade agreements that more closely scrutinize such issues.

Fair Trade's Front Man

Arts: Coldplay's Chris Martin has chosen not to live inside the bubble of his success.

Chris Martin
Interviewed By Katherine Turman

It may be true that rock and roll and agricultural trade barriers don't mix. But even though Coldplay's Chris Martin doesn't sing about fair trade, that hasn't prevented him from becoming the cause's most visible front man.

The 26-year-old Martin writes searing love songs and haunting ballads. His band has twice won the Grammy for Best Alternative Album, and, as the readers of Us Weekly know only too well, he dates Gwyneth Paltrow. But Martin has chosen not to live inside the bubble of success. Radicalized by a trip to Haiti he took with the relief agency Oxfam, he's taken up the cause of Third World farmers impoverished by World Trade Organization mandates that require developing nations to allow cheap, subsidized American and European crops to flood their markets, while their own exports remain thwarted by First World trade barriers.

While touring during the past two years, Coldplay gathered more than 30,000 signatures for Oxfam's fair-trade petition. And last summer at the WTO summit in Cancun, Mexico, Martin delivered the petition—signed by nearly 4 million people—to the head of the organization.

When he started down this activist path, Martin says, "I felt like a third-rate Bono.... Hopefully, it'll escalate until I feel like a full-on Bono." Martin spoke to Mother Jones from London, deflecting questions about Coldplay's new live DVD and focusing the conversation on fair trade, saying, "I don't want to plug anything except this."

Mother Jones: What was your first experience as an activist?

Chris Martin: Probably a "Drop the Debt" event in London. The great thing about "Drop the Debt" is that you have Bono and [Radiohead's] Thom Yorke and all these high-powered musicians actually going inside the buildings where decisions [about Third World debt] are made. I'm not sure how much George Bush is swayed by 100 people standing outside his house. I'm sure he's more likely to be influenced by one person having a meeting with him.

MJ: Even if that one person is a musician rather than a head of state?

CM: You can obviously question the power that musicians or actors have, because they don't really have any political power. What they do have is some effect on public opinion. And politicians like to be seen with those people. It makes them look more trendy and hip. It's all kind of farcical, really, but people like Bono understand they can get their causes across by allowing someone to have a photograph with the singer of U2.

MJ: You've called your experience with Oxfam a "crash course" in fair trade—

CM: They approached us two years ago just as we were making our second album and said, "Do you want to come to Haiti and learn about fair trade?" And we were like, "Fair what?" We hadn't any idea about it. But you go on a trip and learn how the importing and exporting of goods around the world works, and you realize it's a huge crisis. We've now seen, firsthand, the problems caused by America dumping rice on Mexico, or Haiti not being allowed to export its agricultural products.

MJ: In looking online at your recent journey to Mexico, I saw a photo of you behind a plow. When that was being taken, did you feel self-conscious?

CM: One hundred percent. I know full well that you have to kind of whore yourself around. But we don't care about looking like idiots. We're well aware that we do—we look totally stupid standing behind a plow. But that doesn't matter as long as you get the four words "make trade fair dot-com" in the newspaper.

MJ: When you met with Dr. Supachai Panitchpakdi of the WTO—

CM: I just call him Dr. Supa Chai—what a great cup of tea!

MJ: Were you nervous?

CM: No, I wasn't nervous. We're not saying we're the only ones that want fair trade. We're just participating in a band that some people like—that's how we have the profile to get into that meeting, and then to present a petition that says millions of people feel exactly the same as we do. I don't feel like it's all on our shoulders. It's just the same as when you see, I don't know, Britney Spears advertising Pepsi. We're just advertising maketradefair.com. I'm confident in the product we're advertising, so I have no need to be nervous.

MJ: I know that when you met Dr. Supachai, you said, "You seem like a nice guy. Why is it so hard to get this problem sorted out?" How did he respond?

CM: He said it was going to be difficult. The great thing about the Cancun summit was, although it fell apart, it fell apart because the poorer countries are coming together and making a stand for themselves. What will come of that I don't know, but it's better than them just being walked over again.

MJ: Have you changed your life since you became an advocate for fair trade? Are you a big coffee drinker, for instance?

CM: No, I don't drink coffee or tea. I do eat a lot of sugar, and chocolate. I'm sure I'm being a hypocrite every time I eat a chocolate bar. I'm eating products that have been imported cheaply or wearing shoes that probably weren't made in England. The problem of unfair trade is rife.

MJ: I know you're young, but you probably remember Bob Geldof's efforts to feed the world. What impression did that make?

CM: I was really young. I remember hearing about "Live Aid," but I didn't really know what it was. Obviously, I know about it now and think it's unbelievable. I wish we could do something like that now. All the bands, like Eminem and 50 Cent, they're so powerful, those guys, they could really do something huge.

MJ: Coldplay Live 2003 is your first live DVD—do you feel you're a better live band or a studio band?

CM: I feel we're a better studio band. Some days I think we're shit at both; other days I think we're great at both. But we couldn't have one without the other. At the moment, all I want to do is be in the studio all day, every day. But I'm sure in a year's time, we'll be itching to play live again.

MJ: As a child, was there an epiphany when you thought, "I will be a musician"?

CM: One when I was about 11: I'd just
started playing the piano one day, and this song came out. I don't know where it came from, but I said, "Wow! That was pretty cool!"

MJ: Did you go to university to study music?

CM: I went to London to find people to be in a band with. I majored in ancient history.

MJ: But you had no illusions about becoming an ancient-history teacher?

CM: That was my real dream, but then Coldplay came about! [Laughs.] Actually, I spent three years just rehearsing. But it is cool to learn about the Roman Empire. In the future they'll be unearthing statues of George Bush!

MJ: Do you consider yourself a political person or Coldplay a political band?

CM: No, I'd consider us a band interested in certain aspects of politics because it affects us just as much as it affects everybody else. I don't want the Third World to become the Fourth World any more than anybody else does. That's the one thing about when you actually visit a place where there is immense poverty: You see the reasons why, and it makes you fucking angry. Because it's just going to come back and haunt America and haunt England if they—if we—don't do something about it. This is tremendously clichéd stuff. But unfortunately it's all true.

MJ: Organizations like PETA seem to delight in stirring controversy. Do you think being more controversial would help you in your quest for fair trade?

CM: You don't want to piss off the people who actually make the decisions. The more you aggressively protest, the more they will up their defenses.

MJ: You've often said that when you meet people who are responsible for these harmful trade imbalances, they seem to be decent people. Is that a conundrum for you?

CM: Yes, it's a conundrum. I'm sure if we met George Bush tomorrow, he'd charm the pants off us. But we'd just have to try to charm them off him, basically. I think that good things will happen through charm offensive.