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US manufacturers step up pressure on trade

Financial Times | December 27 2006

US manufacturers step up pressure on trade

By Eoin Callan in Washington

US manufacturers are stepping up lobbying efforts in Washington over imperilled trade deals they see as vital to growth next year.

Jim Owens, head of Caterpillar, the heavy machinery producer, has held meetings with key Democrats such as Senator Barack Obama, the presidential hopeful.

The Democratic midterm election victory had cast doubt on whether Congress would ratify trade deals with Colombia, Peru and Panama.

Industry lobbyists have been drawing on contingency funds and the time of top management to try to win votes once the trade deals are sent to Congress by President George W. Bush.

The push by industry reflects the increased importance of exports for manufacturers during economic slowdown at home.

Frank Vargo, of the National Association of Manufacturers, said manufacturing would depend heavily on exports to sustain even moderate growth next year.

“Reducing trade barriers will spur greater exports,” he said, adding that companies were “turning up the volume” on lobbying.

So far lobbyists see no movement on the sticking point between Democrats in Congress and the Bush administration over the trade pacts.

The Democrats want tougher labour provisions included in trade agreements to protect both foreign and domestic workers - an approach considered by the European Union.

But manufacturing groups have resisted this step, arguing for maximum flexibility. Unions counter that manufacturers such as Caterpillar exploit low labour standards to hold back wages.

Concessions on labour standards would be unpalatable for manufacturers.

If a compromise is elusive, the Bush administration could force a high-risk vote in Congress, which could end in overwhelming defeat of the trade plans.

Senior administration officials have sounded an alarmist note in recent briefings at the White House. Ed Lazear, chairman of the Bush council of economic advisers, said “isolationist” trade moves and tax increases by Democrats were a big risk to the economy and could provoke recession. This view is not shared by all economists.

Mr Bush used his year-end press conference to point to opportunities for cross-party co-operation on trade. Promoting bipartisan consensus on trade was cited by a person close to Caterpillar as the aim of meetings between Democrats and Mr Owens, a past Republican donor.

Mr Owens expects revenue growth next year to come from sales of earthmovers in oil and mining markets such as Latin America.

Trade deals can provide duty-free access to new markets, cheaper imports of raw materials and the flexibility to move production of components and finished goods overseas.

 source: FT