May, 2001: Players

By Greg Rushford
Published in The Rushford Report

Zoellick’s backdoor banana deal

Not everyone cheered when U.S. Trade Representative Robert Zoellick cut a deal last month with the European Union’s trade commissioner, Pascal Lamy, to end the festering trade war over the EU’s WTO-illegal banana-import regime, and get rid of the $191 million of U.S. sanctions against the Europeans.

Ecuador and Dole Food Co. reacted angrily. Ecuador was not even informed before the deal was struck, though the major Latin American banana producer — like the United States — had successfully challenged the EU’s 1993 banana regime as WTO- illegal. Dole, which had also complained that it had been injured by the European banana regime, says that Zoellick favored Chiquita Brands International (whose president, Carl Lindner, Jr. has given millions of dollars to both political parties).

Ecuador and Dole complain that the Zoellick-Lamy deal is just as WTO-illegal as the quota-license regime that the United States and Ecuador had challenged in the WTO dispute-resolution process. In fact, Zoellick agreed to let the Europeans keep their same quota-license regime, at least until 2006. The difference is that now the Europeans have agreed to tinker with it enough to let Chiquita get back into the game.

Europe claims that in 2006 it will open its banana markets by creating a tariff-only market instead. But until then, the Europeans will establish an interim managed-trade regime, where licenses for quotas will be allocated to companies on the basis of their market shares back in 1994. Chiquita, which had substantial market share then, is happy. But in recent years, Dole has enhanced its competitive position by buying banana concerns in European countries like Spain and France. Now, the newly purchased Dole companies will not be eligible for licenses based on previous market shares.

Dole would prefer a WTO-compatible “first come, first served” arrangement, where licenses would be awarded on the basis of which competitor could get to European markets first. USTR Charlene Barshefksy was initially enthusiastic about first come, first served as a WTO-consistent solution. She tried to settle the case with Lamy on this basis in October 1999. But Barshefsky pulled back when she learned that her patrons in the Clinton White House — and Sen. Majority Leader Trent Lott, who fronts for Chiquita — objected that Chiquita couldn’t compete as well under a free-trade regime. This seems to be the same political lesson that Zoellick learned before he cut the quota-license deal with Lamy last month.

Dole and Ecuador are livid.

“This action disadvantaged Dole and numerous Latin American operators from competing for future increased market share,” blasted David Murdock, Dole’s chairman and CEO in an April 12 statement. “This action perpetuates the current licensing system, licenses, managed trade and a closed market and is inconsistent with the American free enterprise system.”

In case anyone missed the point, Murdock added: “It gives one company, Chiquita Brands International Inc., a dominant, fixed market share of the European Union’s closed, quota market and continues to allocate licenses to protectionist European Union traders.”

Ecuador’s mission in Brussels released a statement calling it “disconcerting…that the United States and the European Union…believe that their will can prevail over the principles of the multilateral trading system.”

This deal was cut “behind Ecuador’s back,“ added a statement from Ecuador’s embassy in Washington. “It is perplexing, just as the preparation of new negotiations in the context of the Free Trade Area of the Americas and in a new WTO round of multilateral negotiations is under way, that the United States and the European Union believe that their will can be imposed over the principles of the multilateral trading system,“ the statement noted.

Unless Zoellick and Lamy take Ecuador’s interests into account, the Latin American country vows to overturn the new deal in the WTO.

Meanwhile, a happy Fyffes, Europe’s major banana company, released a statement noting that the EU’s promises to go to a pure tariff-only regime by 2006 “may be postponed.”

Zoellick spokesman Rich Mills did not return calls asking about bananas.

U.S. business to WTO:
We’re ambivalent about a new free-trade round

Corporate America was caught by surprise by the better-organized anti-capitalist mobs who trashed Seattle and helped sink the launch of a new multilateral round of trade negotiations at the 1999 WTO ministerial. You would think that the business lobby would be working hard to ensure that such a new round gets underway when WTO ministers meet again in Qatar in November 2001.

Think again. There is no momentum from the business community to ensure that a new WTO round is launched.

In an April 9 speech to the Economic Club of Detroit, the chairman of the National Association of Manufacturers, W.R. “Tim” Timken, Jr., noted that “the business community unified after Seattle and pulled together” to pass PNTR [permanent normal trade relations] for China. Apparently satisfied with that, Timken did not mention the need to launch a new WTO round this year.

NAM’s official position is that it is “committed” to a new WTO round. But the trade association isn’t spending much energy to see that this happens. “Our members agreed this would be one of our top dozen priorities, but not one of our top five,“ says Frank Vargo, NAM’s top international-trade man in Washington. “Their judgment is that the ingredients are not yet there for a new round.”
Vargo attributes the loss of his association’s members’ enthusiasm to “a feeling that the fissures that were there in Seattle are still there.” NAM perceives no real enthusiasm in the developing world and in Europe for “any meaningful cuts on their remaining industrial tariffs.”

“Meanwhile,” Vargo adds, “people want to take aim at U.S. antidumping rules and remaining U.S. tariffs.”

NAM chairman Timken, whose day job is chairman and CEO of the Timken Company, is one of the strongest advocates of existing U.S. antidumping laws. Thanks to a successful exploitation of those laws, Timken bearings dominate domestic markets.

The Business Roundtable’s Washington-based president, Sam Maury, is on the same page with Timken. Maury, a former U.S. Steel executive, testified before the House Ways and Means Committee recently that one reason the United States should lead negotiations for a Free Trade Area of the Americas is what would happen to support for antidumping if we were not there to defend it. Canada and Chile, Maury noted, have already “agreed to discontinue the use of antidumping remedies with respect to one another’s exports.” Moreover, he said, the Japanese want to use similar free-trade bilateral agreements to “strengthen Japan’s position in the next WTO negotiations,” which calls for liberalization of antidumping regimes. The powers that be at the Business Roundtable do not want U.S. antidumping laws liberalized.

In Geneva, WTO Director-General Mike Moore has told people he will probably be able to give the signal by July whether a new round is realistic or not.

Bob Zoellick’s team

Robert Zoellick has been griping to visitors about the incredible amount of unfinished work that the departing Clinton administration passed along: Bananas, beef hormones, Canadian lumber, foreign sales tax, etc. ect. Even one deal that was supposed to have been finished — the bilateral accord with China on the Asian giant’s accession to the World Trade Organization — was never really finished. China still is fighting over issues like agriculture subsidies and treatment of foreign insurance companies. It’s going to take all this year just trying to get back to square one, Zoellick fumes.

If this will be done — an uncertain prospect at present — at least Zoellick is getting decent reviews for the quality of his key staff.

Zoellick’s two top deputies in Washington will be Peter Allgeier and Jon Huntsman. Allgeier, one of the USTR’s most senior career officials, has experience in negotiations in Latin America, Europe, and Asia. Huntsman comes to USTR from the Huntsman Group, one of the largest family-owned chemical manufacturing firms in the United States (with operations in 21 countries).

Allgeier will be concentrating on Latin America and Europe. Huntsman (whose Mandarin is said to be fluent) is expected to handle Asia-Pacific affairs; he was U.S. ambassador to Singapore under the first President Bush in 1992-1993.
Linnet Deily, a Texas banker and a friend of George W.’s, will be running the USTR’s Geneva office, where she will focus on getting the next round of WTO negotiations launched. Deily — who was named by Business Week as one of the top 50 women in business in the United States — comes to USTR from Charles Schwab & Co., where she was enterprise president of Schwab Institutional Services for Investment Managers.

Zoellick boasts that by contrast to the lawyers who ran USTR during the Clinton administration, his key aides are negotiators, not litigators.
But do any of these people know how to schmooze on Capitol Hill?

South China Morning Post: A great newspaper in decline?

Robert Keatley, the editor of the South China Morning Post, was indignant that I wrote last month how an SCMP headline writer had put a misleading headline on an article concerning Beijing’s massive spying on the Falun Gong mediation group (the headline made it look like the article by veteran correspondent Jasper Becker was an exposé of the Falun Gongs’s secrecy, rather than the other way around). It was just a “careless” error on the part of the headline writer, Keatley informed me, not evidence that the SCMP wanted to cause as little offense as possible to prickly communist authorities on the mainland.

“You found an example of poor copy-editing and headline writing, and discovered a conspiracy,” Keatley told me in an e-mail. “Congratulations. Few people could have managed such an unjustified leap to a bizarre conclusion.”

Keatley was more outraged over my column, in fact, than he was over China’s recent arrests of Chinese-American scholars. Two of the most prominent examples: In February, China’s Ministry of State Security arrested two academics, American University political scientist Gao Zhan (who has a U.S. green card), and Li Shaomin, who is an American citizen who teaches at Hong Kong’s City University. While visiting the mainland, the scholars disappeared into the clutches of the secret police under the usual secrecy and denial of fundamental due process.

The respectable world press rightly expressed outrage. In an editorial with the headline, “Beijing’s Bullies,“ the Asian Wall Street Journal editorialized on April 2 about the mainland’s latest “intimidation campaign.”

The South China Morning Post’s April 2 editorial was headlined, “Uneasy silence.” There was no outrage.

“The worries are not so much due to the fact they [the academics] have been taken into custody — the Chinese public security authorities have the right to take action against anyone they believe to be violating the country’s laws. Rather it is because of the secrecy surrounding their incarceration and the lack of detail on the charges they face.”

Continuing, the editorial tiptoed around the cruelty.

“China is making efforts to modernise its system of justice. As part of this modernization, it would be reassuring if there were greater transparency in notification of arrests and of the charges involved.”

The editorial suggested a happy bureaucratic solution:
“The arrests have also revealed gaps in the notification system between the mainland’s Ministry of State Security and the SAR [Hong Kong] Security Bureau. “The SAR is notified if Hong Kong residents are detained or subjected to other action by the public security and Customs authorities. But arrests by the mainland’s Ministry of State Security need not be notified.”

Continuing, the editorial said that there was a “small but significant number of cases where notification does not happen, and it is left to family members and colleagues to raise the alarm.”

The SCMP’s conclusion: “It is important to work towards an arrangement where by the SAR authorities are informed of all arrests and detentions on the mainland. This would go someway towards reducing the nervousness and unease that the arrests have caused in Hong Kong.”

You could call it the Spineless China Morning Post.

The Washington Post finds a “human rights” organization

Speaking of carping at the press, I’m always surprised when disreputable extremists are quoted with respect by respectable news organizations. A case in point: Washington Post reporter Paul Bluestein’s April 15 article on the opposition to the Free Trade Area of the Americas negotiations. One of the anti-FTAA people who was quoted prominently was Juliette Beck, of Global Exchange.

Blustein identified the San Francisco-based Global Exchange as a “human rights group.” Beck told Bluestein that the FTAA “will mean more and more factories closing down and moving to places where workers aren’t free to organize or defend their basic rights.”

Bluestein didn’t ask Beck what kind of places have political and economic systems that Global Exchange approves of. Fact is, Global Exchange is for human rights in the same way that the Sandinistas in Nicaragua were for human rights in the 1980s. These days, Beck’s group approves of the “human rights” that exist in Fidel Castro’s Cuba. If you don’t believe me, check out the group’s website, and click on its “Cuba campaign” section. You can “read about the Cubans’ dramatic advances in sustainable development as they survive, and even thrive, despite the odds.”

Global Exchange offers “Reality Tours,” including one where tourists with communist revolutionary fantasies can go about Cuba “following Che’s Footsteps.”

I spent a week in Havana last September. I’ll never forget the little boy who asked, after I gave him a baseball, if I could also get him a bar of soap and one of those little bottles of shampoo from my hotel for his Mother. To Global Exchange, that’s sustainable development.

The costs of Sen. Byrd’s antidumping amendment

Remember last October, when West Virginia’s legend of pork, Sen. Robert Byrd, slipped into an agriculture appropriations bill a rider calling for the U.S. Treasury to fork over antidumping tariffs it collects from foreigners to domestic petitioners from the private sector? Byrd told his colleagues that the Congressional Budget Office had estimated that this would cost taxpayers slightly less than $40 million annually. I reported in November, 2000 that the CBO had gotten the number from the U.S. Customs Service, but that it was clearly “wrong.“

Based on interviews with federal budget officials and veteran Washington trade lawyers like Ken Pierce, a partner in Willkie Farr & Gallagher, the best “guesstimate” I could come up with was that Customs’ “final” collections in each of the two previous years had been $200 million.

Now, it turns out that Pierce and the budget sleuths were on target. $200 million in taxpayer costs for the Byrd law is the number that pops up in George W. Bush’s budget estimate that has been sent to Capitol Hill.

The news apparently hasn’t caught up to Sen. Byrd. A Byrd spokesman says that the senator is still sticking with the original CBO estimate.

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