Bloomberg
By Mark Drajem
June 29, 2009
www.bloomberg.com

June 29 (Bloomberg) — President Barack Obama’s bid to strengthen democracy in Pakistan and Afghanistan by boosting their exports is ensnared in a debate over labor rules between Democrats and companies such as Wal-Mart Stores Inc.

Saying “bullets and bombs” won’t stop Islamic extremism, Obama in March called on Congress to pass a measure giving duty- free access to imports from the two countries. A version passed by the House limits the products covered and imposes work conditions that would negate potential benefits, according to the U.S. Chamber of Commerce.

“It’s not going to help Pakistan,” said Sarah Thorn, director of international trade in Washington for Wal-Mart, the world’s largest retailer. “It’s the wrong places, wrong products and it has pretty onerous” labor rules.

The fight shows how politically sensitive trade is in the U.S. Congress. Earlier this year, Obama delayed asking Congress to ratify accords with Panama and Colombia after Democratic lawmakers, such as Representative Phil Hare of Illinois, said the agreements would harm U.S. workers.

The House measure, which passed 234-185, would require the U.S. to appoint an outside group to monitor labor conditions at textile and apparel factories in Pakistan or Afghanistan. It also would cut off duty-free imports from factories that don’t adhere to a set of so-called core international labor standards on matters such as prohibiting forced labor and child labor and guaranteeing the right to organize a union.

The Chamber of Commerce and other business groups said in a letter to lawmakers on June 26 that the measure would substitute “counterproductive and unworkable new labor criteria and monitoring requirements” for “longstanding eligibility provisions on labor rights” that are already in place.

‘Pushing Hard’

The administration is “pushing hard” to pass the measure, said Christopher Wenk, chief trade lobbyist for the Washington- based Chamber, the biggest U.S. business lobbying group.

The Senate passed an aid bill for Pakistan last week without the trade benefits the House had included in the legislation it approved on June 11.

Bentonville, Arkansas-based Wal-Mart and apparel companies including Levi Strauss & Co. of San Francisco are pressing the Senate to revamp the House measure.

Democrat Maria Cantwell of Washington, the Senate sponsor of the legislation, met with administration, labor and business representatives last week to try to reach a compromise, said her spokeswoman, Ciaran Clayton.

The AFL-CIO, which is the largest U.S. labor federation, and the American Manufacturing Trade Action Coalition, which represents textile-makers such as closely held Milliken & Co. in Spartanburg, South Carolina, say the House bill is a compromise they agreed to accept. The measure was written by Representative Chris Van Hollen, a Maryland Democrat.

‘Fight on Their Hands’

“If the business community insists on stripping out the labor provisions, then they’ll have a fight on their hands,” said Thea Lee, the AFL-CIO’s policy director in Washington.

Given the longstanding complaints about child labor in Pakistan, “it’s especially important” to impose strict standards, Lee said.

Wenk of the Chamber of Commerce said he’s concerned that the labor rules could become a baseline for other trade agreements and would make it too difficult for companies to get duty-free benefits.

“These provisions will create a significant disincentive for companies to invest, which would undermine the very benefits that this program is intended to create,” the Chamber, the National Association of Manufacturers and other business groups wrote in the June 26 letter, addressed to the Senate Finance Committee.

Cotton Pants Excluded

Van Hollen’s measure limits trade benefits to products made in certain areas of Pakistan, including the tribal regions. It excludes cotton pants and knit shirts, which account for more than a quarter of the $3 billion a year in textile and apparel Pakistan now sends to the U.S.

“These are products that can be produced easily in these regions with relatively low start-up costs and with the best prospects for providing almost immediate positive impact,” Helga Yin, the director for public policy at Levi Strauss, wrote in a letter to Cantwell on June 16.

While both Afghanistan and Pakistan are covered by the legislation, there are no U.S. imports of mass-produced apparel or textiles from Afghanistan now, and new investments would be constrained because of violence and a lack of adequate roads or a port, said Nate Herman, who is lobbying to change the bill. Herman represents the American Apparel and Footwear Association based in Arlington, Virginia.

Helping Business

The new labor requirements may ultimately help businesses, which had their reputations harmed after being linked to worker exploitation overseas, said Susan Aaronson, a professor at George Washington University in Washington who wrote a book on trade and human rights.

“Pakistan doesn’t have a good record in terms of child labor and the employment of women,” she said. “This ensures the rule of law will be followed.”

A spokesman for the Pakistan Embassy in Washington, Nadeem Kiani, didn’t return a telephone message.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

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