Bloomberg Business: Export Giant Washington State Torn Over Giving Obama Trade Power

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(Bloomberg) -- Sipping coffee at a Starbucks on a tree-lined road in Bothell, Washington, Representative Suzan DelBene finds herself stuck in the middle on international trade policy.

[Reposted from Bloomberg Business  |  Carter Dougherty  |  March 23, 2015]

As a former executive at global software giant Microsoft Corp., just down the road in Redmond, and as a congresswoman from a region with Boeing Co. to the north and the port of Seattle to the south, she should be a sure vote to give President Barack Obama full authority to negotiate a massive Pacific trade pact.

Instead, she’s undecided, buffeted by the state’s biggest employers and some small businesses, which favor the deal, and organized labor and environmentalists, who oppose it. Obama is likely to get the support of most Republicans in Congress. If he can’t win over DelBene and other Democrats, the 12-nation Trans-Pacific Partnership, covering as much as 40 percent of all U.S. exports and imports, could be dead.

The president is going to have to persuade his fellow Democrats that the trade accord won’t cost American jobs or damage the environment.

In the face of all the heat, DelBene, 53, won’t say where she’ll come out. “I talk to business, I talk to labor, I talk to everybody,” she said, holding a steaming brew from a company that makes a quarter of its money outside the U.S. “It’s my job to manage this and do what’s best for the state.”

Pressure Cooker

She has company on the fence: Three other Democrats representing districts around Seattle are also uncommitted to their party’s president on the trade pact. One, Rick Larsen, a 14-year veteran of the House, said, “Having been through trade votes, I have a feel for what the pressure cooker is like.”

A consulting firm run by alumni of the 2012 Obama presidential campaign, 270 Strategies, is helping to target Washington and Oregon with what it promises will be a blitz of advertising in support of negotiating authority. On the other side, opponents held a rally outside DelBene’s office last month exhorting her to oppose it, and her office has been flooded with phone calls and e-mail.

Fast Track

The immediate issue isn’t the trade deal itself but a bill to give Obama what is known as fast-track authority to negotiate it. Under fast track, once the president had a deal, Congress could vote it up or down but couldn’t amend it.

For now, the action is in the Senate, where Orrin Hatch, a Utah Republican, and Ron Wyden, an Oregon Democrat, are trying to negotiate a bipartisan compromise that could generate momentum in the House, where passage is less certain.

The last time Congress was asked to pass fast track was in 2002. It made it through the House by a three-vote margin.

Trade Dependent

Washington’s politicians often say theirs is the most trade-dependent state in the U.S. Almost 1 in 4 Washington jobs are associated with overseas commerce, and trade-related employment grew at three times the rate of total employment in the last decade, according to the Business Roundtable, a lobby group that studied all 50 states.

At the sprawling Boeing facility in Everett, the jets on the runway bear logos for Lufthansa and All Nippon Airways Co. The port of Seattle hosts 17 shipping lines handling containers and grain bound for overseas.

About 73 percent of Boeing’s Washington state revenue in 2014, $44 billion, came from overseas, said company spokesman Charles Bickers.

Larry Brown, political and legislative director for the International Association of Machinists and Aerospace Workers, which represents 33,000 Boeing employees in Washington and supported DelBene in her first run for Congress in 2012, said his members are “very appreciative of the jobs for foreign customers.”

‘Diminishing Returns’

But he parts ways with Boeing over fast track. Federal trade policy has delivered “diminishing returns,” Brown said, because it has helped the company move some operations overseas -- “exporting jobs,” in his words -- by easing tariffs and investment barriers. Boeing assembles major components in Italy and Japan. China is a base as well, with joint ventures for parts manufacture, maintenance and refurbishing in two cities.

Tim Neale a Boeing spokesman, said, “All of our final assembly work is still here in the United States, and 80 percent of the billions we spend each year with our suppliers still goes to U.S. companies -– more than 15,000 in total.” He said the operations Boeing has placed overseas have “helped us win many significant airplane orders in those countries, which in turn has helped us maintain and even grow our domestic workforce.”

Challenges Feared

Environmentalists, numerous in the Pacific Northwest, have focused their ire on a handful of issues, said Robin Everett, a regional representative for the Sierra Club.

One is a dispute-settlement method in U.S. trade deals that lets foreign companies sue governments for alleged violations through an international arbitration panel. Though such suits are rare, activists fear they could be used to challenge state and local environmental rules.

Natural Gas

Another is the environmentalists’ concern that the Pacific trade agreement would ease restrictions on the export of natural gas, generating pressure for more fracking, the controversial method of extracting energy from shale. Everett said relatively low gas prices in the U.S. could rise as Japan stepped up imports through liquefied natural gas terminals on Washington’s Pacific coast.

“These trade deals are an overarching problem for every environmental issue that we work on,” Everett said.

DelBene, who has received roughly equivalent campaign contributions from business and labor in her political career, said she is looking for ways to make sure any trade agreement has strong environmental and labor protections.

She says the U.S. hasn’t lost any of the arbitration cases that concern the environmentalists. And she hopes that trade deals will be vehicles to solve the problems that worry unions by improving labor standards abroad, reducing the incentive to chase lower wages overseas.

Job Concerns

DelBene also dismisses the argument that trade agreements are primarily responsible for job destruction. She says the U.S. tax system, technology and the failure to enforce prior trade agreements also play roles.

“People have looked at all sorts of effects of globalization and blamed trade,” DelBene said. “But it’s lots of things.”

About 90 percent of Washington’s 12,510 exporters are small and medium-size businesses. They account for a quarter of the state’s merchandise exports, according to the U.S. Department of Commerce.

One of them, American Nettings and Fabric Inc., is owned by Ross Bernard. His company, which among other products makes nets to keep deer, birds, insects and other pests off fruit and vegetable crops, expects to get 80 percent of its $3 million in revenue from abroad.

American Nettings has its only satellite office in Peru, which has had a free-trade agreement with the U.S. since 2009. The deal knocked tariffs on the company’s nets from about 15 percent down to zero.

Bernard, 58, employs six people in Ferndale, a small town in DelBene’s district that’s a 15-minute drive to the Canadian border. Bernard is Canadian, but moved the business to the U.S. because it’s a better export platform, in part because of free-trade deals. The North American Free Trade Agreement, Bernard said, “worked out very well for us.” He is finishing financing for a new facility that will almost double his space and workforce.

Bernard, who has invited DelBene to visit his plant later this month, supports fast-track authority and says trade pacts are free advertising for U.S. companies.

“Our customers follow these free-trade deals,” Bernard said. “They see a new agreement and say, ‘Oh, I never thought of that.’”

 

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