Americas Representative style Democracy: How are you being served?
By Mitch Gurney
February 2008

“Our country is in a fix, in no small measure, because we had no strategy to help middle income people.”
Former President Bill Clinton, speech while stumping for his wife Hillary Clinton in Oakland Ca.

“This time we want to talk about the fact that the real problem is not that someone who doesn’t look like you might take your job; it’s that the corporation you work for will ship it overseas for nothing more than a profit”.
Senator Obama speech “A More Perfect Union” March 18, 2008, Philadelphia, Pa.

Recently while researching manufacturing job losses occurring in the US over the past 28 years I stumbled upon an informative article. This in combination with my other findings caused me to reflect upon the blight that has befallen America’s middle class worker.

Manufacturing at one point comprised nearly 70% of the US job market. It is a sector hit hardest by outsourcing which began in the late 1970’s. 2002 was the year which saw the emergence of “services outsourcing” which potentially broadens job losses beyond the manufacturing sector to higher-skill (white collar) workers.

Perhaps we should re-assess our representative style democracy within the context of the corporate lobbying and campaign financing that pervades both political parties and the impact this has on our government’s policy making. The article informs of actions undertaken by Congress in 1999 and illustrates the consequences of corporate influence over policy making and provides a glimpse of our elected officials pandering to the needs of our corporate infrastructure and perhaps often doing so at the public’s expense.

“The fruit of its labor” published November 1, 1999 by CNN.com chronicles the activities of Fruit of the Loom who at the time was “suffering from bad performance and poor management and lobbying heavily for a bill that would ripen its bottom line.” Fruit needed to make a “$45 million interest payment on an accumulated debt of $1.3 billion” and its stock had fallen from $48 per share a few years before to $4”.

The story goes that Fruit “handed out more than $435,000 in soft-money donations, a figure that puts contributions by the firm ahead of those of such giants as Coca-Cola, Exxon and Bank of America. Most of Fruit’s plums go to Republicans, including $265,000 to the National Republican Senatorial Committee, run by Kentucky Senator Mitch McConnell, the principal opponent of campaign finance reform”.

Congress had successfully “killed campaign finance reform” and “could now get on” with more pressing business, “such as an amendment to an African trade bill that would allow apparel produced in the Caribbean Basin to enter the U.S. duty free, provided it is assembled from U.S. fabric”.

“Fruit’s lobbyists – along with those from competitors like the Sara Lee Corp., [makers of Hanes underwear] and retailers like the Limited and the Gap – [were] pushing hard for passage. Fruit officials claim the measure, which President Clinton supported, will create jobs, and deny that the company’s donations can buy influence. Says Ron Sorini, a Fruit lobbyist: “There’s absolutely no correlation between our soft-money donations and those who decide to vote in favor of this bill.”

This raises a few questions: Create jobs where? And if there is no correlation between soft-money donations and buying votes, why make such donations?

Naturally the “…much coveted tariff break comes at a cost.” Eliminating duties on apparel from the Caribbean will run U.S. taxpayers at least $1 billion in lost revenue over five years–a figure that, by congressional rules, must be made up with cuts in other programs.

A little background on the Bill:

The Bill, H.R.434, aka “Trade and Development Act of 2000,” falling within the umbrella of NAFTA was a revision and an extension to existing legislation known as the “Caribbean Basin Economic Recovery Act” launched in 1983. On May 4, 2000 the House of Representatives approved the bill by a vote of 309 to 110. The Senate approved the bill by a vote of 77 to 19 on May 11, 2000. It was signed into law on May 18, 2000 by President Clinton becoming P.L [Public Law] 106- 200.

On February 15, 2007, President Bush extended the Trade and Development Act of 2000 with additional authorizations for certain Small Business Administration programs until July 31, 2007.

“Fruit confirms …the bill is expected to deliver a quick $25 million to $50 million to the bottom line, adding to savings achieved after moving some 17,000 of its U.S. based jobs, mostly to the low-wage Caribbean Basin, and reincorporating in the tax haven Cayman Islands. The job cuts were spread across the South, especially Kentucky, where earlier in this decade Fruit was one of the largest employers”.

Fruit picks up a cool $25 – $50 million while we taxpayers pick up the tab on an estimated $1 billion in lost tax revenue over 5 years at the sacrifice of cuts to [domestic] programs. This bill was for eliminating duties on apparel coming in from the Caribbean and would therefore be an ongoing loss of revenue to the US Treasury. The $25 – $50 million realized by Fruit consequently would be ongoing annual profits realized by them and based on estimates of apparel sales in the US at that time.

In addition Fruit realized added savings from outsourcing 17,000 US jobs.

Hypothetically let’s say the wages Fruit paid in the US at the time was $11.00 per hour [1997 industry averages] for a 40 hour work week. That’s $440.00 a week per employee, times 17,000 outsourced jobs equals $7,480,000.00 times 52 weeks equals $388,960,000.00 annually. Let’s say in the “low-wage Caribbean Basin” Fruit pays $1.00 per hour for 40 hour work week. That’s $40.00 per week per employee times 17,000 equals $680,000.00 times 52 weeks equals $35,360,000.00 annually.

Annualized Fruit through job outsourcing increased their bottom line by $353,600,000.00. That in addition with the $25 million to $50 million saved through the elimination of the apparel tariffs was not a bad return on their $435,000 soft-money “investment.”

Obviously from a business perspective this was quite a financial coup for Fruit and their competitors. Not only do they profit millions by outsourcing they also save millions in not paying duties on goods shipped back into the US that at one time were manufactured here. But at what cost to the average American citizen? These companies won big time while the US taxpayers pick up the tab, had reductions in programs, and thousands of American workers were out of work. Plus Fruit and their competitors depend on us to buy their “imported” goods.

The article mentions only Sara Lee (makers of Hanes), the Gap, and The Limited who were also lobbying heavily for passage of the bill. There are perhaps in excess of a hundred American apparel companies. Read the labels of any of their products and they are all manufactured outside the US. What does that tell you? The 17,000 outsourced jobs only pertain to Fruit at the time of the article. We can only speculate on the amounts each of their competitors paid in soft-money donations, the profits they realized through outsourcing, and what was delivered to their respective bottom lines following passage of the bill. But if we use the examples given here for Fruit and extrapolate the numbers, we’re talking big bucks here.

A vibrant healthy corporate infrastructure is vital to our economy. Clearly government policies should be balanced. But does this seem balanced to you? Shouldn’t government’s role be to strike a balance between the needs of corporations and those of the people? Where were the people’s lobbyists to buy influence among our elected officials and defend American workers and protect the US Treasury from pillage?
Interestingly the “principal opponent of campaign finance reform” Kentucky Senator Mitch McConnell, “where earlier in this decade Fruit was one of the largest employers”, voted in favor of the bill. Now imagine that.

Let’s pull this into perspective; we are merely assessing one company within a single industry here. This is not isolated to Fruit or the apparel industry as we have seen this replicated numerous times over in other industries and with similar Trade Acts applicable for other areas around the globe, like China, etc. This was the accounting of only one company, for one bill, during one Congressional session. US firms have been outsourcing manufacturing jobs and “reincorporating in tax havens such as the Cayman Islands” for nearly 28 years.

Research indicates that from 1979 through 2007 some 20.3 million manufacturing jobs have been lost in the US. Some of this loss can be attributed to normal fallout as a result of typical business cycles, but research indicates that 38 percent or 7.6 million – which I suspect is a conservative estimate – of those 20.3 million jobs were lost as a consequence of outsourcing and off-shoring.

By Mitch Gurney

Sources:
Article: The fruit of its labor
http://www.cnn.com/ALLPOLITICS/time/1999/10/25/farley.html
House of Rep Final Vote Roll Call 144

http://clerk.house.gov/evs/2000/roll144.xml
http://www.govtrack.us/congress/vote.xpd?vote=h2000-145
Senate Final Vote
http://www.govtrack.us/congress/vote.xpd?vote=s2000-98
CARIBBEAN/SUB-SAHARAN AFRICA TRADE BILL PASSES IN HOUSE
https://www.apparelandfootwear.org/pdf/cbi.pdf
http://en.wikipedia.org/wiki/Caribbean_Basin_Trade_Partnership_Act
http://www.apparelandfootwear.org/LegislativeTradeNews/CBTPA.asp
PUBLIC LAW 106–200—MAY 18, 2000:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=106_cong_public_laws&docid=f:publ200.106.pdf
THE TRADE AND DEVELOPMENT ACT OF 2000: STRENGTHENING OUR
ECONOMIC PARTNERSHIP WITH SUB-SAHARAN AFRICA AND THE CARIBBEAN BASIN
http://clinton4.nara.gov/WH/EOP/nec/html/AgoaCbiPressFinal.html
CBO pay as you go cost estimates of HR 434
http://www.cbo.gov/ftpdoc.cfm?index=2058&type=0&sequence=0
President Bush extends laws HR 434 until July 31, 2007
http://www.whitehouse.gov/news/releases/2007/02/20070215-5.html
African Trade and Investment: Proposals in the 106th Congress
http://www.ncseonline.org/NLE/CRSreports/Economics/econ-36.cfm?&CFID=15849868&CFTOKEN=18434010
Measuring the Costs of Trade-Related Job Loss
http://www.iie.com/publications/papers/paper.cfm?ResearchID=418
Imports, Exports, and American Jobs
Professor of Economics at the University of California, Santa Cruz.
by Lori Kletzer
http://people.ucsc.edu/~lkletzer/cnpjuly12003.pdf
BLS Statistics
http://www.bls.gov/news.release/pdf/empsit.pdf
Apparel Sales:
http://retailindustry.about.com/od/seg_apparel/l/aa010319a.htm
http://retailindustry.about.com/od/seg_apparel/l/aa022200a.htm
http://www.referenceforbusiness.com/industries/Apparel/Men-s-Boys-Clothing-Elsewhere.html
Revisiting NAFTA
http://www.epi.org/content.cfm/bp173
Trade Policy’s impact on jobs and wages in Ohio and nationally
http://www.epi.org/newsroom/releases/2008/02/nafta-rscott-20080229.pdf

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