Most favored lobby: China gets what it wants the old-fashioned way.

DORAL COOPER AND RONALD HOLLEY are from different worlds. She lives in Washington, D.C., and is a former trade official in the Reagan administration who has used the experience gained in her government job to become a high-powered lobbyist. He lives in Batesville, Miss., a community of 6,400 in the northwest corner of the nation's poorest state, where he grew up, graduated from high school, and went to work cutting cloth for Fruit of the Loom, the area's largest employer. In 1994, the worlds of Cooper and Holley collided.

At the time, she represented an alliance of bigname retailers who wanted to block efforts by a few members of Congress seeking to limit certain kinds of cheap imports. He wasn't represented by anybody. Except Congress.

She won a little, lost a little. He lost everything.

When the dust settled on Capitol Hill, Congress did what Doral Cooper, her fellow lobbyists, and the big businesses they represented wanted--at least temporarily. It kept intact--for two more years--a tradelaw provision that allowed ever more imports of clothing from low-wage countries.

That was just enough time for Holley to lose his job, when Fruit of the Loom, his employer of 20 years, closed its Batesville plant, laid off all 850 workers, and moved production offshore. Until then, Holley had earned $10.25 an hour, a little more than $21,000 a year. The bottom end of middle-class America. On this point, Holley poses a question that's on the minds of many working Americans: "How can someone who makes $10.25 an hour compete with someone making 30 cents an hour? We can't live on that. How can you call that equal?"

How indeed? After corporate executives and Washington policymakers, no group has played so large a role in eliminating jobs in America as trade lobbyists. These are the people who help to shape the government's policies on international trade. They represent U.S. multinational corporations, foreign-owned companies, foreign governments, and other special interests.

Lobbying, to be sure, is hardly new to Washington. Attempts to influence American policy are as old as the republic. What is different today are the extent of those efforts, the huge increase in the number of lobbyists, and the impact they are having on American workers.

As the number of trade lobbyists has gone up, the U.S. trade deficit has ballooned and the economic well-being of middle-class America has gone down. Take the 10 biggest foreign exporters to the United States in 1995: Canada, China, France, Germany, Japan, Mexico, Singapore, South Korea, Taiwan, and the United Kingdom. In 1970, the United States had a trade surplus with five of them. There was no trade with China, the deficit with Taiwan was small ($22 million), and the only serious deficits were with Canada ($2 billion), Japan ($1.2 billion), and Germany ($386 million). That year, 157 foreign agents were registered to lobby the U.S. government on behalf of those 10 countries. By 1995, the number had jumped to 554--an increase of 253 percent. And the U.S. merchandise trade deficit with the 10 countries had shot from $2 billion in 1970 to $161 billion in 1995. Several million jobs were wiped out as imported products replaced American-made goods in the marketplace because of the trade deficit with just those 10 countries.

What has been bad for American workers has been very good for foreign producers and U.S. multinational companies, which have helped frame the government's free trade policies. They have profited handsomely by convincing Washington policymakers to trim or eliminate tariffs and ease or remove other trade barriers on imported goods. To gain access to the people who write the trade regulations, foreign interests buy the services of insiders who once did those jobs themselves: former government officials turned lobbyists.

The Japanese, of course, wrote the book on Washington lobbying a generation ago. When Japan began exporting to the United States in large quantities, Japanese corporations, trade associations, and government agencies retained powerful law firms and consultants to represent them before Congress and the regulatory agencies. In 1991, the most recent year for which figures are available, the Japanese spent $83.9 million in consulting, public relations and legal fees for lobbying and related activities, up 577 percent from 1980.

Today, what the Japanese perfected is being replicated by others, from the smallest country in Latin America (El Salvador) to the largest in Asia (China). Officially, the Department of Justice says a total of 1,111 foreign principals--foreign governments, corporations, trade associations, and others with foreign ties--have registered agents in the United States. More than 10,000 lobbyists are working in the nation's capital on behalf of foreign-owned corporations, foreign governments, and U.S. multinational corporations with a stake in foreign countries.

China Scales the Wall

To better understand the extent and consequences of the lobbying influence, consider the achievements of the newest player in town: the People's Republic of China. The Chinese may be having difficulty moving to a market economy, letting political prisoners out of jail, embracing Western-style ideas of democracy, and tolerating free expression. But in one important area, China has made the transition from the old Communist state to a sophisticated modern power in record time: influence peddling in Washington.

Look no further than China's handling of its most important bread-and-butter trade issue--preservation of its most favored nation status with the United States. Every year, China's trade status comes up for renewal, and every year the Chinese have been bad boys. They have locked up and tortured political opponents. They have sold the ingredients for making poison gas to Iran and missiles to Pakistan. They have used prison labor to manufacture goods sold in stores across this country.

The United States vows punitive action unless China cleans up its act. China stiffens and warns the United States about interfering in its internal affairs. When relations worsen, the United States says it will impose sanctions against China and releases a list of products on which high tariffs will be levied. Retailers and importers howl. The media churn out stories about how the high duties will jack up the prices of consumer goods, from toys to silk shirts. And then, when a rupture with China seems possible, its trading status is miraculously renewed.

The truth is, for all the sound and fury coming out of Washington every year, China's MFN status, which allows it to export its products to the United States at the lowest possible tariffs, has never been at risk. That's because China and a host of American multinational corporations with a stake in the matter have created a powerful lobby whose views on trade prevail year in and year out in Washington.

How did the Chinese achieve such a favorable trade position in so short a time? They began the same way the Japanese did--hiring lobbyists and channeling American decision making along lines beneficial to China. But there was one big difference: When the Japanese began exporting in volume, they had few allies here. The Chinese already have powerful corporate advocates in Washington.

General Motors and Ford, which fought Japanese imports of autos and auto parts for years, are among China's most ardent supporters. Like many American multinationals, they see China as both an expanding market for U.S. goods and a potential manufacturing site--one where U.S. labor costs could be replaced by low-cost Chinese labor. So it's in their interest that Chinese-made goods be allowed entry to the United States with low tariffs. Indeed, because of low duties, imports from China have soared in the last decade, rising from $3.8 billion in 1985 to $15.2 billion in 1990 to $45.5 billion in 1995.

Proponents of trade with China are fond of saying that China, with its 1.2 billion people, will need many goods as the nation develops--an expanding market for American companies. "China is becoming the largest market in the world for almost any product you can name: airplanes, construction equipment, consumer products, and virtually everything else that's produced and marketed," says AT&T Chairman Robert E. Allen.

So far, though, the U.S.-China trade has been decidedly one-sided. The Chinese are selling to us, but buying much less in return, with increasingly adverse consequences for Americans. Although cheaper Chinese-made products may give consumers a price break, the ongoing erosion of better paying manufacturing jobs, aggravated by imports, is having a ripple effect, driving down wages and the standard of living of middle-class Americans.

But what is economically unhealthy for the nation as a whole is very good for the multinationals. Unlike small and medium-sized companies that manufacture here, multinationals have operations around the world and export goods from those overseas facilities back to the United States--which is why, when China's favorable trade status is up for annual review, the Chinese can count on American multinationals to be their strongest supporters for low tariffs.

Although MFN comes up annually, to understand just how powerful the China lobby has become, let's go back to 1994 That year, by all accounts, China seemed destined to lose its favorable trading position.

When running for president in 1992, Bill Clinton criticized George Bush for extending MFN status for China, saying Bush had "coddled" the Chinese dictators. After he was elected, Clinton extended MFN in June 1993, but, he insisted, on one condition. Said Clinton: "I am signing an executive order ... [extending] most-favored-nation status for China for 12 months. Whether I extend MFN status next year, however, will depend upon whether China makes significant progress in improving its human-rights record....I intend to put the full weight of the executive behind this order."

Clinton said China would have to stop using prison labor in its factories, allow freedom of expression by religious minorities, and provide an accounting of political opponents imprisoned by the Communist regime. In the year that followed, China made little progress on these points. If Clinton were to follow the spirit of his directive, it seemed he would have little choice but to revoke MFN status.

That's when the China lobby swung into action. The coalition of Fortune 500 companies that teamed up with agents of the People's Republic of China was as influential a lobby as Washington ever sees. In addition to the efforts of individual multinationals--such as AT&T, General Electric, TRW, Chrysler, Kodak, and Boeing--powerful business consortiums raised large sums of money to underwrite the lobbying assault.

The lobbying blitz was described by one lawmaker, Rep. Frank Wolf (R-Va.), as bordering on a "feeding frenzy of lawyers" Beginning in the winter of 1994, lobbyists swarmed over Washington. They conducted briefing sessions at the capitol and brought corporate executives to Capitol Hill to personally lobby lawmakers. They mobilized letter-writing campaigns. And they distributed studies that purported to show the high cost to the American economy of revoking MFN status for China.

The type of pressure brought to bear was illustrated at a House Ways and Means subcommittee hearing in February 1994, when one corporate speaker after another warned of the "devastating consequences if MFN were revoked. Typical of the alarms sounded was one issued by Mattel Vice President Fermin Cuza: Higher import duties would have a "severe impact" on American importers, some of whom "would be quickly forced out of business." Higher tariffs, he added, would "raise retail prices by approximately 25 percent, at a minimum, [and] also put at risk many of the 32,000 U.S. jobs in the U.S. toy industry."

In addition to help from the U.S. multinationals, China fielded its own impressive team. The Washington office of Cleveland's Jones, Day, Reavis & Pogue, the nation's third-largest law firm, represented the Chinese embassy. The Washington office of Mudge Rose Guthrie Alexander & Ferdon, the New York law firm of former president Richard M. Nixon, represented the China National Import/Export Corporation. Rollins International, the consulting company of Edward Rollins, former aide to Ronald Reagan and GOP political consultant, was the registered foreign agent for the China Chamber of International Commerce and the municipality of Nanjing, China.

One set of numbers shows how far China has come in the lobbying game. In 1970, China did not have a single lobbyist in Washington. Today, no fewer than 19 law firms and consultants, many of them representing multiple Chinese clients, have registered as foreign agents for China. And that doesn't include the U.S. multinationals who can be called on when needed.

Confronted by this powerful lobby, Clinton backed away from his demand that China reform. Although China continued to jail political opponents, repress religious minorities, and use prison labor to make products for sale in the United States, on May 26,1994, the President announced the United States would renew China's MFN status.

Although acknowledging there were "continuing human rights abuses," the President said that continuing trade benefits represented the "best opportunity" both to solve the human rights questions and advance the United States' "other interests with China."

Beijing had not only triumphed; it had gotten more than it had bargained for. In extending MFN, Clinton said that in the future, renewing China's trade status would not be contingent on its progress on human rights. With that major stumbling block off the table, it has been renewed ever since.

Why does it matter that the China lobby won?

* Between 1986 and 1995, the U.S. trade deficit with China exploded from $1.6 billion to $33.9 billion--a 2,019 percent increase.

* The imports that caused those deficits eliminated an estimated 680,000 American jobs.

* Chinese shipments to the United States are not raw materials, but finished goods like radios, television sets, and shoes--products that used to be made in America by American workers.

* China exports an even greater volume of certain high-tech products to us than we sell to them. In 1995, $1 billion worth of computers were exported to the United States from China. U.S. companies exported a mere $267 million in computers to China--one fourth of what that country sold to us.

* While Washington talks about high-paying jobs created by high-tech goods, our exports to China resemble those of a Third World country. Of the top 20 products exported in 1995, ranked by their value, four were agricultural, accounting for a fifth of all exports to China. The only sizable export of a manufactured product: aircraft, worth $891 million.

* The United States exported only one commodity to China with a value exceeding $1 billion: phosphatic fertilizers. Among the few U.S. businesses benefiting from this trade is a Tampa, Fla.-based company called U.S. Chem Resources, a subsidiary of a global corporation called Sinochem International Petroleum Co. With annual sales of more than $122 billion, Sinochem is in the same league as Exxon.

And where is Sinochem headquartered? Beijing, China. In short, one of the largest US. exporters to China is a Chinese-owned company.

The Fruit of the Loom Amendment

Remember Ronald Holley and his coworkers, who lost their jobs when the Fruit of the Loom plant closed in 1995? The Batesville shutdown was part of a larger Fruit of the Loom cutback in domestic manufacturing, following a little-known battle fought on Capitol Hill in 1994 over an obscure trade provision.

For years, American retailers have imported apparel labeled "Made in Hong Kong" that actually is sewn in mainland China. The practice grew out of U.S. customs regulations that placed a cap on the volume of apparel that could be imported into the United States from any one nation. When mainland China reached the maximum, American importers and Hong Kong businessmen found a way to circumvent the limit: By having the fabric cut in Hong Kong, then shipped to mainland China for sewing and assembly--the bulk of the work--and sent back to Hong Kong for export to the United States, companies could give their garments Hong Kong labels and come in under Hong Kong's unused quotas even though the garments were largely made in China. It was all perfectly legal under U.S. customs regulations.

This worked fine for retailers such as The Gap, The Limited, J.C. Penney, and Wal-Mart, which were always pressuring suppliers for the lowest prices on apparel. But it wasn't good for domestic producers such as Fruit of the Loom, whose factories were primarily in the United States. The importation of more low-cost goods from China put yet more cost pressure on the company, where workers earning $7 to $10 an hour were competing with 30-cent-an-hour Chinese seamstresses.

In the summer of 1994, Fruit of the Loom and other U.S. producers asked Congress to close the loophole that allowed goods made in one country to come in under the quota limits of another. As Ronald Sorini, Fruit of the Loom's senior vice president, put it: "When China is doing 90 percent of the work, the label should read 'Made in China."'

What followed was a high-stakes battle on Capitol Hill that pitted retailers, importers, and foreign producers opposing the label change against Fruit of the Loom and other domestic producers who favored it. Described as "total war" by one of the combatants, the fight over the "Fruit of the Loom Amendment," as it became known, swirled around the Senate Finance Committee, which had to okay the provision before it could go to the full Senate for a vote.

Among those lobbying the committee that summer, Doral Cooper, a former official of the Office of the United States Trade Representative, was to play a pivotal role. An assistant trade representative for Asia, Africa, and the Pacific during President Reagan's first term, Cooper had left the office in 1985 to become a trade consultant. After working for Deaver & Associates, the well-connected consulting firm of Michael Deaver, Reagan's one-time deputy chief of staff, she joined C&M International and built up a successful trade practice. Her foreign clients included the Korea Foreign Trade Association, the Singapore Trade Development Board, the Board of Foreign Trade on Taiwan, and the Indonesian Ministry of Trade.

As a lobbyist for The Limited, a major importer of clothing under such brand names as Victoria's Secret and Structure, Cooper took part in the 1994 campaign to shoot down the Fruit of the Loom amendment. The strategy was simple: Swamp the Senate Finance Committee members with calls, letters, and personal visits from corporate leaders warning that clothing prices would shoot up, hurting American consumers and the retail industry, if they approved the amendment.

Corporate chiefs telephoned committee members, urging them to vote no. Letters flooded Senate offices. And Cooper, along with others, lobbied committee members, focusing in particular on then-Senator Bob Dole, who was seen as holding the deciding vote. Of the full-scale campaign, Cooper later told the Legal Times: "This was a must-win for us."

The upshot: On August 2,1994, the Finance Committee deadlocked, thus killing the Fruit of the Loom measure. Afterward, Fruit of the Loom officials went back to lawmakers; this time the company prevailed and late in 1994 secured language in trade law similar to what had been rejected earlier.

But once again lobbying by retailers and foreign interests succeeded in getting a provision into the new law that would cushion its impact. Rather than take effect on January 1, 1995, as the original Fruit of the Loom proposal had called for, the new provision would not take effect until 18 months later.

That was too late for Ronald Holley and his fellow employees. In May 1995, Chairman William Farley said the company was committed to a "gradual migration" of its sewing facilities to the Caribbean and Central America. The company was moving production offshore aggressively. From producing 30 million dozen garments offshore in 1995, the company said it would produce 50 million dozen in 1996, and 70 million dozen offshore by 1998.

Six months later, the company announced it was eliminating the jobs of 3,200 of its U.S. employees because of the "difficult retail environment for apparel and increasingly competitive nature of the business." Fruit of the Loom closed six U.S. plants and scaled back employment at two others, cutting back its domestic workforce by 12 percent.

In Batesville, Ronald Holley, who had cut cloth for men's briefs and undershirts, was out of a job for five weeks. He found work as a shipping clerk for a local furniture maker, at 30 percent less pay. Even so, he considered himself lucky. "Every time I go to the grocery store with my wife, I run into somebody I worked with for years," he said in the summer of 1996. "The ones I've been running into lately have not found work."

As it turned out, the impact of the Fruit of the Loom shutdown in Batesville went far beyond the 850 people who lost their jobs. Batesville learned what cities and towns all over America have been finding out: When a large employer, especially a manufacturing plant, closes, it has a ripple effect, spreading outward to those who supplied goods and services to the company and its employees. When the mill closed, a local vending company that furnished snacks, soft drinks, and sandwiches to the plant lost its largest account. The company had to lay off several long-time employees. One of them was Holley's wife, Vickie. She still has not found work.

Americans employed in manufacturing now represent 15.8 percent of all jobs. That's down 39 percent from 1960, when manufacturing jobs made up 26.1 percent of all jobs in the United States. None of the country's leading trading partners has experienced anything approaching this loss in manufacturing jobs. Indeed, some have actually increased the percentage of those jobs. Germany had 34.4 percent of its workforce employed in manufacturing in 1960; 33 years later, in 1993, the number had declined slightly, to 29.1 percent. In Italy, the percentage has remained virtually unchanged--24 percent in 1960 versus 23.2 percent in 1993. In Japan, the share of the workforce employed in manufacturing went up during the period that such jobs plummeted in the United States, growing from 21.7 percent in 1960 to 239 percent in 1993.

Like other people we interviewed, Ronald Holley remained puzzled about Washington and could not understand why policymakers, through free trade agreements, were willing to sacrifice the nation's manufacturing base. "What are the young people going to do? When I was 19 I got a job at this plant," he said. "Later on, I used to coach Little League baseball, and some of the kids I coached, well, they went on to get jobs there, too, and were working there when it closed.

"Where are the new jobs going to be? We can't all be lawyers or computer experts. And some choose not to go that way anyway. So what will people do? What it looks like to me is that our government or our Congress--whoever it is--is taking some of the jobs away that they seem to think are not important."