Committee on Ways and Means, Trade Subcommittee, 7-10-01, Statement for the Record

Channellock
Meadville, Pennsylvania 16335
July 10, 2001

Attention: Allison Giles
Chief of Staff
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington DC 20515

Gentlemen:

It has come to my attention that Congressman Crane is soliciting testimony from the private sector regarding the United States-China trade relations and the status of China’s negotiations to the World Trade Organization. Specifically, the hearings have to do with whether or not the United States will grant for another year to "non-market economy countries" such as mainland China and Taiwan, Normal Trade Relations (NTR) formerly known as Most-Favored-Nation (MFN) trade status.

We understand that Congressman Dana Rohrabacher (R-CA) on June 5, 2001 introduced a joint resolution disapproving the extension of the waiver authority contained in section 402(c) of the Trade Act of 1974 with respect to China. The purpose of this letter is to comment on that resolution.

By way of background, Channellock is a family-owned business established in 1886 in Meadville, Pennsylvania, USA. We are in the business of manufacturing mechanics hand tools, specifically pliers and screwdrivers under the trademark CHANNELLOCK?. We make a very high quality product that is well-know in global, hand tool marketplaces. We employ 570 people in Meadville, Pennsylvania, 461 of whom are members of the United Steelworkers of America Local 1917-03.

It is my belief that granting Normal Trade Relations or Most Favored Nation Status to mainland China and to a lesser degree Taiwan, is slowly killing the manufacturing base of the United States for two reasons:

1. In doing so, you give these nations who are purportedly "non-market economy countries", full access to the domestic markets of the United States of America. Conversely, in trying to sell our products in their markets, we find non-tariff barriers, trademark violations, and certainly great difficulty in collecting payments due from delinquent customers.

2. At the same time, you saddle American industry with massive regulation and onerous, confiscatory taxes to which Chinese manufacturers are not subject.

I am by nature a fair trade person and believe that trade benefits all countries of the world. But I believe that you need to understand the restrictions under which you expect us to trade/compete with these two countries achieving Normal Trade Relations.

As stated above, mainland China has no regard for intellectual property law. They continually abuse/copy, our trademarks and patent rights. And there is no rule of law in China to follow-up on any violations of our rights in the areas of intellectual property laws.

Regulation:

ERISA - Show me any Chinese pension plans and regulation of them. Show me their Pension Benefit Guarantee Corp. regulations which are in place in this country to protect pensioners in case an employer goes into default.
OSHA - Show me their Occupational Safety and Health Administration. Show me any Safety Committees. Show me the Chinese manufacturer’s Safety Committee Minutes. Show me their Lost Time Accident Reports. Show me their Machine Guarding Standards.
Environmental Protection Agency (EPA) - Show me their clean air standards. Show me their Hazardous Waste permits. Show me any permits and fees that they pay for all sorts of things such as ground water run-off and the right to burn trash in an incinerator. Show me their emission standards and their compliance documentation. Show me their Clean Air Standards Act.
Show me their Minimum Wage Law Legislation.
Show me their Family Medical Leave Act Legislation.
Show me their Patient’s Bill of Rights Legislation.
Show me their Trade Adjustment Assistance Act Legislation (when their local manufacturers lay off people because of foreign competition, the government provides training and education funds to retrain these laid off workers).
Show me their Unemployment Compensation Statutes and the taxes that are paid by Chinese manufacturers to support said statutes.
Show me their Social Security Program and the taxes that the Chinese manufacturers pay to support that program.
Show me their Medicare and Medicaid Legislation. (And, oh by the way, show me how they go about accrediting their hospital facilities such as we do in this country via the Joint Commission on Accreditation to assure consistent, high quality care.).
Show me how many Chinese manufacturers are ISO 9000 certified.
Show me their Labor and Industry Regulations assuring their factories are safe places to work.
Show me their Robinson Pattman legislation with regard to protection of consumers against Chinese predatory pricing practices.
Show me their "Right To Know" Regulations requiring Chinese manufacturers to properly label all chemicals/oils etc. workers contact in their daily jobs.

Taxation:

Show me their depreciation schedules and while you’re at it, show me their Generally Accepted Accounting Principals as stated in their form of a Journal of Accountancy - doesn’t exist.
Show me any estate taxes they pay.
Show me any capital gains taxes they pay.
Show me any income taxes that are paid to any city, county, state, and federal agencies.
Show me any sales taxes that are paid by Chinese manufacturers.
Show me any property taxes that are paid by Chinese manufacturers.
And certainly show me any Occupational Privilege Taxes that are paid by Chinese manufacturers.
Show me any Capital Stock Taxes paid by Chinese manufacturers.

Product Liability:

Show me how you can be compensated if you are hurt while using a Chinese product. Who do you sue? It certainly will not be the Chinese manufacturer.

The point of all of this is that offering Most Favored Nation/Normal Trade Relations Status to these kinds of countries does nothing but slowly kill the domestic manufacturing backbone of this country and you are using a two-edged sword to do it:

1. The one edge is giving them open access to our markets while we have limited access to their markets.

2. The second edge is that Chinese manufacturers are not subject to any of the above referenced regulations under which US domestic manufacturers must operate. This severely raises our costs and makes us un-competitive. The long-term affect is that it will put us out of business. If that is your goal, you are right on track.

Any red-blooded American citizen should be outraged. Declaring mainland China and Taiwan as a "non-market economies" is ludicrous. Just look at the billions of dollars of trade between China, Taiwan, and the United States - most of it from them, to us. Calling China and Taiwan "non-market economies" just makes no sense.

Further, offering them full and free access to our markets when our local industries cannot begin to compete with them due to the above referenced regulations and taxes.

The solution lies in having these countries recognize and implement social, safety, and environmental standards. The United States government needs to further rethink our systems of taxation to aggressively promote the creation of capital and to aggressively reward productivity instead of taxing it.

I submit this for your consideration with the hopes that some day somebody inside the beltway will WAKE UP!

Sincerely,

William S. DeArment
President & CEO

[The attachment is being retained in the Committee files.]