US labour leader warns of ‘inferior’ China trade deal

US labour leader warns of ‘inferior’ China trade deal

Richard Trumka, America’s top union leader, has warned Donald Trump that he risks striking an “inferior agreement” with China to end the trade war if he fails to rein in Beijing’s use of industrial subsidies, raising pressure on US negotiators in the final stretch of talks with Beijing.

The 69-year-old president of the AFL-CIO said the deal being hashed out between US and Chinese officials did not seem to contain anything “very earth shattering or very helpful” to rebalance the trade relationship between the two countries, he said in an interview with the Financial Times.

In particular, he urged Robert Lighthizer, the US trade representative, and Steven Mnuchin, the US Treasury secretary, to secure binding commitments from China to prevent currency manipulation and restrain the use of industrial subsidies. Some currency measures are expected to be included in the deal, but big curbs to subsidies are not thought to be part of the agreement, according to people familiar with the text.

“[The Chinese] circumvent comparative advantage by underwriting the cost of their uncompetitive industries or by targeting an industry and subsidising [it]. That has to come to a screeching halt,” said Mr Trumka. “If the agreement doesn’t do that, and gives us a way to enforce it, then it will be an inferior agreement. And it’ll be another opportunity, a great opportunity, missed.”

Mr Trumka’s reservations are significant because they highlight the risk of a political backlash against Mr Trump if he is seen as striking a weak deal.

While US labour unions generally favour Democrats, they have been sympathetic to the president’s protectionist stance on trade. A rejection of the China deal by Mr Trumka, who has led the AFL-CIO labour federation for a decade, would be a big blow to Mr Trump’s hopes of claiming that his deal will benefit rust belt voters who backed him in droves in the 2016 presidential election.

Speaking in a Washington office decorated with memorabilia celebrating past political and union campaigns as well as the Pittsburgh Steelers American football team, Mr Trumka said the president would be making a “colossal mistake” if he favoured Wall Street over US workers in the China deal.

“If they go [on] the side of Wall Street, a couple of billionaires will benefit from it and do just fine, but the rest of the American people won’t do that. It will continue to hurt our economy and our ability to be a world power, because we are losing that capacity,” Mr Trumka said.

He warned that the US president was already losing his hold on union members. “They are coming back across the bridge,” he said. “Unfortunately for [Mr Trump] the list of things he’s done to hurt [members] massively outweighs the number of things he’s done to help them.”

Mr Lighthizer and Mr Mnuchin were in China this week for talks that the White House labelled “productive”. Liu He, China’s vice-premier, will be in Washington next week for what could be the final round of negotiations before a signing summit between Mr Trump and Xi Jinping, the Chinese president.

“We’ll give the agreement a fair, honest, look, and if it’s a good agreement, then we’ll do what we can to support it. If it isn’t, we’ll say what we think is wrong,” Mr Trumka said of any potential deal.

Mr Trumka has also been critical of the USMCA, a trade deal to replace Nafta signed by Mr Trump last year with his counterparts from Canada and Mexico. The agreement is facing an uphill battle in the US Congress to secure ratification, partly because trade unions and Democrats have said it does not ensure enforceable labour standards in Mexico and offers excessively good terms on exclusive data protection for pharmaceutical companies.

Mick Mulvaney, the White House chief of staff, this week stepped up the pressure on Congress to approve the USMCA by saying the US was prepared to pull out of Nafta if lawmakers did not ratify the agreement. Mr Trumka rejected the threat and insisted that changes to the deal were essential.

“That’s not the way to get to yes. It was a take-it-or-leave-it attitude,” Mr Trumka said. “And quite frankly the American people deserve better than that. So I hope they will reconsider and actually work with us to get to yes, because this agreement right now is premature.”

While many lobbyists and aides on Capitol Hill believe it would be increasingly difficult to ratify USMCA as the 2020 presidential race approaches, Mr Trumka said this was no reason to rush it through. “No one should be slave to a clock,” he said. “If you get this right, all of us would support it.”

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