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Shipping Dispute


Is everybody in the White House there on family business? The President is — he’s itching to declare war on Saddam Hussein, the man who, as he put it recently, “tried to kill my daddy.”

But what about the Labor Secretary? When the administration declared its other war this summer — the war on the West Coast dockworkers’ union — was that too, a family affair?

The U.S. Secretary of Labor is Elaine Chao, a Taiwan-born former Heritage Foundation Asia Fellow who’s spent much of the last decade boosting U.S.-China trade. Chao, who served as deputy Maritime Commissioner in the Ronald Reagan Department of Transport, has been a persuasive force for so called “normalized” relations with China. Those are relations devoid of any quid pro quos having to do with human, environmental or labor rights.

Chao led a Heritage foundation delegation of major donors to the Hong Kong reunification ceremony in 1997, and by several accounts has done her bit to erode anti-China sentiment among an influential segment of the conservative right-wing. She and her husband, Senate foreign relations leader Mitch McConnell (R-KY) mustered Republican support for granting the People’s Republic of China permanent Most Favored Nation (MFN) status in 2000.

The couple has met in person with Chinese leader Jiang Zemin. Chao’s father James Chao and Zemin were schoolmates, they’ve met on several occasions, and Mr. Chao owns a shipping company that built ships in Shanghai’s state-owned shipyards, and does business with the Chinese government.

On Oct. 7, when the President chose to invoke the 1947 Taft-Hartley Act to force contract-less International Longshore Workers Union (ILWU) members back to work after a management lockout, Chao stated, “We have been patient. But now other workers, small business owners and farmers are being affected by this dispute.”

There’s reason to believe Chao’s worries were actually about powerful Chinese and U.S. players whose fates have for a long time been tightly tied to hers.

Union dockworkers have been working without a contract since July 1. The Pacific Maritime Association (PMA), which represents a consortium of shippers, locked workers out in September, accusing them of “slowing down” work — a charge the ILWU denies. There’s no denying, however, that once the gates were shut at Oakland, Seattle, Los Angeles and rest of the 29 ports ILWU/PMA contracts cover, cargo mounted up. Shippers and retailers began to panic about profit losses — and none worried more than those doing trade with China.

At some ports on the West Coast today, Chinese trade outflanks all others. According to Wall Street Journal statistics, the U.S. imports $46.29 billion worth of goods from China every year, and 90.8 percent of it goes through West Coast ports. U.S. exports to China stand at $5.95 billion, just behind exports to Japan and South Korea. “The government’s been colluding with management since at least June,” said ILWU communications director Steve Stallone. Indeed the Labor Department has been heavily involved — on one side. Department of Labor representatives met with officials from Commerce, Transportation and Homeland Security in a White House working group all summer. According to a Department source who spoke the press anonymously this August, the high level group discussed different ways to force union members back to work and even considered citing national security and using Navy personnel to unload ships. (“White House Considers Options to Block Port Strike,” AP 8/7/02.)

When the President took the historic step of invoking the Taft-Hartley Act (for the first time against not a strike, but a management lock-out), it was to “protect America’s economy and jobs,” the White House said. The first economy at stake, however, was that of Chinese traders, including long-time chums of Chao herself.

Chao’s father James (who failed to respond to reporter requests for an interview) owns Foremost Maritime Corporation. Formerly based in Hong Kong, now New York, Foremost ships goods to and from the United States and Asia. One of Foremost’s clients, China Ocean Shipping Company or COSCO, is a Chinese Government controlled company which belongs to the Pacific Maritime Association.

Not so large a business-owner, James Chao has given generously in the past to his son-in-law’s Kentucky election campaigns. In fact, for a senator in a land-locked state, McConnell receives a lot of shipping money: $31,150 in the 2002 race so far. Currently running for his fourth term, McConnell chairs an appropriations subcommittee that deals with foreign policy. He’s a Republican leader, not least on issues pertaining to trade, and for this and other reasons he’s received strong support from pro-China lobbyists.

One of the biggest is a former patron of his wife, Maurice “Hank” Greenberg. One of the Heritage Foundation’s largest donors, Greenberg is CEO of American International Group (AIG) an insurance company that does business with China. Greenberg’s donated thousands of dollars to Sen. McConnell’s campaigns in the past — especially in the pre-2000 years, when the Most Favored Nation votes were not yet in.

McConnell and Chao have been cagey when it comes to who funds their China-related activities. He raised $2.4 million to set up a think tank at the University of Louisville. It sponsors six-week, all-expenses paid trips for students to China. Is Greenberg a funder? Is the PRC itself?

McConnell’s refused to disclose the grant-givers and he called it “xenophobic” when the New Republic magazine and his local paper, the Louisville Courier Journal, raised questions about it last year. Chao failed to mention her service on the board of a telecommunications company with Chinese government ties when she took office as Labor Secretary. She says she forgot.

And the two appear to have ties to some of the very same China players who got Al Gore and the Democrats into so much trouble a few years back. According to the conservative WorldNetDaily, McConnell was one of only two Republicans to receive illegal contributions from Chinese campaign-finance felon, John Huang.

Years after the Democrats’ “Chinagate” there’s been no scandal, and until now not even any scrutiny of the possible involvement of the Chinese government or its allies in the Bush administration’s decision to force open the West Coast’s ports at the union-workers’ expense. But there’s no doubt that getting cargo moving was a concern for among others, Greenberg.

AIG is a major maritime insurer, the second largest in the United States in 2000. AIG no longer offers protection for cargo held up or delayed by labor disputes, but it does offer protection against damage or theft. When cargo’s delayed on shore, the risk of an “incident” skyrockets, said an AIG salesperson off the record this week.

Detour container-ships to Mexico or Panama for unloading, as some shippers were beginning to, during the recent lockdown, and you’re virtually guaranteeing a claim. “Mexico’s very high theft potential,” said the West Coast AIG salesman. Because insurers typically ensure cargo from warehouse to warehouse, AIG’s at risk as long as covered cargo is en route. “We like to see things moving,” said the AIG employee.

“Toys, clothes and electronics from China — that’s just about all we see on the docks,” says ILWU spokesperson Stallone. Since the passage of MFN, trade with China’s been booming. The nation’s first Chinese-American Governor, Gary Locke of Washington, is gearing up for a big shipping conference in Seattle/Tacoma to boost trade still further next year.

The competition for shipping business is on, with prime competitors, Singapore and Hong Kong, hoping U.S. labor costs will edge American dockyards out. Workers at Asia’s ports have none of the protections won by U.S. labor unions. In China, independent unions are banned altogether.

“In Hong Kong or Singapore, management has total control of the product. In a labor dispute, they just send in the troops,” says Jeff Engels of the ILWU in Seattle. “Total management control is what they want here too,” he says. For many years, what’s been good for Chinese traders has no doubt been good for Chao/McConnell. Could we be looking at another scandal of Chinese influence? If the party labels were reversed, right-wing media hacks would be howling. Until now, however, there’s not been a whisper. In Washington, questions about Chao and her connections remain strictly “all in the family.”

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