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Jim Sinclair: Yen rally will be short because it''s political death for Bush

Section: Daily Dispatches

By Elizabeth Becker
The New York Times
Saturday, February 21, 2004

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SEATTLE -- Huge container ships steam into this port
every day loaded with clothes and shoes, furniture and
video games, electronics and aircraft parts made in

On their return trip, those same ships often cross the
Pacific half empty, bearing chemicals, meat, grain,
and engines and routinely stuffed with hay or scrap

quot;This is what the nation's trade imbalance really
looks like,quot; said Mark Knudsen, the deputy director
of the Port of Seattle. quot;We've got so much empty
cargo space, it pays to ship over hay for Chinese
animals, or scrap paper to be recycled into
packaging for Barbie dolls.quot;

Perhaps more than anyplace else in the country,
this port city lives or dies by trade. The Seattle area
and Washington State earn more per capita from
trade than any other area of the country -- $5,875
in 2002. One out of three jobs in the state is tied
to trade. And with its deep historical ties to northern
Asia, Seattle sees China more as a customer than
a competitor.

With last week's news that the annual trade deficit
had reached $489.4 billion in 2003, a rise of about
$70 billion, Seattle is once again caught up in the
national debate over trade imbalances and the flight
of jobs overseas. Even though most economists
say many other factors have contributed to job
losses, trade is becoming the focus -- or scapegoat
-- here and in the national political debate as
Americans try to adjust to the quickening pace of
globalization. Two-way trade in the region declined
by $11 billion from 2000 to 2002, a symptom,
officials said, of the problems caused by the
country's trade deficit. The state's unemployment
rate has climbed to 6.8 percent, one of the highest
in the country, giving the phrase quot;offshoringquot; a
palpable meaning in this Pacific Rim city.

Industry leaders like Boeing and Microsoft are
openly shifting some jobs overseas, and a high
level of education has failed to protect software
engineers with master's degrees from losing their

Marcus Courtney, a union representative for
information and technology workers, said that quot;if
outsourcing is a threat here, where 44 percent of
Seattleites have a college education,quot; then
high-technology workers in the rest of the country
should be worried.

U.S. Rep. Jennifer Dunn, a Republican from Bellevue,
blames the decrease in exports for her region's
unemployment rate and dismisses the focus on
outsourcing as quot;a problem we are going to have to
live with from now on.quot;

quot;To my mind, trade is the one way we're going to
create new jobs, so what we need are more trade
agreements opening up more markets,quot; she said.
quot;No one can stop the global economy. We have
to take part and work on our strengths.quot;

That is the conundrum. Nearly everyone supports
trade here: Democrats and Republicans, elected
officials, trade unions, and industry giants like
Boeing, Microsoft, and Weyerhauser. But they
disagree over whether the benefits are shared
equitably, whether financing the soaring trade
deficit will undermine the economy, and whether
the jobs lost through outsourcing will be replaced
with equally good jobs.

Microsoft, one of Seattle's signature companies,
sells 60 percent of its products overseas, $18
billion worth last year, and is routinely praised and
attacked for its global presence. Slowly but
steadily, the company is outsourcing work to
India and other countries while keeping most of
its jobs in the Seattle area.

Maggie Wilderotter, a senior vice president at
Microsoft, said her company invested $6 billion
in the region every year and that half of its new
employees this year would be hired in the Seattle

quot;I don't look at jobs as outsourcing or insourcing,quot;
she said. quot;We do business in 78 different countries,
and it's important that we have employees that are
part of that culture. The United States is our top
talent pool.quot;

The city's image is still recovering from the battle
here five years ago when Seattle became famous
as the site where protesters shut down global trade
talks with demonstrations.

quot;Some of the chic liberals around here enjoy making
skeptical remarks about trade while they make money
off of it,quot; said David Brewster, executive director of
Town Hall, a nonprofit civic association. quot;The problem
is we're the first to suffer when the world market
suffers, and that is what is happening.quot;

David K.Y. Tang, a trade lawyer at Preston Gates
amp; Ellis, said that he was optimistic about
globalization and its long-term ability to spread benefits
here and abroad. In disputes about trade and jobs, he
said, people forget that by competing in a global
market, Seattle and its industries reap global profits
even if that means quot;we will suffer some of the pain in
job losses.quot;

quot;The customers overseas want a piece of the pie too,
and we have to invest some of our profits back into
the markets of our customers,quot; Tang said.

Today other voices are questioning the trade deficit.
The billionaire investor Warren E. Buffett warned last
November that allowing it to grow amounted to
transferring America's net worth abroad quot;at an
alarming rate.quot;

But economists and trade experts disagree over the
link between trade and unemployment.

quot;There isn't a correlation between high unemployment
and our big trade deficit,quot; said Robert D. Hormats, vice
chairman of Goldman Sachs in New York. quot;But it's the
combination of the two that has made trade such a hot
political issue -- the hottest in my memory.quot;

Much of the job loss during the Bush administration,
economists say, was a result of increased productivity,
new technology, and the weak economy as well as
global competition. But as the recession fades and the
economy improves, there have been few new jobs to
replace those that were lost, in part because global
competition and the demand for greater productivity
are as fierce as ever.

The effect of the trade deficit is further complicated by
the weakening of the dollar against the euro, which is
raising hopes that the United States can significantly
increase exports to Europe. The United States has a
$94.3 billion deficit with the European Union, a
$12.1 billion increase from 2002 but smaller than the
record $124 billion deficit with China.

Indeed, the United States is the only major industrial
power with a deficit with its major trading partners.

The fear in the white-collar workplace here is so strong
that U.S. Rep. Adam Smith, a Democrat from the
southern end of Puget Sound, has asked the Government
Accounting Office for a national study on the number of
jobs that have moved overseas and which ones are at risk.

quot;We've got to figure out how to compete in the new
economy without destroying our own livelihoods,quot; Smith
said. quot;This study could help make sense out of a big
public policy issue and steer us toward a tax policy that
makes sense and where we need to put money into
education and training.quot;

Even the city's port is not safe from the debate over trade.

Gregory J. Nickels, the mayor of Seattle, is battling the
Port of Seattle and the longshoreman's union to close
one of the city's three port terminals in a few years,
saying it makes more sense to use the spectacular
mountain-framed waterfront property for condominiums
than cargo ships going back to Asia without full loads.
He argues that even the $700 million of recent
renovations on the port will not increase cargo traffic.

quot;The land values are such that when the port is creating
only 13 jobs per acre, there may be a better way to
create jobs,quot; Nickels said.

Rudolph Eric Finne, president of local chapter 19 of the
International Longshore and Warehouse Union and a
firm believer in trade, disagrees and says the proposal
epitomizes the confusion over trade.

quot;The mayor's position is shortsighted,quot; Finne said. quot;Our
share of maritime trade is bound to rise now that we've
improved the port.quot;

Even though Boeing recently lifted the nation's exports
with sales of aircraft to China, here in Seattle the
company has laid off 26,200 people in the last three
years, in part because the Sept. 11 attacks brought a
big drop in sales, according to Todd Blecher, a Boeing
spokesman. To avoid more layoffs, the state gave
Boeing more than $3 billion in tax breaks and
subsidies to persuade the company to assemble its
newest aircraft at an existing plant in the Puget Sound

Seattle business and community leaders see an
obvious answer to some of the trade problems just a
hundred miles or so to the north, in Canada, where
trade losses are less immediately catastrophic
because of stronger national health and pension
programs that protect workers while they search for
new jobs.

quot;We don't have the social safety net we need to soften
economic dislocation engendered by trade and changes
in technology,quot; said Bill Center, president of the
Washington Council on International Trade, a nonprofit
association. 'We have to drive fear out of the workplace
with necessary benefits -- portable pensions, health
care, and money for retraining and education.quot;

That, he said, could help people accept Seattle's
place in the global economy and to understand that
quot;if the global economy doesn't grow, then America's
economy can't grow.quot;


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