Falling Sales Bolster Caterpillar's Free Trade Lobbying
May 21 2009 - 6:33PM
Dow Jones News
Caterpillar Inc.'s (CAT) plunging sales and its shrinking
workforce are strengthening the construction equipment maker's case
for approval of a U.S. free trade agreement with Panama, observers
said Thursday.
Caterpillar has been lobbying for Congressional ratification of
the Panama agreement for over two years as it eyes a potentially
rich source of equipment sales in the widening of the Panama Canal.
Chairman and Chief Executive James Owens on Thursday called the
$5.25 billion canal expansion one of the world's largest public
works projects in recent years.
More than 60% of the Peoria, Ill.-based company's $51.3 billion
in sales last year came from overseas customers. Owens said
Caterpillar's export business last year supported "tens of
thousands of jobs in the U.S. for Caterpillar and its
suppliers."
Industry observers say Caterpillar's arguments for expanding
free trade are likely to get more traction in Congress now than in
previous years when the company's sales were booming and its U.S.
factories were running at capacity. Because of the downturn in the
global economy, the company expects 2009 sales to fall by 30% from
last year. It's laid off about 25,000 workers since last year.
"You could see the Panama Canal expansion as one of the biggest
economic stimulus projects in the world and this trade agreement
would ensure U.S. companies would get a share of the work," said
Daniel Griswold, director of trade policy studies at the Cato
Institute, a conservative think tank in Washington D.C.
The Panama agreement and free trade deals with Columbia and
South Korea were signed during the Bush Administration, but have
yet to be voted on by Congress.
Without approval of the Panama deal, Caterpillar maintains it
will have difficulty supplying earth-moving equipment for the canal
because the company would be subject to Panamanian tariffs that
effectively raise the prices of Caterpillar machinery imported into
the Central American country by 3% to 10%.
Caterpillar said the tariffs put it at a disadvantage to foreign
competitors that already have duty-free access to Panama.
A top official for the U.S. Trade Representative's Office told
the Senate Finance Committee Thursday that the Panama agreement
would create employment and business investment opportunities for
U.S. citizens.
"This agreement will give American workers, farmers, ranchers
and businesses the same access to Panama's growing market that
Panama has to our market," Everett Eissenstat, assistant U.S. trade
representative, said in prepared remarks.
Eissenstat said 90% of Panamanian good sold in the U.S. enter
the country duty-free already. But U.S. exports to Panama are
subject to tariffs as high as 20% on some consumer and industrial
goods and a 15% average on U.S. farm products.
Labor unions, a key Democratic constituency, have denounced the
free trade deals as giving U.S. companies incentives to abandon
domestic operations and relocate to foreign countries with lower
labor costs.
As a result, the Administration and Democrats in Congress are
moving cautiously and a votes on the pending trade agreements have
not been scheduled.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com