The Games China Plays to Avoid Trade Tariffs

It has been over twenty years since we first noticed how China slips it goods into the United States void of any tariff or duty. They aren’t that clever and some of the games they play are downright blatant. We first started noticing this during a trip to Kenya. Our chapter there was quite proud of a new Free Trade Zone 9 (note that free trades zones are ripe for corruption). They took us on a tour. Part of it was a textile mill that had contracts with Target, Walmart and JC Penney’s.

The place was pristine – no sweat shop here by a long shot. The temperature did not exceed 75 degrees which was a lot cooler than the outdoors. The machinery was high tech and noticeably quite clean which was not a usual sight in industrial Africa. It was running at full capacity and during questioning we learned that the place was being run by entrepreneurs from Malaysia. The workers who seemed to be quite happy were being paid the Kenyan minimum wage which equated to $30 a month – not a day or a week but a month! Selling to some of the most profitable department stores on earth meant that their profit was quite serious.

I remembered a few days before; we were confronted in the lobby of our hotel by a group known as the Kenyan Cotton Farmers Association. They voiced a complaint about their own nation not supporting their harvested cotton and would prefer to import it from abroad. I asked if we could walk through the supply warehouse. There it was: Bales of cotton stacked to the ceiling and wall to wall. It must have taken three ship loads to bring all of it into the nation. Brought into the nation? Yes, this is what the association was complaining about. The bails were all marked “Product of China”.

So, here we are Chinese cotton brought into Kenya to make children’s clothing to be sold in Target, J.C. Penney’s and Walmart stores throughout the good old USA. And it is duty free through the trade agreement known as the Africa Growth and Opportunity Act – AGOA. I would later tell our Kenyan chapter to refer to the trade agreement as the Asian Growth and Opportunity Act. They applauded and agreed. We have American consumers buying children’s clothing from traditional department stores and it is labeled Product of Kenya and they must get a good feeling about it. If they only knew.

I quipped to some of the plant managers “Who really owns this building – Kabaki? (Kenyan President at the time) They replied, “No, it is in his sister’s name.” I then brought it up to the Minister of Trade about our findings. He stated that the local cotton farmers were just sore losers and just need to work harder. He also said, “I don’t believe China grows cotton”. It was the same old story: Corruption staring us right in our face without shame.

We first saw this in Kenya but would later see the same modus of operandi (M.O.) in Botswana, Ghana, South Africa, Equatorial Guinea and probably throughout all of Africa. China is making a fraud out of our trade agreements and our people in high places are letting them get away with it. How many palms get greased?

We don’t really have to go over to Africa to see it happening. Why not look at what is happening in Haiti? Wherever there is a “Free Trade Zone” you will find this kind of corruption. Haiti is one of the most poverty stricken nations on earth. So, it is quite easy for it to obtain Free Zone status for products made there and shipped into the United States.

It was not known to us at the time that what we saw in Kenya was rather “minor league” compared to what was happening closer to us in the Caribbean. China was running a textile facility on the island. It was large enough to make men suits by the hundreds daily. That one plant was supplying chain stores in the United States like Joseph Banks. Things were going undetected and fine until the earthquake hit the island. The plant was destroyed for a few days. We say a few days as an engineering miracle was about to take place.

The owners of the plant (in China) responded in quick military action. They put Boeing 747’s in the air filled with replacement machinery, engineers, workers, cotton, etc. Within three days that destroyed plant was back into full operation and shipping to the United States once again like nothing happened. The revenue generated from this place selling Chinese cotton products to the United States by the tons on a nonstop basis must be mind boggling.

Television reporters marveled at what was happening but not one person brought up the fact that this facility was making Chinese fabric into fashion items to be sold in United States stores and duty free. Where was the outrage?

These two examples are just a few of the outrages we see in export/import abuse to the detriment of U.S. taxpayers. We shall continue.

Mr. Alford is the Co-Founder, President/CEO of the National Black Chamber of Commerce®.

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