Kernaghan is director of the National Labor Committee, an international workers' rights organization based in New York. More than 15 years of monitoring the labor practices of United States-subsidized factories in Latin America and Asia have taught him where the real power lies in U.S.-Chinese relations:

Not in any embassy or government office, but behind the dollar signs of trade.

Like many folks who pay attention to the underbelly of the global economy, Kernaghan couldn't help but marvel at the irony of a story that broke last week, just before China released the 24 Navy crew members. According to a vice president for Kmart, the spy plane incident had inspired a deluge of messages at the chain's Troy, Mich., headquarters from customers demanding that Kmart "quit doing business in China."

Said the exec, Dale Apley, in the New York Times: "(T)hey're not going to buy things made there anymore."

If regular customers of Kmart, Wal-Mart and other retail giants had an inkling of reality, they'd know that a boycott of China would fairly clear the shelves of their favorite stores.

Wal-Mart alone is the largest importer of Chinese-manufactured goods in the world; it contracts with thousands of factories there. For Kohl's Department Stores, Inc., a 338-store, Wisconsin-based chain, China is the main country of origin for goods.

"All the big U.S. companies are in there, feeding at the well of the Chinese workers' 20-cent-an-hour wages and total lack of rights," said Kernaghan. "That plane going down really gave the American people a wake-up call about how the Chinese government operates. For years, our multinational corporations have run cover for this vicious regime."

How much cover?

62 percent of all shoes and sneakers imported to the United States are made in China. So are 83 percent of all toys and sporting goods, 54 percent of all leather products, 76 percent of all umbrellas, 30 percent of all furniture, and one in four caps and hats.

"This is something no one is talking about around U.S.-China relations - the enormous trade deficit," said Kernaghan. "Last year, the United States exported $16.3 billion worth of goods to China, but we took in $100.1 billion from them. While Europe and Japan run trade surpluses with China, China accounts for almost one-quarter of our worldwide trade deficit."

In 1999, the United States took in 42 percent of all Chinese exports. And the imbalance is only growing. In January, the trade deficit between us and them ballooned 19.3 percent. "That's

$7.2 billion in a month!" said Kernaghan.

Meanwhile, our investment in China is increasing; in 2000, nearly half of all direct foreign investment in China - $40 billion - came from U.S. firms.

This past January alone, we sank $2.2 billion there. In other words, U.S. investment not only funds a repressive regime and sweatshop labor, it's helping to enlarge our trade deficit and increase the number of manufacturing jobs lost here - 271,000 in the first quarter of 2001.

The Bush administration can do all the tough talking it wants on China, said Kernaghan, but the truth is: "We don't want to threaten the trade relationship. Look at the message that was sent by the U.S. Army's black berets being made in China and Burma. You want another irony? The island where the plane went down? Hainan? A U.S. company, Loral, is building a radar system there - for the Chinese government."

©2001 San Francisco Chronicle

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