Three years ago the United States opened its doors to duty-free imports of a vast variety of goods from Third-World countries, running the gamut from ale to zinc.
Now it appears that the helping hand extends to the maker of two multimillion-dollar oil drilling and production platforms that are under construction in Malaysia.
And the struggling entrepreneur turns out to be Brown & Root Inc., a Houston-based giant of the American construction industry.
The result has been cries of protest from Congress, the domestic steel industry and lavor unions, along with an official petition for exclusion of the platforms from the list of 2,700 Third-World items eligible for duty-free treatment.
At a hearing on the petition last week before the U.S. Trade Policy Staff Committee, Brown & Root defended its use of a wholly-owned subsidiary in Malaysia to build the platforms for export -- presumably duty-free -- to the Santa Barbara Channel off California.
"In fact," said John Christian Archer, director of federal relations for Brown & Root, "the Malaysian fabrication yard is... precisely the kind of economic development Congress sought to encourage" in giving trade preferences to many commodities from underdeveloped countries.
Taking issue with Brown & Root's claim was Rep. George Miller (D-Calif.), who joined with 60 other members of Congress in urging exclusion of offshore oil platforms from the so-called Generalized System of Preferences (GSP) that exempts selected Third-World imports from duties.
"I strongly doubt that you would find many members of Congress who interpreted the Gsp/ as such an incentive for runaway U.S. corporations" that set up production facilities in selected countries "for the purpose of picking up not only the lower wage and foreign tax benefits, but the duty-free benefits as well," said Miller."But that is unfortunately the way it is being abused," he added.
The GSP was included in the 1974 Trade Act to assist the economic development of poor countries, and has grown into a list of about 2,700 trade items from 127 countries for which the United States will waive import duties. Collectively, this duty-free trade amounted to $4.2 billion for the first 10 months of 1978, more than $1 billion more than the total for 1977, according to government statistics.
The duty-free items include a virtual trade bazaar, ranging from shark oil, coconuts, Ping-Pong balls, clothespings and lack handkerchiefs to telebision sets, steam engines, railway cars -- and now offshore oil platforms.
Until the mid-1970s, oil platforms were not a trade issue because all that were purchased for use in U.S. waters were made domestically. But opposition emerged when foreign yards (one in Japan and the Brown & Root subsidiary in Malaysia) won bids for three of four platforms bought for use in the Santa Barbara Channel and U.S. Customs ruled that the Malaysian-made platforms would quality for a duty exemption if they met GSP requirements.
The duty, if paid, would be 9 1/2 percent -- meaning a savings of that amount for Brown & Root if it qualified for the exemption.
The Ironworkers International Union, which initiated the petition to require that duties be paid on all platforms, stumbled almost accidentially across Brown & Root's involvement in the Malaysian project.
At first the union assumed it was a Japanese emdeavor and was prepared to fight it on those grounds, according to William Lawbaugh, trade specialist for the union. Only later, Lawbaugh said, did he read a trade journal article identifying the company as a Brown & Root subsidiary.
But the union still contends that the steel is largely fabricated in Japan and run through the Malaysian plant largely to quality for the duty exemption -- a charge that Brown & Root's Archer denied.
Archer told the government's trade panel that the steel arrived as "raw material" and was processed by a work force that consisted of 10 Americans, three Britons, an Australian and 621 Malaysians. "There is no economic incentive to serve merely as an assembly yard for prefabricated steel production," he said.
Archer also noted that the company, one of the world's largest producers of oil platforms, has plans well under way for fabrication plants on both coasts of the United States, saying they will provide "thousands of American jobs."
Miller contended that, unless domestic facilities are protected from duty-free competition from abroad, the West Coast alone stands to lose "in excess of one-third of a billion dollars" in wages anticipated over the next five years.
Unions and other groups have lodged numerous complaints about duty-free foreign competition that threatens American jobs, but this is believed to be one of the first involving high-technology production abroad by a major U.S. based corporation.