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Nafta winners and losers { June 22 2003 } Original Source Link: (May no longer be active)
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Borderland Sunday, June 22, 2003
A decade of NAFTA left losers, winners
Diana Washington Valdez
El Paso Times
By Dawn Gilbertson and Jonathan J. Higuera
Arizona Republic
Conchita Hernandez was among the first casualties of free trade.
She was laid off in 1994 after 20 years in the garment industry when her plant moved from El Paso to Monterrey, Mexico.
After her benefits were used up, she struggled to find work because of her limited English.
"Even temporary job agencies wanted only people with GEDs (high-school equivalent diplomas) who knew English and who had worked up to six months before the job application," Hernandez said.
Seven years later, in North Carolina, Bill Sellers, 61, also learned a hard lesson from the trade pact with Mexico. The former textile factory supervisor lost his job in 2001, a victim of cheaper socks entering the United States via Mexico, and he hasn't found a new one.
"I can't even find a part-time job," he lamented.
Listen to the Mexican workers gathered along South Oregon Street and you'll hear of similar struggles to stay employed. Jesus Macias, 58, was waiting with other workers Wednesday morning hoping to find day labor.
"Many people in Mexico are hurting," he said. "At least I can find a job here."
On the eve of the 10th anniversary of the North American Free Trade Agreement among the United States, Mexico and Canada, free-trade fallout continues. The reality of NAFTA at 10 is a still-developing story of winners and losers.
But for every worker displaced by NAFTA -- and there are at least a half-million in the United States alone -- there's a tale of gains from the pact: large U.S. companies with a new stronghold in Mexico, U.S. farmers expanding their reach, a thriving auto parts industry in Canada, a pair of jeans with the same price tag as 10 years ago. Trade among the countries has ballooned.
"Some people want to focus on the negative aspects of free trade, but there are some good things that happened as well," said Hector Lopez, the city of El Paso's industrial development adviser.
During the latter 1990s, some traditional border businesses fell off, including foreign-made electronics purchased in El Paso for resale in Mexico, and the "por libra" stores that sold used clothing by the pound to mostly low-income families from Mexico. While some blamed NAFTA for the demise of these businesses, others said the trade shifts created by the less-publicized 1995 General Agreement on Tariffs and Trade also had an impact -- thus creating a double blow to the region.
Lopez said, "It is ... important to note that not everything that happened to El Paso's economy was the result of NAFTA."
"Most people had the feeling that NAFTA would kill the American businessman because of a flood of cheaper imports, but I found it to be the other way around," said Bob Meyer, a Nogales, Ariz., tomato distributor. "Once we got into Mexico, we killed a lot of the smaller farmers who couldn't compete with American quality and costs."
Free trade created some new investment opportunities that did not exist before NAFTA, and more choices for consumers who shop in El Paso and Juárez stores.
"There are dozens of goods made in Mexico being sold in El Paso convenience stores, and hundreds in the larger grocery stores," said economist Tom Fullerton who teaches at UTEP. "The same is true of stores in Juárez, where consumers can now buy U.S.- and Canadian-made products without having to drive across the border."
What it isn't is the all-or-nothing world painted by critics and supporters during supercharged debates in the early 1990s.
NAFTA didn't stem illegal immigration to the United States from Mexico; in fact, there's evidence it contributed to a surge in migration as millions of rural Mexican citizens, their crops virtually worthless, left their homeland in search of opportunity.
And although manufacturing jobs clearly were lost, particularly in El Paso, NAFTA didn't create the giant sucking sound of jobs heading south, as presidential candidate and Texan Ross Perot famously predicted. Still, the trade pact does not address the movement of people within the NAFTA region, only good and services.
"The hyping of gains and losses were clearly just that -- hype," said Raul Hinojosa, a UCLA professor and NAFTA expert. "That's not to say there were not winners and losers."
Some pivotal trade topics, such as agriculture and trucking, remain on the NAFTA to-do list. For example, tariffs on the most sensitive agricultural products, such as corn and sugar, don't disappear until 2008.
And important issues not on the NAFTA table, such as immigration, loom large for the United States and Mexico. Environmental problems caused by industries south of the border linger.
Mexico needs to shore up its educational, legal and economic foundation to move beyond its concentration on border factories, which are losing ground to offshore destinations.
"We kind of did the easy stuff. Now it's the hard stuff," said Mary Jo Waits, associate director of the Morrison Institute for Public Policy at Arizona State University.
Coming out on top
Tying any economic development during the past 10 years solely to NAFTA is shortsighted. Other factors, such as increasing globalization, the devaluation of the Mexican peso, and the stock market boom and bust in the United States, helped shape the countries' economies and lifestyles.
Among the biggest NAFTA beneficiaries:
The Mexican economy: Foreign investment soared until the recent recession, as U.S. companies in particular felt more comfortable doing business there.
Large U.S. manufacturers: They slashed production costs and boosted profits by opening factories in Mexico, where workers are paid about $4 to $5 a day. Automakers, clothing manufacturers and computer and electronics companies, in particular, have used Mexico as a platform for fast, cheap and flexible production facilities. Levi Strauss & Co., once a big player in El Paso's dominant textile industry, has moved most production overseas.
U.S.-Mexico relations: Many economists and other observers list this as NAFTA's crowning achievement.
"It's finally given those two countries something positive to talk about. It's always been us yelling at Mexico and Mexico feeling unhappy," said Patrick Cronin, assistant professor of international studies at the American Graduate School of International Management in Glendale, Ariz.
Free-trade casualties
In the United States, labor unions and other longtime NAFTA critics have decried the loss of well-paying manufacturing jobs.
Fullerton, the UTEP economist, said the losers in El Paso's border region "are the former business owners and employees whose companies closed or went bankrupt as a result of competition from Mexico or Canada."
Former Motorola manufacturing specialist Janice Martin, 51, who planned to retire from the electronics giant, watched her job go north. The duties of the Arizona production line she worked on were outsourced to a company in Canada. She is now training to be a blackjack dealer at an Indian casino.
"It's a crying shame that an American worker cannot go to work for a company and plan on retiring (there)," Martin said.
Nationally, more than 500,000 workers have been certified by the government as having lost their jobs because their employer shifted production to Mexico or Canada or the business was hurt by imports from those countries.
The numbers are tracked by the U.S. Department of Labor, which administered a grant program for such workers.
The hardest-hit areas, based on the number of certified NAFTA casualties, have been North Carolina (48,152 workers), Texas (47,657) and Pennsylvania (36,855).
As a city, El Paso took the biggest hit with 19,400 NAFTA-displaced workers. Its job losses occurred in manufacturing, particularly the apparel industry, which plummeted to a low of 17,007 jobs in December 2002 from a high of 30,800 in December 1992. El Paso's unemployment rate was 11.7 percent in 1992, having hovered in double digits during the 1980s.
Major NAFTA critics, such as the Economic Policy Institute in Washington, D.C., contend that the actual U.S. job damage attributable to NAFTA is close to 800,000.
The institute takes issue with the government and other NAFTA proponents' focus on the jobs created by new exports -- 900,000, paying up to 18 percent higher than the average American wage, according to one 2001 estimate -- saying it's one-sided accounting. Any calculation of gains must also take into account the job losses from imports, the Economic Policy Institute says.
"It's like balancing your checkbook by only calculating the effects of withdrawals," said Robert Scott, an international economist with the institute.
He acknowledges that the number of U.S. jobs lost because of NAFTA is tiny compared with the 130 million jobs nationwide but says that the job losses are the tip of the iceberg.
"The greatest impact is not the lost jobs," he said. "It's in lost wages and bargaining power employees have had in negotiations. It's the so-called threat effects. For every plant that moves, three or four can threaten to move."
Globalization's role
Indeed, economists say the debate over NAFTA job losses has obscured a key point: Globalization is more to blame than a three-country free-trade pact. NAFTA simply accelerated an inevitable economic trend, they say.
Federal Reserve economist Pia Orrenius said of lower-skill manufacturing job losses: "To blame it on NAFTA might be an easy solution. The truth is, they're going to Mexico, and they're going to Panama, and they're going to China, and they're going to Vietnam."
A Deloitte & Touche study found that 61 percent of manufacturers have moved production to lower-cost countries.
Martha Tovar, president of Solunet, an information business in El Paso that serves the maquiladora sector, said she believes El Paso missed out on opportunities to benefit from NAFTA more directly. She said most of the El Paso border region's trade economy is still driven by the maquiladora industry. In contrast, other border communities had more trade-related growth than El Paso attributed to NAFTA.
"I'm still a proponent of free trade, and I think it has been good for the economy overall," Tovar said.
Diana Washington Valdez may be reached at dvaldez@elpasotimes.com; Times Washington correspondent Sergio Bustos contributed to this story.
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