Dawn Gilbertson and Jonathan J. Higuera
The Arizona Republic
Jun. 18, 2003 12:00 AM
Veteran Tucson machinist Jerry Miller loves his job, but he's trading his trusted
toolbox for a start-up business in real estate. The 49-year-old has seen too
many jobs evaporate around him as manufacturing work moves to Mexico and other
low-wage countries.
"I did not want to change professions," the married father of two
said. "But it's not safe to stay."
From textile ghost towns in North Carolina to job training centers in El Paso,
manufacturing workers such as Miller are still adjusting to free-trade fallout
as the 10th anniversary of the North American Free Trade Agreement approaches.
But for every worker displaced by NAFTA, and there are at least a half-million
in the United States, there's a tale of gains from the pact.
Take PING, the Phoenix-based golf giant. It says savings from a move to Guaymas,
Mexico, saved its golf-bag business, and a push into Canada sent sales soaring.
The reality of NAFTA at 10 is this: a still-developing story of winners and
losers, split largely by where you work and what you make. 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, NAFTA didn't create the giant
sucking sound of jobs heading south, as presidential candidate Ross Perot famously
predicted.
"Ten years on, we've got a better sense that the folks who sold NAFTA kind
of oversold the benefits and the folks who were very fearful of it were a little
overly pessimistic," said Patrick Cronin, assistant professor of international
studies at Thunderbird, the American Graduate School of International Management,
in Glendale.
Some pivotal trade topics, such as agriculture and trucking, remain on the NAFTA
to-do list. Tariffs on the most sensitive agricultural products, such as corn
and sugar, for example, don't disappear until 2008.
And 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 over 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.
"It locked Mexico into committing to being an open country," said
Pia Orrenius, a senior economist with the Federal Reserve Bank of Dallas.
Economists consider the increased foreign investment more important than trade
gains because tariffs on the U.S. side already were relatively low.
Overall, Mexico's fortunes are now more closely tied to a stable United States
rather than its more volatile Latin American neighbors. More than 80 percent
of the country's exports are bound for the United States.
The U.S. economy gained less, as expected, given its size. "We have such
a huge economy that NAFTA didn't make as much of a difference," Orrenius
said.• Large American manufacturers: They slashed production costs and
boosted profits by opening factories in Mexico, where workers are paid about
$2 an hour. Automakers, clothing manufacturers and computer and electronics
companies, in particular, have used Mexico as a platform for fast, cheap and
flexible production facilities.• U.S.-Mexican 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," Cronin
said.Free-trade casualties
The losers have been well-chronicled. In the United States, labor unions and
other longtime NAFTA critics have decried the loss of well-paying manufacturing
jobs.
Former Motorola manufacturing specialist Janice Martin, 51, who planned to retire
from the electronics giant, watched her job on a Mesa production line go north,
outsourced to a company in Canada. She is 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.
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).
Arizona, whose economy is heavier in services than manufacturing, has had 5,000
such workers.
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.
A calculation of gains also must take into account the job losses from imports,
EPI says. "It's like balancing your checkbook by only calculating the effects
of withdrawals," said Robert Scott, an economist with EPI.
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 . . . 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."
U.S. Rep. Jim Kolbe, R-Ariz., a staunch supporter and promoter of NAFTA, said
the job losses were inevitable. "It's not a downside of NAFTA," he
said. "People have to be prepared to make the change. After all, we had
lots of people making buggies in 1900, but we don't have that anymore."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.
"They would have happened anyway," the Federal Reserve's Orrenius
said of lower-skill manufacturing job losses. "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.
Machinist Miller knows the shift is inevitable. That's why he bought, with a
partner, a franchise that buys beat-up homes and resells them.
"If we're buying things for half and one-third the price that we could
have produced it, I don't know how we can complain about the fact that it's
being produced there."
His boss at Competitive Engineering, Don Martin, also is blunt about the realities
in the aerospace industry.
"We're in a global economy. . . . You can kick and scream, but it's going
to happen," he said. "If we're smart, we better get on the bandwagon.
We better embrace NAFTA and things like it."
Gannett news correspondent Sergio Bustos contributed to this article.
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