With NAFTA, Analysts See Winners, Losers

By JAMES GERSTENZANG

Nov. 14, 1993 12 AM PT

TIMES STAFF WRITER

WASHINGTON —

Jobs. For the proposed North American Free Trade Agreement, they are the bottom line. Americans everywhere are asking: If Congress approves the pact in 1993, will I have a job in 1994?

Advocates say NAFTA, which would eliminate tariffs on virtually all goods traded between the United States, Mexico and Canada, would create hundreds of thousands of jobs for Americans.

Wrong, say the opponents: NAFTA would cost hundreds of thousands of American jobs as manufacturers relocate plants south of the border, where cheap labor could make goods for duty-free export to the United States.

In the Alice-in-Wonderland landscape created by NAFTA, both sides are probably right. Congress, which is scheduled to vote on the agreement this week, is listening to the contrasting voices of Americans at work.

Here is one working American: Donald Grindle, a 13-year veteran in the Atlanta Saw Co.’s parts department. Grindle has high hopes that the trade deal, by eliminating the limits that Mexico now places on foreign-made saws, will be a boon for him and his fellow workers.

“We ship lots of stuff out of the U.S.,” he said. “About 75% of our saws are exported--to Russia, China and other places. We ship them finished products. I guess Mexico is about the only country where we can’t ship finished products. So I’m sure NAFTA will help in the long run.”

And here is another: Joe Wells III, executive vice president, general manager and self-described “chief cook and bottle-washer” of the Homer Laughlin Glass Co., which has been making clay-based products in and around Newell, W. Va., for 122 years.

It is a labor-intensive business; 60% of his costs pay the salaries of the workers who this year will turn out 144 million plates and bowls for homes, restaurants and medical clinics. Wells, the fourth generation of his family to run the company, would not pull up stakes easily.

“I’ve got an obligation to my community,” he said. “We’re fighting hard to create jobs in West Virginia. We’ve spent a lot of money to modernize. Our work force is trained. I believe in the American workers. They’re probably the most trained, talented work force in the world.”

Then along came NAFTA, which would wipe out the 35% duty that, Wells says, keeps his company competitive in the U.S. market with manufacturers from Europe and the Pacific Rim. Without that tariff, he fears, competitors would build plants in Mexico and ship their products duty-free into the United States.

“If that tariff is eliminated, the competition would just drive us out of business,” he said. “We’re very loyal to the area we live in. But the bottom line is this: If I have no choices left to me, am I going to go overseas? Am I going to go to Mexico? The answer is yes. We want the company to survive.”

Most analysts say they believe that there are more Atlanta Saw companies than there are Homer Laughlin Glass companies. On the whole, they say, NAFTA would create more American jobs than it would destroy.

But they would be different jobs.

Potential new workers for the Atlanta Saw Co. do not know who they are. And if Congress approves NAFTA, those who get jobs there probably won’t know even then that the trade agreement deserves the credit.

Workers at Homer Laughlin Glass, by contrast, already know that NAFTA will be responsible if the company flees to Mexico. For them, it will be little consolation that Atlanta Saw is taking on new employees hundreds of miles away.

And that is precisely why NAFTA is generating so much controversy. It helps explain why lawmakers like California’s two Democratic senators, Dianne Feinstein and Barbara Boxer, are dead set against NAFTA even though most studies show that California would enjoy a net gain in employment if the agreement is approved. It explains why most labor unions oppose NAFTA even though they might well enjoy an overall gain in membership.

By economic sector, the big winners would include manufacturers that rely on higher-skilled labor that is hard to match in Mexico. By bringing down tariffs on U.S.-made goods, NAFTA would open new markets for American high-tech manufacturers and exporters of consumer goods.

Also standing to gain are producers of other goods that, for whatever reason, Mexico can’t match. In this category are apple producers from Washington state; even with a 20% tariff, Washington’s apple exports to Mexico have leaped from 575,000 boxes to 6 million boxes in just three years.

“In smaller communities that’s a lot of jobs in orchards, in packing plants, in more truck drivers,” said Jim Thomas, a spokesman for the Washington Apple Commission.

The losers would be concentrated at the lower end of the skill spectrum, where jobs are already disappearing due to a combination of automation and cheap foreign labor. The Amalgamated Clothing and Textile Workers Union, for example, predicts that 500,000 U.S. jobs will disappear over the next five years if the trade pact is enacted.

But for companies that have already moved production facilities to take advantage of cheap Third World labor, NAFTA could actually mean more jobs for Americans.

Fermin Cuza, vice president of international trade and government affairs at the El Segundo, Calif., headquarters of Mattel Inc., puts his firm, a giant in the world of toys, in this category.

Mattel’s Hot Wheels cars and Barbie dolls scoot off assembly lines from Mexico to Malaysia, but its engineers, designers, marketing planners, accountants and transportation managers work in a 14-story office tower in the midst of what Cuza calls “the economically depressed Southern California market--2,000 U.S. jobs located right here in Los Angeles, where we’re having so many problems.”

NAFTA should mean more business for Mattel and more jobs for Los Angeles, Cuza says, because it would erase the 12% duty added to the price of toys manufactured in Mexico for sale north of the border.

“We see our company growing stronger under NAFTA because our costs of doing business will go down,” he said.

NAFTA’s winners and losers would vary by region as well as sector. California and other states along the U.S.-Mexican border are expected to profit handsomely because they are near the newly opening Mexican market. Losers would be concentrated in the smokestack industries of the Northeast and Midwest.

Marvin Wortell, chairman of Triton Industries, a family-owned metal-works company on the west side of Chicago, is already looking for a place to relocate on the U.S. side of the Mexican border. He supplies parts to Zenith and Motorola, among others, and his customers in Mexico want to do business with suppliers operating close by.

“It’ll be us or somebody else,” he said. He is not ready to entirely shut his doors on his 150 skilled employees, all of them non-union and many of them minorities. But with or without the trade agreement, he says, “the industrial North, the Rust Belt, is really going to shrink.”

Will winners outnumber losers? The Clinton Administration answers yes: The agreement would produce a net gain of 200,000 jobs. More than that, it says, 21 of 23 studies predict that the pact would create more jobs than it would cost.

Economists Timothy Koechlin of Skidmore College and Mehrene Larudee of the Center for Popular Economics in Amherst, Mass., say no: They predict a net loss of as many as 490,000 jobs if the agreement is implemented.

The truth, as usual, is probably somewhere in between. Nearly a dozen studies cited in a review by the Institute for International Economics in Washington forecast that the gains and losses would be about in balance.

Jeffrey Schott, a senior fellow at the institute, has little patience for Ross Perot’s dire prediction that the trade deal could send 5.9 million jobs fleeing southward. Likewise, he said he believes that the agreement would not generate spectacular job growth.

“The jobs issue has been exaggerated in terms of the immediate impact of a trade agreement on the economy,” said Schott, whose institute has predicted a two-year gain of approximately 171,000 jobs.

“Almost all of the studies show that where the job impact would be small, it would be positive,” Schott says. “It can contribute to some job recovery, but it won’t drive it.”

Likewise, he says, the number of jobs lost to NAFTA would be only a fraction of the 2 million or so that are disappearing anyway as U.S. industry slashes payroll in response to global competition. “Technological change is a much larger share,” he said.

L. Joseph Thomas, a professor of manufacturing at Cornell University’s management school, says the new jobs would be scattered throughout the nation at plants that make everything from computers to automobiles.

“The lost jobs are easier to predict: a continuation of the drain of manufacturing jobs, heavy manufacturing,” he said. “But a lot of those jobs have gone away already. There certainly will be some job loss, but this idea that after NAFTA there will be a huge rush of jobs just is not right.”

President Clinton, who is pumping hard for the trade agreement, is promising $90 million worth of new job-training programs for those who are thrown out of work by NAFTA. But, the critics ask, what good are new jobs in Atlanta for an unemployed textile worker in Massachusetts? What are the chances that a glassmaker in West Virginia can be retrained for a semiconductor plant in Sunnyvale?

Members of Congress have been frank in acknowledging that, regardless of any impact the pact would have on the nation as a whole, their bottom line is jobs in their district or state.

For months, Rep. Lewis F. Payne Jr. (D-Va.) worried about just that question. Before announcing at the end of October that he would vote for the agreement, he called each of the companies in his district to determine if any of them were likely to move to Mexico.

“What I found was--and this was interesting to me--that these companies didn’t intend to move jobs to Mexico, but they were working to try to see how they could move their products to Mexico and consequently how they could grow their businesses and keep jobs right in our district.”

More specifically, what Payne found was a company called American, which makes hotel furniture in the town of Martinsville, Va.

The largest potential new market for its beds, chairs, dressers and wardrobes, the company told him, was Mexico. But a tariff as high as 12%--which the trade agreement would phase out--has kept the company out of the competition.

“So they have two plans,” Payne said. “If NAFTA succeeds, they will continue to do business in Martinsville and ship their goods into Mexico, creating jobs in our district. If NAFTA fails, they intend to move production facilities into Mexico because that’s the only way they can be successful competing there.”

Still, there is a deep unease in the work force that the nation is at a turning point in its economic relations with its global partners, characterized by the potential dismantling of the steep tariffs and quotas that have marked its love-hate economic relationship with its closest neighbors.

So here is Patrick O’Toole, 44, in touch with the world via cellular telephone as he drives his pickup across the high desert valleys near Savery, Wyo., to check on his sheep.

The American Sheep Industry Assn. says it fears that the trade pact will allow big producers in Australia to set up processing operations in Mexico as a back-door entry into a suddenly unprotected U.S. market.

But O’Toole has his mind on an even wider and more frightening impact that would reach across the economic spectrum. He is wondering whether the long-term impact of free trade with Mexico will be a U.S. economy so weakened that he will be forced to liquidate the Banjo Sheep Co. that his father-in-law began with orphaned sheep during the Great Depression.

“There is an absolute correlation between the working man and woman doing well and the success of the agricultural sector. People who make five bucks an hour don’t buy nice wool shirts and eat lamb. I’m watching my future disappear,” he said.

Times researchers Edith Stanley in Atlanta, Tracy Shryer in Chicago, Ann Rovin in Denver, Lianne Hart in Houston, Anna M. Virtue in Miami and Doug Connor in Seattle contributed to this story.

The Potential Effects

Sorting out potential winners and losers under the proposed trade agreement is difficult because particular industries can be hurt in some aspects while gaining in others. The auto industry, for example, makes both lists, according to separate studies of the agreement:

WINNERS

* Auto parts

* Chemicals

* Agriculture

* Electrical machinery

* Food products

* Computers

* Paper

* Metal

* Communications

Source: The business coalition USA-NAFTA, which is promoting the trade pact.

LOSERS

* Autos and auto parts

* Electrical machinery, equipment and supplies

* Apparel

* Food processing

* Furniture and fixtures

* Leather

* Stone, glass, clay, cement

* Manufactured goods

Source: The Economic Policy Institute, an independent research organization in Washington that opposes the agreement.

EFFECT ON TRADE

Here is a look at some of the main U.S. imports and exports, the current value of the trade with Mexico and how NAFTA would affect tariffs and quotas:

U.S. TO MEXICO

VEHICLES AND PARTS

* 1992 value: $6.8 billion

* Current tariffs (applied by Mexico): 10% to 20%

* Under NAFTA: Phased out over five to 10 years

CHEMICALS/PETROCHEMICALS

* 1992 value: $3 billion

* Current tariffs: 10% to 15%

* Under NAFTA: Tariffs on 58% of the products eliminated immediately; the rest over 10 years

PROCESSED FOODS/BEVERAGES

* 1992 value: $1.9 billion

* Current tariffs: 10% to 20%