Buchanan Stirs Debate on Trade Woes in N.H.

Early Tuesday morning, as the sun managed to nudge the temperature over zero, the White Mountain Lumber Co. here was busy.

Out front, workers unloaded a shipment of logs from a flatbed truck. Inside, an automated rotary saw began cutting them to size.

But the buzz of activity was deceptive because “we’ve been very marginal for the last year,” said Barry Kelley, the sawmill’s owner.

And that, punctuated by the angry bite of the saws, is the timber behind Patrick J. Buchanan’s message in New Hampshire.

As Buchanan jubilantly proclaimed “victory” Monday night for his second-place finish in the Iowa caucuses, he thanked his supporters in the anti-abortion movement. But then he quickly turned to another subject that he hopes will serve him even better here in the New Hampshire primary next Tuesday.

His Iowa finish, he said, was a victory for a new conservative movement that he vowed “will stand up beside working American men and women and tell them clearly that, when we achieve office . . . never again will we negotiate trade deals that sell out the interest of American working people . . . and ship their jobs overseas to foreign lands.”

For Buchanan, the problems of the lumber industry offer a prime plank in his campaign platform and his contention that U.S. trade policy does little to protect American jobs from unfair foreign competition.

The reason for the mill’s problems have a lot to do with the soft housing market and a two-year skid in the market price of lumber. But there is another factor perhaps more relevant to the presidential campaign: Canadian exports. The economy of this small state is a microcosm of the impacts of world trade nationwide.

Thus, the Republican presidential campaign finds itself this week at the difficult intersection of international trade and politics, with Buchanan--his position sharply divisive here and across the nation--firing up the debate.

In many parts of this state, particularly its far north, Buchanan can find a supportive reception among those who blame the North American Free Trade Agreement, completed in 1993 with Canada and Mexico, for the loss of their jobs.

At the same time, however, New Hampshire in 1994 exported goods worth $1.2 billion to other countries. Nearly 40% of them went to Canada.

“Canada is obviously our largest trading partner,” said Dawn M. Wivell, director of the state Office of International Commerce. Mexico is in fourth place, behind the United Kingdom and Japan. “Free trade has just made our products more marketable and less expensive.”

With the U.S.-Canada free-trade agreement that preceded the pact with Mexico in effect earlier in this decade, New Hampshire’s sales to Canada grew 41.4% from 1992 to 1993, before tapering off 8.7% in 1994, the most recent year for which statistics are available. Sales to Mexico jumped 33% during the first year under NAFTA.

All told, Wivell said, an increasing number of New Hampshire workers--at least 35,000 this year--owe their jobs to exports.

Four years ago, the economic plight of lower-middle income workers was at the center of Bill Clinton’s presidential campaign. He continues to insist that increased global commerce will fuel economic growth--a position that pleases moderate Republicans and many conservatives more than many Democrats.

Within the GOP, pressure from Buchanan’s campaign has already shifted party leaders away from their free-trade stands. As he pushes further, however, his drive could split the party between its business constituency, which values the benefits of trade, and the party’s newly won blue-collar adherents, many of whom fear it.

Pushing the issue hard, Buchanan could move his party further in the direction of protectionism--back to where the nation as a whole has stood for many years--even if he does not win the presidential nomination.

“We were protectionist for much of our history, especially the Republicans because they represented the manufacturing interests” seeking to keep European competitors’ products out of the nation during the 19th century, said David Calleo, a political economist at Johns Hopkins University.

“It certainly can be divisive,” Calleo said. “This is a major political issue, for now and the future. This is probably the main issue that is troubling the country and Buchanan is out front with it.”

For all that, there are signs here that the North American pact can create jobs on the U.S. side of the border.

One example is Guitebec Inc., a subsidiary of a Quebec musical instrument maker that opened a factory in Berlin in December 1993 to manufacture electric guitars. The plant now employs 40 workers, up from the original 10.

A spokesman for the parent firm said that the trade agreement was not the chief inspiration for the move. More important was the company’s feeling that a “made in USA” guitar would sell better than a Canadian one. But the trade agreement does have a lot to do with its subsequent expansion.

“We get a benefit in both directions” from the phasing out of duties on musical instruments, said Katherine Calder, head of artist relations for Guitebec’s Montreal-based parent, Lasido Inc. Duties have been cut to 1.75% from the 8% before the agreement and will disappear entirely over the next few years.

The tariff reductions allow the company to export its Canadian-made acoustic guitars to the United States more cheaply, Calder said, and the company imports its American-made electric guitars to Canada at a similarly better price.

“If not for NAFTA we would be doing 10% less business,” she said.

For many New Hampshire businesses fighting Canadian rivals, the trade pact is not an issue except to the extent that it fails to protect them from the trade advantage Canada gains from its weaker currency.

The Canadian dollar, which has slid sharply during the last three years, is trading at about 73 U.S. cents. So, Canadian manufacturers buying labor and materials domestically get a substantial price advantage.

“They can build their product for 25% to 28% less, right off the top,” said Robert Baillargeon, whose Berlin-based Cross Machine Inc., is in competition with a large Canadian firm for sales of its top product. “How the hell can you compete with that?”

Every year Cross Machine turns out eight to 10 hydraulic rakes designed to keep hydroelectric water intakes clear of debris. Lately, Baillargeon said, he has been losing contracts to the Canadian firm by slim margins.

He and his son, Raymond, argue that it is small manufacturers like them who are suffering most. “I believe NAFTA will take its toll on the little industries,” Raymond Baillargeon said. It is a common fear.

Dennis Cote, an economic development specialist trying to attract business to Berlin, said that smaller companies remain confused about the benefits and threats posed by the pact.

“The smaller firms recognize [that] they need to be more global,” he said. “But they’re not sure what the trade agreement means. All the options and possibilities haven’t been fully fathomed yet.”

From the top floor of his sawmill, Barry Kelley watched the unloading below, the first step in a process that will end in the shipment of cut and trimmed lumber to a New England furniture maker.

Canadian sawmills clustered along the border have grabbed an increasing share of a static or shrinking U.S. lumber market by shipping wood to the United States at prices difficult for U.S. competitors to meet.

They benefit from cheaper power and lower labor costs than their American competitors, government-subsidized labor and raw timber, according to U.S. lumbermen. The weak Canadian dollar further helps them undercut U.S. prices.

“This is an issue Buchanan could grab up here,” Kelley said. “There’s no question we’re exporting jobs” to Canada.

Hiltzik reported from Berlin and Gerstenzang reported from Washington.