NAFTA’s Winners Enjoy New Life as Losers Try to Cling to Middle Class

Joe Pavao knows that somewhere in the huge American workplace, the North American Free Trade Agreement has wreaked havoc.

“But for me,” he says, “it’s only good that has come out of it”--a steady job paying $9.31 an hour, plus health insurance, for dispatching tractor-trailers filled with upholstery fabric to Mexico.

Now look 864 miles west to Fredonia, Wis., where Marvin Windsor, a 25-year veteran of assembly-line work, lost his $40,000-a-year job 15 months ago when the Square D Co. moved production of low-voltage transformers to other U.S. locations and to Mexico. He hasn’t had a steady job since.

“I used to bowl. I used to shoot pool. I don’t do none of that anymore,” he says. “I wish they’d move the job back.”

Three years ago, as Congress neared a final vote on NAFTA, both supporters and opponents predicted that trade and its impact on jobs would be a major issue in the 1996 election. Supporters, describing the scenario that Joe Pavao is living, argued that the pact would bring new jobs. Opponents, pointing to what would befall Marvin Windsor, said NAFTA would devastate U.S. employment.

Now, it is clear that both sides exaggerated. There are plenty of Pavaos and plenty of Windsors, but NAFTA’s effects have been less dramatic than either side forecast. And trade has become one of the disappearing issues of the 1996 election.

“I don’t think NAFTA has made much difference in either country when it comes to employment,” says economist Gary Hufbauer of Washington’s Institute for International Economics. “But it has intensified trade between the two countries.”

Three years ago, before NAFTA took effect, the United States ran a slight surplus in its trade with Mexico. Since then, U.S. exports there have grown by a healthy 25%, but imports have nearly doubled, turning the small U.S. trade surplus with Mexico into a $17-billion deficit.

What effect has that had on American jobs? No one can say with precision.

The U.S. Commerce Department, which has not attempted an actual count, estimates that the increased sales of U.S. goods and services in Mexico and Canada--which is also part of the accord--are probably responsible for 260,000 jobs in this country.

Critics are dubious. “If there are 260,000 jobs created by NAFTA, can someone even show me 50,000?” asked Lori Wallach, a trade expert with Ralph Nader’s Public Citizen group. “It’s like, ‘Where’s Waldo?’ ”

The other side of the equation--jobs that have migrated because of NAFTA--is even harder to pin down. The U.S. government has certified that 86,000 jobs were lost to both Mexico and Canada as of July 31 as a result of the trade pact.

In the view of the Commerce Department official overseeing the agreement, a certain amount of “job dislocation” is inevitable when two nations whose economic strengths differ greatly increase their two-way trade.

“In an opening up, you recognize there will be some winners and there will be some losers, but you’re moving the economy in the right direction,” said Regina K. Vargo, deputy assistant secretary of commerce for the Western Hemisphere. “The alternative is to stifle your most competitive sectors of the economy.”

Besides, she and others have stressed, the trade pact probably prevented Mexico from retreating from its free-trade posture when the peso crisis struck at the end of 1994--as the nation did during its previous recession in 1982.

In the months after NAFTA went into effect on Jan. 1, 1994, the prospect of a three-nation free-trade zone generated excitement among U.S. companies.

One eager firm was the Old Town Canoe Co., a Maine company that makes more canoes than anyone else in North America. It has since found that selling to Mexico is harder than paddling upstream.

The agreement, by eliminating a 20% Mexican tariff on foreign canoes, enabled Old Town Canoe to make its first sales there. But, said a disappointed Steve Krautkremer, the company’s sales manager, “it was a onetime sale that didn’t evolve into anything greater.”

At Waterman Industries in Exeter, Calif., the picture is sunnier. Sales to Mexico of valves and other water-control machinery have more than tripled since the pact, said Hector Molina, the Latin America sales manager, “and everything’s made here in California.”

Does that mean more workers? Not exactly.

“There’s been more work, but companies are streamlining,” foreman Danny Eggleston said. “Our sales to Mexico have increased. Our productivity has increased. As far as more man-hours--we haven’t worked any more man-hours because of it.”

Then there’s the experience of Storage Technologies Corp., on the eastern edge of Colorado’s Rocky Mountains between Denver and Boulder. The company makes disks and tapes for mainframe computer systems. Elimination of a 20% tariff gave it a competitive edge over Japanese competitors, and sales have increased.

“We have a good corporate story to tell about increasing business in Mexico,” said spokeswoman Judith Hargrave. But company employment is down, she said, and “it is very difficult for us to identify . . . one person . . . that directly benefited in a way that could be quantified.”

That has not been the case here at Quaker Fabric Inc., whose president, Larry A. Liebenow, saw possibilities in an expanded Mexican market at the start of the decade and enlisted his workers in a campaign to win congressional approval of the pact in 1993.

Fall River’s industrial history, its topography and the blasts it suffers from wintry Atlantic winds have given it the moniker of the town of mills, hills and chills.

Quaker Fabric turns out fabric that is shipped to furniture factories in the U.S., Europe, the Mideast and Mexico. Before the negotiations to expand the U.S-Canadian agreement, “we were never able to sell anything in Mexico,” Liebenow said.

Then, as Mexico began negotiating to join the trade pact, it unilaterally reduced some tariffs, quotas and import-permit requirements, including those on Liebenow’s products.

With overall sales doubling from 1990 to 1996, the company has increased its entirely nonunion work force from 1,100 to 1,700, Liebenow said. Roughly 150 of the 600 new jobs can be attributed to the increased business as a result of the trade agreement, he said.

One of those jobs went to Joe Pavao, who was hired 2 1/2 years ago. Five days a week, from 9 a.m. to 5 p.m., he tracks the company’s shipments, including those to the firm’s warehouse 2,246 miles away in Naucalpan de Juarez, Mexico.

“Last week it was three trailers. You’re talking a full 53-foot trailer, filled with 500 to 700 rolls of fabric,” he said.

The job, he said, enabled him to buy a three-bedroom house for his family, which includes a 9-year-old stepson and an 18-month-old daughter. He has two cars. With his wife working part time, he is saving $50 to $80 a week and contributing to his company’s tax-saver retirement plan.

Contrast that with Marvin Windsor’s story.

When Square D laid him off, he took a pay cut of $3 an hour to work building forklift trucks. That job lasted only a few months.

His wife, with more seniority, kept her job at Square D. Her paycheck and his $274 a week in unemployment benefits barely keep them afloat.

In September 1995, he began a two-year program at the Milwaukee Technical College to learn about manufacturing air conditioners. The federal government pays his tuition under a program supporting workers who lose their jobs as a result of NAFTA.

He will finish the training program at the end of the current school year. But will he find a job?

“I’m skeptical,” he said. “Around here, I don’t see a lot of jobs in air conditioning. I’ve seen a lot of grunt jobs they want to start at $7 an hour,” but better-paying jobs for more skilled workers are rare.

As for the North American Free Trade Agreement, he said, “It don’t seem to be working out for me.”