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

Politics: Both proponents and foes exaggerated in predicting impact on U.S. Pact is turning into disappearing issue of 1996 election.

October 15, 1996|JAMES GERSTENZANG | TIMES STAFF WRITER

FALL RIVER, Mass. — 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.

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