NAFTA's Impact on NC, part 3
Leaders scramble as job losses mount
By JOSEPH NEFF, JOHN WAGNER AND KARIN RIVES, Staff Writers
Raleigh News and Observer
Tuesday, August 20, 2002 7:08AM EDT
Nearly a decade into the era of free-trade deals, the collapse of North
Carolina's manufacturing foundation has finally made it onto the
political radar screen.
The loss of factory jobs to foreign competition has emerged as a central
issue in the 2002 U.S. Senate race. Two leading contenders, Republican
Elizabeth Dole and Democrat Erskine Bowles, are trying to defuse the
political danger posed by their fervent embrace of free-trade agreements
in the 1990s.
Gov. Mike Easley, having paid little heed to the issue during his first
year in office, is now searching hard for ways to help laid-off factory
workers and their communities.
The task facing North Carolina elected leaders -- to find remedies for
the shuttered factories and cash-strapped towns across the state and to
spur economic growth -- has been made harder because of their late start
addressing the issue and because the state's financial cupboard is now bare.
Even as foreign competition was devouring thousands of factory jobs a
year in the mid- and late 1990s, most political and business leaders
touted the benefits of the global marketplace.
The list of free-trade advocates through the 1990s reads like a Tar Heel
Who's Who: former Govs. Jim Holshouser and Terry Sanford, hog baron
Wendell Murphy, top executives at Duke Power
, R.J.
Reynolds and the state's largest banks.
Leading the charge was then-Gov. Jim Hunt. He lobbied the congressional
delegation and presided over trade missions to Mexico, China and 16
other countries. Another key booster was Bowles, during his tenure as
President Clinton's chief of staff and as director of the Small Business
Administration.
Even North Carolina's textile barons, the men running companies such as
Guilford Mills and Cone Mills, lobbied hard for big free-trade deals
such as the 1993 North American Free Trade Agreement.
Chuck Hayes, the late chief executive officer of Guilford Mills,
repeatedly described NAFTA as "truly the beginning of a renaissance for
the textile industry in the United States."
Today, someone making that statement might be run out of town. Since
NAFTA took effect eight years ago, 86,000 textile jobs have disappeared
in North Carolina alone.
The assumption by the free-trade backers was that NAFTA and subsequent
trade deals would create more jobs in North Carolina than they would
destroy. It's impossible to say whether that's true, however, because
clear statistics are not available.
"It's frustrating for us not being able to get a net understanding of
how large these job losses are," said state Commerce Secretary Jim Fain.
"It's also hard to know what our job gains have been. ... We don't know
if there's been a net benefit to the state."
North Carolina also lacks reliable measures on whether it exports more
goods than it imports. But one statistic is telling: 46 percent of the
containers shipped out of the state port in Wilmington in the past two
months were empty. This trend dates back at least four years.
Nearly all the empties returned to Asia. "The containers need to go back
so they can get filled up," said Erik Stromberg, director of the state
Ports Authority. "Basically, they are carrying air."
While the mainstream of the state's political and business elite pushed
for free trade, only a few of the powerful resisted the tide.
The opponents tended to come from the edges of the political spectrum.
Among them: Sen. Jesse Helms, the conservative Republican from Raleigh,
and U.S. Rep. Mel Watt, a liberal Democrat from Charlotte.
Though they shared a distaste for NAFTA and other trade deals, the
opponents failed to agree on a common solution.
Watt, for example, objected to what he saw as inadequate provisions for
helping laid-off workers.
But Republican opponents, such as Helms and U.S. Rep. Howard Coble of
Greensboro, have little fondness for most programs to help the workers.
"You like to be humanitarian in helping people who've lost their work,"
Coble said. "But I'd like there to be more emphasis on continuing to
make the economy sound and protect those jobs, and hopefully not even
have need for the trade-assistance feature.
"I have the fear that this program could have the trappings of another
entitlement program," he added, "and I don't think we want to go down
that road."
Watt said he's not surprised that workers' concerns have gotten short
shrift.
"On any issue, you tend to be lobbied more by the business interests,"
Watt said. "Seldom are poor people at the lobbying table."
Perot's crystal ball
Many people remember NAFTA's role in the 1992 presidential campaign,
when third-party candidate Ross Perot predicted that free trade with
Mexico would be ruinous: "You implement that NAFTA, the Mexican trade
agreement where they pay people a dollar an hour, have no health care,
no retirement, no pollution controls ... and you are going to hear a
giant sucking sound of jobs being pulled out of this country."
After passing NAFTA in 1993, Congress took the next big step a year
later by adopting the General Agreement on Tariffs and Trade, or GATT,
which established the World Trade Organization. The WTO set the rules
that will cut tariffs among the WTO's 144 members, abolish all quotas on
clothing and textiles in 2005 and settle trade disputes.
Free-trade backers acknowledged that the treaties would lead to some
U.S. layoffs, especially among the low-skill, low-wage manufacturing
jobs common in North Carolina. But they were confident that the U.S.
economy would be an overall winner.
Even in the '90s, for example, when there was still optimism that the
textile industry could remain healthy in North Carolina, Hunt and top
textile executives thought that little could be done to save
garment-industry jobs, Hunt's correspondence shows.
"As we all concluded, these [apparel] jobs were going to be lost
anyway," Guilford Mills lobbyist J. Douglas Galyon wrote to Hunt in
1998. "It was a matter of being lost to the Far East or to a NAFTA partner."
The Government Accounting Office predicted in 1994 that the U.S. textile
and apparel industries would lose up to 255,000 jobs because of
free-trade agreements. That estimate was far short: The Bureau of Labor
Statistics puts the total at 650,000.
Another congressional body, the Office of Technology Assessment,
predicted in a 1992 report that workers displaced by NAFTA would be
forced to settle for lower wages and benefits, if they found work at all.
"Workers in apparel, auto parts, and TV assembly are already suffering
job losses due to movement of production to Mexico; NAFTA may reinforce
this," the report said. "The workers most likely to be dislocated lack
the skills for jobs that may be created."
Despite the strong consensus favoring free trade, Perot still found some
North Carolina allies in his battle against free-trade agreements.
On the Senate floor, Helms
argued against
granting the elder President Bush the "fast-track" trade-negotiating
authority that his son recently won from Congress.
"The extension of fast-track authority will have a devastating impact on
the textile/apparel industry," Helms said in a typical 1991 speech.
Citing internal documents from the U.S. Trade Representative's Office,
he accused the government of planning to "surrender" the domestic
textile industry to obtain other advantages from trading partners.
Helms said GATT and subsequent WTO rules would destroy 1.4 million
textile and apparel jobs, including 223,000 in North Carolina. But
Helms' oratory failed to convince many of his colleagues. It was common
then, and now, for establishment figures to dismiss critics as eccentric
or ideological.
"I know some people who are concerned about NAFTA are well-intended,"
Bowles said in September 1993, when he headed the Small Business
Administration. "But so many others are involved in demagoguery."
Bowles, Hunt and other NAFTA supporters argued that North Carolina would
win by exporting more goods to Mexico, such as tobacco, pork, textiles
and jet engines.
"I sometimes think that the giant sucking sound that Ross Perot hears
... is those 90 million Mexicans down there buying U.S.-made goods, and
they're buying a dickens of a lot of goods from North Carolina," Bowles
said in 1993.
The battle for NAFTA in November 1993 was fierce. The Clinton
administration, the state's business leaders
and Hunt put
intense pressure on the North Carolina congressional delegation.
The lobbying turned even some ardent NAFTA foes. Rep. Charlie Rose
a Fayetteville
Democrat, led the fight against NAFTA, but he switched at the last
minute. "I did so as a gesture of good will to President Clinton," Rose
wrote to Hunt afterward.
And some who opposed NAFTA did so symbolically. Two days before the
vote, Sen. Lauch Faircloth
wrote to
Hunt, explaining that he planned to vote against NAFTA, but only because
passage was a sure thing:
"Jim -- it will pass the Senate easily, I will probably vote no, but
otherwise would have thought differently -- Lauch."
Watt was among
those in the Tar Heel delegation not swayed by the lobbying juggernaut.
He warned that many workers in his district were not trained for the
high-tech jobs expected to be created under NAFTA.
"All my efforts to have an aggressive retraining program included as
part of NAFTA ... were unsuccessful," Watt wrote in November 1993.
"Without the promise of retraining, I simply could not justify this
NAFTA to the employees in my district for whom low-wage jobs are clearly
better than no-wage jobs."
Watt continued: "Perhaps the most devastating consequence ... is the
precedent we have set." Future trade agreements, he said, would be
modeled after NAFTA and would lack retraining programs and encourage
companies to move jobs abroad.
Steadfast supporter
Hunt remained a strong free-trader to the day he left office in 2001. He
supported the passage of GATT in 1994 and a 2000 measure that paved the
way for China's entrance into the WTO.
"In the long run, we have more jobs than we would have without them,"
Hunt said in a recent interview. "The question is, did we gain more jobs
than we lost, and do the new jobs pay more?"
The answer is not clear. With no authoritative measurements, dueling
numbers tend to be generated by groups with vested interests or axes to
grind.
The Economic Policy Institute, a pro-labor think tank in Washington,
estimates that free trade destroyed more than 133,000 North Carolina
jobs from 1994 to 2000.
A competing estimate by Global Trade Information Services of South
Carolina, a consulting business that supports free trade, contends that
93,000 to 160,000 jobs have been created in North Carolina since 1994.
Hunt, however, was not a free-trader 100 percent of the time.
His papers at the State Archives show that he sought protection for two
powerful industries: tobacco and fiber optics.
In 1994, as the Clinton administration pondered changing tobacco-export
policy because of health concerns, R.J. Reynolds
drafted a
letter urging U.S. Trade Representative Mickey Kantor to keep policy the
same. Hunt made minor changes and sent the letter to Washington.
Months later, Hunt urged Kantor to block foreign tobacco with increased
tariffs and quotas.
"The importance of tobacco and tobacco products to the economy of North
Carolina cannot be overstated," Hunt wrote. "It is critical to all our
communities ... that the tobacco market be stabilized."
Two years later, Hunt wrote to Bowles at the White House asking that
tariffs be maintained on fiber-optic cable. Corning Inc., a major U.S.
producer of the cable, employed 4,000 workers in North Carolina at the time.
"If the U.S. tariff is eliminated, our industry is going to face
increased import competition and price pressure without any increased
export opportunities to offset the pain," Hunt wrote. The trade
agreement was eventually negotiated to Corning's satisfaction.
Hunt was less active, however, on behalf of laid-off workers. In a
recent interview, he could provide no examples of actions he took to
help mill workers who lost jobs.
"I can't remember, but I wanted to be helpful," Hunt said. "Our textile
guys on some occasions asked me to make phone calls, and I'm sure I made
them."
Another facet of Hunt's pro-trade activism were the 10 publicly financed
foreign trade missions he led while in office. The stated goals were to
promote North Carolina exports and lure foreign investment.
China "is a huge market for us," Hunt said on the eve of his 1998 trip
to China. "Those markets will be the single best thing that will help us
have a better life here."
Supporters say the missions led to major investment in places such as
Research Triangle Park, host to foreign corporations such as BASF,
GlaxoSmithKline, Nortel, Sumitomo Electric and Ericsson.
But some companies whose executives accompanied Hunt on the trips later
moved jobs overseas.
Executives from General Electric, Cone Mills and Guilford Mills joined
Hunt when he went to Mexico in 1995. Since then, GE has closed plants in
Hickory and Mebane that made transformers and power panels and moved the
jobs to Mexico, laying off 650 workers. Cone began making denim in
Mexico in late 1995 and has laid off more than 1,000 workers in North
Carolina. Guilford Mills invested heavily in Mexico while laying off at
least 950 workers in North Carolina.
Free trade has proven rougher for North Carolina textile companies than
they anticipated. After supporting free-trade agreements so strongly in
the mid-1990s, Guilford, Burlington Industries, Pillowtex and Galey &
Lord have all filed for Chapter 11 bankruptcy protection in the past two
years.
Textile companies blame their misfortunes on the strong dollar and on
trade agreement violations, such as China's transshipping goods through
Mexico to evade quotas.
Chuck Hayes, the late Guilford Mills CEO, spoke for many in his industry
when he said that without devaluation or tariffs, the United States
would be swamped with foreign garments and textiles in 2005, when all
quotas expire under the WTO schedule.
"We will be flooded with the cheapest material we will lay eyes on
unless we raise tariffs," Hayes said in an interview shortly before his
death last month. "We'll never have a level playing field after that."
NAFTA prevails
North Carolina's delegation in the House of Representatives voted 8-4 in
favor of NAFTA. Since then, the delegation's trade philosophy has become
more fractured.
For Rep. David Price, a Chapel Hill Democrat, voting for trade deals has
been relatively easy. His Triangle district is home to high-tech and
pharmaceutical companies that favor expanded trade.
"In our district, we do not have the large manufacturing enterprises
that are obviously most disadvantaged by current trends," he said.
The more challenging districts to represent on trade are those that
depend on traditional manufacturing -- and here members have taken very
different approaches.
The district of Rep. Cass Ballenger, a Hickory Republican, has suffered
heavy losses in textiles and apparel, and boasts the greatest
concentration of furniture jobs in the country. But Ballenger has the
strongest pro-free-trade voting record in the state delegation.
Ballenger argues that NAFTA and other trade deals have largely gotten a
bum rap.
The promise of NAFTA, he said, was that when jobs were lost, many would
shift to Mexico, where factories would be more likely to use U.S. yarn
and cloth.
For a while, that's mostly what happened, he said. "I'll admit that we
did lose some stuff, but NAFTA brought business back to this country, too."
Coble, the Greensboro Republican, has also witnessed the loss of
thousands of textile and other manufacturing jobs in his district.
Coble voted for NAFTA in 1993 but has soured on trade agreements since
then, saying he has seen too many instances where developing countries
got "not only the gravy but the meat, while we got the crumbs."
Coble vigorously defends his NAFTA vote, however.
"It was reciprocal, unlike a lot of these other trade agreements.
Mexico, Canada and we all gave up something in return for something," he
said. "I think NAFTA, from ocean to ocean and border to border, has
served us very well. ... That's not to say that NAFTA has not been
involved in job losses, but many of those jobs would have been lost anyway."
Recently, politicians have paid more attention to the plight of laid-off
workers and local economies hammered by plant closings.
Since he entered the Senate campaign, Bowles has expressed regret for
his enthusiastic support of free-trade agreements while serving in the
Clinton administration.
"I'm not going to support any fast-track legislation, any slow-track,
no-track," he said in an interview. "I'm not going to support any kind
of track or bilateral or multilateral trade agreements until we start
enforcing the agreements we have."
Republican front-runner Elizabeth Dole, meanwhile, hangs onto her
free-trade policies from the 1990s, when she supported fast-track
authority and criticized the Clinton administration for moving slowly on
expanding NAFTA. She has tried to inoculate herself on the issue by
setting one of her early TV ads in a textile mill.
The recession, the state's budget crisis and the financial problems
faced by cities across the state have been an issue for Gov. Mike Easley
since he took office in early 2001, but the governor -- like members of
the General Assembly -- has yet to set forth a comprehensive strategy to
counteract the job losses in a changing economy.
"Hunt had the luxury of very nice budgets and good economic times,"
state Senate Majority Leader Tony Rand, a Fayetteville Democrat, said of
Easley's predecessor. "Two years ago, we thought we were rich. ... The
reality has now sunk in. It's a different time."
Conversations finally began in earnest this year in the General Assembly
and in the governor's office on how to improve retraining programs, how
to structure incentives to attract jobs where they are most needed, and
how to improve the skills and education of the work force.
Easley, for one, isn't looking for a quick fix.
"You've got to make people understand the importance of education," he
said. "The bar has been raised. These cheap labor jobs aren't here
anymore, and you're either going to have to get better skills or take a
poorly paying job."
Easley is also floating ideas for more flexible retraining programs for
workers. He wants more money for schools, community colleges and
universities during the lean times.
But such long-term strategies give no help to today's laid-off workers,
and Easley acknowledges that he has no immediate answers:
"The only thing I'm saying is, in order to have a strong economy in the
future, we have to make our people understand that it's going to take
more skill and more education."
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