Originally published March 4, 2008 at 12:00 AM | Page modified March 4, 2008 at 10:48 AM
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Blame it on NAFTA. Really?
Sensing a link between trade-related anger and votes in Tuesday's Ohio primary, Democratic presidential candidates Barack Obama and Hillary...
Sensing a link between trade-related anger and votes in Tuesday's Ohio primary, Democratic presidential candidates Barack Obama and Hillary Rodham Clinton have assailed the trade strategy pursued by both Republican and Democratic administrations for nearly two decades.
Many people here blame the silent, steady erosion on a series of trade deals that began with the 1994 North American Free Trade Agreement (NAFTA).
The rivals have promised to renegotiate NAFTA's terms with Mexico and Canada, add tough labor and environmental requirements to any new accords and reorient trade policy from the needs of Wall Street's moneyed elites to the protection of hard-hit workers.
But economists disagree about how much of Ohio's manufacturing plight is due to trade. The state's manufacturing employment of 989,400 actually increased slightly after NAFTA took effect in January 1994 and didn't begin declining for more than seven years.
The U.S. Trade Representative's Office points to a nearly 200 percent growth in trade among the United States, Canada and Mexico from 1993 to 2006.
But Ohio has suffered a staggering loss of 236,000 factory jobs since 2000, more than any state other than California and Michigan. The GM plant near Youngstown now has fewer than one-third of the 11,000 autoworkers employed in the 1980s.
A 2003 study by the nonpartisan Congressional Budget Office concluded that trade agreements such as NAFTA can have local impact but little effect on overall employment across the broader U.S. economy. Given the size of the U.S. economy, the study concluded, NAFTA has raised the sum of U.S. economic activity only slightly.
A study by Martin Baily, chairman of the Clinton administration's Council of Economic Advisers, and Harvard University's Robert Lawrence, concluded that trade causes no more than 3 percent of all mass layoffs.
More important in the loss of manufacturing jobs, economists say, is that computerized tooling has made factories far more efficient. In 1995, for example, it took 2.4 man-hours of work to produce one ton of steel at Cleveland's main steel plant, then owned by LTV. This year, the current owner, India's Mittal Steel, estimates it will produce a ton of steel using precisely half as much labor.
Trade-policy critics, such as Robert Scott of the Economic Policy Institute, insist that NAFTA and expanded trade with low-wage countries such as China are to blame for more than half the manufacturing jobs lost since 2000. Demand for foreign-made goods is crowding out sales of products made in the United States.
After the 2001 recession, Ohio continued to hemorrhage jobs longer than the rest of the country. For a century, the Buckeye State has been synonymous with large corporations, from John D. Rockefeller's Standard Oil at the dawn of the 20th century to Goodyear or Procter & Gamble today. What once had been its industrial pride was now dead weight. The state's nonfarm employment didn't bottom out until November 2003.
Since then, job creation has been puny, less than 1 percent. If the state had produced new jobs at the same rate as the nation as a whole, more than 288,000 unemployed Ohioans would be working today.
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But in an age where Silicon Valley's nimble garage-based entrepreneurs are the embodiment of job growth, Ohio has lagged on new business ventures. Six out of every seven jobs in Ohio are outside the factory gates, and it is in the nonmanufacturing sector that the state has failed to develop new jobs.
"We haven't created the service-economy jobs at the rate the rest of the economy has," says economist Timothy Dunne of the Cleveland Federal Reserve Bank.
Allen Kitzel, president of a family-owned machine shop near Cleveland's airport, shakes his head when asked about Democratic presidential candidates' vows to renegotiate the controversial North American Free Trade Agreement with Mexico and Canada.
"I don't understand what they're speaking about. To us, it's been an absolute boon," he says. From small businesses such as Kitzel & Sons to the foreign-owned corporations that employ more than 200,000 state residents, trade has provided Ohio clear benefits as well as costs.
Ohio companies exported $39.4 billion in goods last year, meaning thousands of state companies prospered thanks to the same cross-border openness that has decimated countless manufacturing communities.
Like many Ohio manufacturers, Kitzel, 58, has watched his industrial customers depart the United States for lower-wage locales such as Mexico. He's responded by expanding the area in which he tries to sell, finding a Spanish-speaking distributor and dispatching one of his executives on trade missions to Mexico.
As a result, he's been able to hold onto his existing customers and even expand his orders. Today, he's waiting for final word on a $1.1 million contract for his diamond-tipped cutting tools from a supplier on Canada's oil sands project.
Across town, that's the same lesson Jergens Inc., a supplier of tooling components, has absorbed. The 65-year-old company is based on the former site of a New York Central Railroad repair depot. When the companies that bought Jergens' tooling started leaving for Mexico, the maker of industrial clamps and vises began scouting for new markets and new products.
It found both. Jergens developed a quick-release pin that is used to stabilize giant towers of audio speakers for concert performers. It also branched out into Web-based training, introducing an online series of courses called "Tooling University."
The company now offers more than 400 classes on topics from basic shop math to operating computerized manufacturing gear. Its 200-person payroll is 25 percent larger than five years ago, says Sean Stapulionis, Jergens' general manager.
"Youngstown, Ohio's problems have nothing to do with NAFTA. The real story in manufacturing isn't trade, it is technology," said Daniel Griswold, director of trade policy studies at the libertarian Cato Institute in Washington.
"We're producing 40-50 percent more stuff than we did before NAFTA. We're just doing it with fewer workers. ... NAFTA has probably accelerated that trend to a higher level of manufacturing, but that's been one of the successes of the agreement, not one of the problems."
In Youngstown, one homegrown new industry is computer software, taking root in a former discount-furniture store that houses a half-dozen high-tech companies. They are anchored by Turning Technologies, a $30 million business that Inc. Magazine last year labeled the fastest-growing privately held software company in the nation.
As defenders of global trade point out, international commerce is a two-way street. And Youngstown's software industry has customers in 90 countries, producing revenues that support over 230 local jobs.
Compiled from USA Today, Fort Worth Star-Telegram and St. Louis Post-Dispatch
Copyright © 2008 The Seattle Times Company
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