Can you still hear that ‘giant sucking sound’ on jobs?

Aug. 08, 2014 @ 06:00 PM

More than 20 years after NAFTA was enacted, the ripple effects of the trade pact reverberate through a pair of upcoming area plant closings that will cost nearly 900 jobs.
NAFTA — the North American Free Trade Agreement — took effect on Jan. 1, 1994, eliminating trade barriers and tariffs among the United States, Canada and Mexico. But one unwelcome effect of the pact during the past 20 years has been the erosion of manufacturing jobs from the United States to Mexico, where labor costs are cheaper and regulations are lagging. In the 1992 presidential campaign, independent candidate Ross Perot called the threat of job losses with NAFTA as “that giant sucking sound.”
Two area companies that announced plant closings in the past several months cited moving production to Mexico as a factor in the decision.
Steelcase Inc. will phase out production during the next two years at its south High Point office furniture manufacturing plant, eliminating 264 jobs. Some of the production at the facility will be shifted to Mexico, Steelcase indicated in a document notifying workers about the plant closing three months ago.
In late May, the parent company of Arrow International in Asheboro, Telefex Inc., announced it will close the plant in phases during the next three years. The shutdown will eliminate 635 full-time and contract jobs.
Production will shift to another Arrow International plant in Mexico, city of Asheboro officials said when the announcement was issued.
“We deeply regret this decision and the impact it will have on the lives of employees and their families. It's a big loss for our community,” said Asheboro Mayor David Smith.
Both plants have been fixtures in their communities — the Steelcase factory has provided paychecks locally for four decades under different ownership, while Arrow International has been in Asheboro since 1952.
Nationally, NAFTA is estimated to have displaced 682,900 U.S. jobs through 2010, according to the Economic Policy Institute, a research organization and think tank based in Washington, D.C. That includes 18,100 jobs lost in North Carolina, which ranks 10th in most NAFTA-related job losses among the states.
High Point already has endured a first round of manufacturing job losses in the immediate wake of NAFTA in the 1990s. Several hosiery factories in the city, which had been longtime employers, shifted production to Mexico or closed because of overseas competition.
NAFTA didn’t by itself prompt the move by U.S. companies to Mexico, said Mike McCully, associate professor of economics at High Point University.
“But NAFTA made it easier for companies to move by removing restrictions,” he said.
After NAFTA was enacted, the relocation of companies from the United States to Mexico became what McCully termed a “snowball effect.” As American companies witnessed their U.S. competitors shifting to Mexico for lower production costs, it put pressure on all businesses to consider the move, McCully said.
pjohnson@hpe.com | 888-3528

 

Why does NAFTA still matter?
The North American Free Trade Agreement, known as NAFTA, was a monumental trade pact that eliminated tariffs among the United States, Canada and Mexico. The approval of the agreement by Congress in 1993, and signed by then-President Bill Clinton, ushered in an era of trade pacts between the United States and other countries. NAFTA was shrouded in controversy, with many critics saying the pact would lead to the loss manufacturing jobs in traditional U.S. industries as companies sought cheaper labor and lax regulations in Mexico.