Free Trade Winners Praise the Pact, But Will Kudos Last?
TO the rhythmic ``kerchunk'' of a machine press, Laurie Varrato is paying off a new Mercury Sable.Skip to next paragraph
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She whips the face of a shiny meat thermometer into place, stamps the dial, and lays it on a tray to be boxed and shipped to Sam's Club in Mexico. This mother of three isn't sure if the North American Free Trade Agreement (NAFTA) is good or bad for America. But Mrs. Varrato is certain of one thing.
``I couldn't have bought my Sable wagon without this job,'' she says. The Varrato family hadn't bought a new car in a decade. ``It's silver,'' she says, her eyes alight with pride.
NAFTA went into effect New Year's Day a year ago. At the time, Varrato was waving cornflakes past a price scanner for $5 an hour at Stop & Shop. Four months later, thanks to rising sales to Mexico, she was hired by Cooper Instrument Corporation.
NAFTA immediately eliminated duties on half of all US goods shipped to Mexico; other tariffs are being phased out over the next four, nine, or 14 years. For Cooper Instrument, NAFTA got rid of a 20-percent tariff on thermometers. Overnight, its products cost less in Mexico.
``Twenty percent is a major chunk out of the pricing structure,'' says Carol Wallace, the unpretentious CEO of Cooper Instrument. The family-run firm manufactures temperature, time, and humidity instruments. Sales to Mexico in 1994 have more than doubled to about $200,000, Ms. Wallace says, creating at least two new jobs on the assembly line here in the cow-dotted hills of central Connecticut.
For automobiles, computers, telephone equipment, corn, and a vast range of US-made goods, the story is similar: Tariffs are falling, sales are up sharply to Mexico. Overall, United States exports to Mexico - averaging a $1-billion-a-week pace since May - have risen this past year twice as fast as US exports to the rest of the world.
``What sucking sound?'' asks Bob Gardner, referring to Texas billionaire Ross Perot's warning about US jobs being ``sucked'' down to Mexico by NAFTA. The president of Local 15338 of the United Steelworkers of America has nothing but praise for the trade pact. ``NAFTA is keeping us very busy,'' he says.
Members of Mr. Gardner's local are machinists, pipe fitters, and mechanics who make $9 to $14 an hour working at the Baltimore-based Ellicott Machine Corporation, a manufacturer of dredging equipment. At least 10 of the 40 new full-time jobs this year at Ellicott are a direct result of a doubling of sales to Mexico since NAFTA went into effect, says Peter Bowe, CEO at Ellicott.
``Most of our competition there is from Europe. NAFTA's tariff reduction increases our relative cost advantage,'' Mr. Bowe says.
In a statement that doesn't explicitly give credit to NAFTA, US Commerce Department chief economist Lewis Alexander estimates that ``there would have been 130,000 fewer US jobs in the third quarter had we not had the surge in US exports to Mexico this year.'' Through October 1994, US exports to Mexico are up 22.8 percent over the same period in 1993.
But there are two sides to a trade equation. Imports from Mexico and Canada rose slightly faster than US exports in 1994. NAFTA naysayers note that higher imports mean lost American jobs. And the sharp devaluation of the Mexican peso in late December means imports from Mexico will become even less expensive this year.