A Bittersweet Deja Vu for Canada
ORVILLE MEAD never set out to save this one-stoplight town and become a hero.Skip to next paragraph
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But that's what he is to many of the 2,500 residents of Durham, Ontario. Mr. Mead is credited with saving hundreds of Canadian furniture-manufacturing jobs threatened by a tidal wave of imported furniture made with cheap labor south of the border - in the United States.
In the years following the 1989 Canada-US Free Trade Agreement (FTA), one-quarter of Canada's furniture industry was wiped out by a brutal combination of free trade, recession, and an unfavorable exchange rate. The 25 percent tariffs on American-made furniture fell, opening Canadian floodgates to a torrent of high-quality, inexpensive US products. More than 18,000 jobs were lost as 500 Canadian companies went under, including the company that Mead worked for.
``I used to have a new company car every year,'' recalls Mead, now president of Durham Furniture Inc., the biggest employer in this southwest Ontario town located 30 miles from Lake Huron. ``Now I have a five-year-old Volvo with 240,000 kilometers [150,000 miles] on it.''
For Mead and thousands of Canadian businesspeople and workers, free trade with the US has been both a boon and a grueling adjustment.
Some economists think Canada's experience may be a scaled-down version of what awaits the US as free trade increases with Mexico, thanks to the 1994 North American Free Trade Agreement (NAFTA).
Mead smiles, remembering his pre-FTA salad days with a national furniture company. ``I used to have two homes that were paid for. Now I have one house with a big mortgage.'' Reviving a factory
Refusing to admit defeat, Mead in 1992 led a small group of investors intent on reviving Durham's main employer - a three-story, brick furniture factory that survived the Great Depression but went bankrupt three years after FTA took effect.
``We bought the factory out of the ashes,'' Mead says. His hands are folded on a gleaming, cherry-veneer desk, the only luxury appointment in a windowless office not much bigger than the photocopy room down the hall.
Mead's first move was to hire the original 100 workers back - at the same $12 (Canadian: US$8.53) per-hour wage - to work for the new Durham Furniture Inc.
After losing money for two years, the company crawled into the black in 1994 by selling furniture in the US for the first time. This meant redesigning its products and hiring a US marketing manager. Exports to the US of Durham's line of solid cherry, maple, and ash bedroom suites make up 50 percent of sales. Durham has since added another 120 employees and is looking to hire more.
``This factory wouldn't be here without Orville,'' admits Floyd Lawrence, who grew up working in the factory and served as Durham's mayor during its 1992 bankruptcy.
Ironically, the success of Mead and others have free-trade boosters crowing as Canadian exports continue to play a crucial role in buoying the otherwise lackluster economy. Between 1988 and '93, Canadian imports from the US increased by 26 percent, while exports to the US grew by 39 percent, according to a study by the Toronto-based Royal Bank of Canada.
Canadian exports to Mexico comprise just 2 percent of all exports. But NAFTA is now raising Mexico higher on Canadian exporters' market lists. (See related story.)