SHUT DOWN & SHIPPED OUT

Many local factories still feel NAFTA's sting

9/28/2010

Last of three parts

About a decade has passed since trade relations with China were normalized, and it's been almost that long since President George W. Bush took office. Yet Ohio continues to lose factory jobs to the Chinese and to nations the United States trades with as a result of Mr. Bush's aggressive free-market policies.

And nearing two years into his presidency, President Obama has yet to rewrite the trade agreements he campaigned against as being harmful to American manufacturers and that he promised to overhaul.

“It took us 30 years to get into this mess,” said Tim Burga, chief of staff for the Ohio AFL-CIO. “This is some hard stuff to reverse all of a sudden.”

SHUT DOWN & SHIPPED OUT: A Blade investigation

No small amount of political capital has been spent on global trade and the role it's had in the decline of U.S. manufacturing, especially in northwest Ohio and southeast Michigan.

On Sunday, a Blade investigation showed that about 170 factories closed in the region since Jan. 1, 2000. Global competition was an obvious factor in 47 closings that The Blade counted that resulted in work being shifted to other countries.

For example, Textileather Corp., a Toledo factory producing fabric for car interiors, closed last year, cutting 160 jobs and shipping work to Canada and China. Much of the production at New Mather Metals, a Toledo stabilizer-bar maker with 168 employees that closed this year, was shifted to Mexico.

Foreign trade also may have tangentially affected the 61 factory closings that resulted in work being shifted to other states, as dirt-cheap labor costs in other countries caused some companies to relocate to states where labor costs were lowest and where labor unions were scarce.

According to the Ohio Department of Job and Family Services, 5,055 displaced workers in northwest Ohio qualified for federal assistance in 2010 because of job losses caused by trade, compared with 3,244 who qualified last year.

A bevy of other factors contributed to factories closing and shifting work out of the region. Those factors include taxes and regulations, a shrinking American automotive industry, high labor costs and strong unions, and a national recession.

After decades of lost jobs and mounting frustrations, most of the attention is still paid to global trade and how to deal with its negative effects. Republicans, Democrats, labor leaders, and economists almost daily decry this country's $289 billion trade deficit and the effect it has on American workers.

But they want more than a shift in trade strategy. They also call for an evolution in how the United States approaches manufacturing and economic development.

With at least 21,500 jobs lost in the last 10 years in greater Toledo to factory closings, and many more thousands to corporate downsizing and outsourcing, how much those strategies shift could largely determine the region's economic future.

U.S. Rep. Marcy Kaptur (D., Toledo) has a track record of opposing trade agreements she says she believes would harm American manufacturers.

In other words, Miss Kaptur has opposed numerous trade agreements in her nearly three decades representing the 9th Congressional District.

She voted against the landmark NAFTA legislation in 1993 pushed by President Bill Clinton, voted against the Central American Free Trade Agreement in 2005 backed by President George W. Bush, and opposed normalized trade relations with China.

“We are competing against countries that close their markets,” Miss Kaptur said. “It's a failure of top policy makers in Washington that our businesses are competing against countries that practice mercantilist capitalism.”

Miss Kaptur co-sponsored a bill in March for the United States to withdraw from NAFTA. She had cited NAFTA, which came into effect in 1994, for the loss of more than 1 million U.S. jobs through trade with Mexico and Canada.

Trade proponents argue that the net job losses actually caused by NAFTA are minimal and that trade with North American nations is essential. From June, 2009, to June, 2010, Ohio exported $10.4 billion in goods to Canada and Mexico.

The Republican challenger to Miss Kaptur in Ohio's 9th Congressional District, businessman Rich Iott, said a high U.S. corporate tax rate is what's driving manufacturing jobs out of northwest Ohio to foreign locations.

“We need to get our corporate tax rate in line with our global competitors,” he said of the average combined American corporate tax rate of about 39.2 percent — second highest in the world. “It's not a trade issue. We don't have the environment in this country that's good for businesses to thrive.”

The biggest factor in America's trade problem — in both sheer size and complexity — is China. The U.S. trade deficit with China so far this year tops $145 billion, and the Chinese are also the top foreign holders of U.S. debt.

China is often accused of holding down the value of its currency against the dollar, closing off its markets to imports, dumping products in the United States to flood markets, and having lax regulations and cheap labor.

The United Steelworkers union recently filed a petition with the U.S. trade representative against China for violating World Trade Organization rules through its multibillion-dollar subsidies for alternative energy and strict limits on imports — two actions that would surely harm greater Toledo's growing solar industry.

Last week, President Obama reportedly pushed China Prime Minister Wen Jiabao to revalue Chinese currency.

But Miss Kaptur said the Obama Administration hadn't done enough overall to create more global market parity.

“I haven't seen any change in this administration and I haven't seen the sophistication in the trade office to try to deal with the asymmetries in the marketplace,” she said.

In March, the liberal Economic Policy Institute released a study showing the United States lost 2.4 million jobs as a result of its deficit with China from 2001 through 2008, including 91,800 jobs in Ohio. The state's 5th U.S. Congressional District, represented by Republican Bob Latta, lost 6,700 factory jobs to China — the most of any Ohio congressional district.

“There's a real fear in Washington of getting the Chinese upset,” Mr. Latta said. “For America to be successful, we have to hold the Chinese accountable and we have to get out there and compete.”

Ken Lortz, regional director for the United Auto Workers in Ohio, is, like Miss Kaptur, a Democrat and a supporter of Mr. Obama.

He also aligns with Miss Kaptur in his criticism of the current administration's track record on trade.

“I'm disappointed in the Obama Administration,” Mr. Lortz said. “He said he was going to rewrite NAFTA. He hasn't done a damn thing to rewrite NAFTA.”

Mr. Lortz is upset that this same discussion — and inaction — on trade persists, and much of his anger is directed toward Republicans.

He cited former U.S. Rep. Rob Portman, a Republican candidate for U.S. Senate in Ohio, as an architect of what Mr. Lortz said were harmful trade policies when Mr. Portman served as President George W. Bush's trade representative from May, 2005, to May, 2006.

Asked to respond to Mr. Lortz's criticism, the Portman campaign instead attacked Mr. Portman's opponent, Ohio's Democratic Lt. Gov. Lee Fisher.

“Nearly nine out of every 10 [jobs] that left [Ohio] went to other states that have rolled out the welcome mat for Ohio's workers while the Buckeye State's elected officials like Lee Fisher have been slamming the door in their faces,” Jessica Towhey, Mr. Portman's campaign press secretary, wrote in an e-mail to The Blade.

What Mr. Lortz, Miss Kaptur, and other trade reformers want is the enforcement of environmental, labor, and import regulations in other countries that put U.S. companies at a disadvantage when such rules are ignored.

They want countries such as China, Japan, South Korea, and Germany to allow more American-made products across their borders and they want the U.S. government to cease providing incentives for American corporations to ship jobs overseas.

Mr. Obama and Democrats in Congress scored a victory on one of those fronts over the summer, when a bill funneling billions of dollars to states to save teachers' jobs was paid for by ending a multibillion-dollar tax break for companies conducting business in other countries.

With Ron Bloom, the President's former automotive czar, as Mr. Obama's senior adviser for manufacturing, at least a portion of the administration's manufacturing strategy involves growing the alternative energy sector through federal cash incentives.

Greater Toledo, with an estimated 6,000 people employed in the emerging solar industry and millions of dollars in research dedicated to solar development at the University of Toledo, could stand to gain if Mr. Obama's strategy is successful.

Mr. Burga, a top official for the AFL-CIO in Ohio, said that more must be done to bring fairness to global markets if any manufacturing strategy based on growing new industry and retraining workers is to succeed.

“The American people have to weigh in on what they want the economy to look like,” Mr. Burga said. “Right now we have an investor's economy where as long as shareholders get what they want everything is OK. We have to figure out if we want a worker's economy.”

Ohio economic development officials deny that the state has shifted from cultivating its traditional manufacturing base to focusing more on building a new one through high-tech ventures.

But under current Democratic Gov. Ted Strickland, and his predecessor, Republican Bob Taft, the state has poured billions of dollars into research and development of new technologies through programs such as Ohio's Third Frontier.

Mr. Strickland also has worked to position the state as a competitor in alternative energy by establishing renewable energy standards that are expected to create a market for the solar panels made at First Solar Inc.'s factory in Perrysburg Township.

Steve Weathers, president and chief executive of the Regional Growth Partnership, a nonprofit economic development agency in northwest Ohio, admits his organization has shifted strategies.

Mr. Weathers said the Regional Growth Partnership is more focused on growing new companies than on recruiting companies from other states. He pointed to the 75 start-up companies in bioscience, alternative energy, and advanced manufacturing launched by the Third Frontier-funded Rocket Ventures program over the past two years.

“We hope to reach 100 new technology companies,” Mr. Weathers said. “We still look to recruit manufacturers, we still look to retain manufacturers … but we always are trying to plant new crops.

“Evolve and go forward. We have to always remind ourselves that we need to move forward. We want to be competitive.”

Mr. Weathers said the growth partnership's strategy for local investment and growth — up-and-coming Toledo solar panel maker Xunlight Corp. is a client of the Rocket Ventures program — is a result of challenges facing the region.

He said a shrinking American automotive industry, old buildings, and cash incentives offered by other states take Toledo out of contention for some companies looking to consolidate and relocate.

“Is our infrastructure evolving to meet the needs of tomorrow's manufacturing?” Mr. Weathers asks. “Are the incentives we offer, the training we offer, the skill sets we offer — are they evolving to meet the needs of tomorrow's manufacturers? It's a question mark.”

Any shift from traditional manufacturing at the state and regional levels puts more pressure on local development officials to protect and cultivate factory work in their towns.

Especially in communities far from research institutions such as the University of Toledo, it could be years before the developments in new technologies such as solar panels in Toledo could benefit small cities such as Fostoria and Upper Sandusky — both hard hit by factory closings.

Joan Reinhard, executive director of the Fostoria Economic Development Corp., said her community is working to improve its roads and railways to attract new businesses. She also said she remains diligent to her existing business surveys to identify and try to eliminate barriers for growth in Fostoria.

The city has suffered four plant closings totaling about 600 jobs in two years.

“I think everybody is in the same position, we have to fend for ourselves to a certain extent,” Ms. Reinhard said. “Yes, the economy stinks, but it's not going to get better unless we make it better.”

And in Upper Sandusky, where 845 factory jobs have been shed since 2005, Mayor Scott Washburn said he has no choice but to take a micro approach to economic development.

“We attack it job by job,” he said. “We'd all like to land that 500-person factory, but in reality, that's not gonna happen.”

Robert Reich, a liberal economist who was secretary of labor under President Clinton and was on President-elect Obama's transition team, told The Blade that federal or state lawmakers could lend a hand.

He said communities that lose major employers should receive federal funds to attract or develop new businesses and that the federal government also could require any profitable company to pay everyone it lays off severance equal to their last monthly wage times number of years worked.

Mr. Latta, the Republican congressman, blames Ohio's manufacturing losses on government policies to curb oil drilling and limit coal use, to extend the 2009 stimulus package, to enact this year's health-care reform, and a failed cap-and-trade energy proposal.

When pushed to explain his stance, given that the region was bleeding manufacturing jobs before the stimulus bill, health-care reform, and cap-and-trade policy were up for debate, Mr. Latta said:

“Every time I walk into a factory in my district, I know what the workers are going to say. … They want Washington to quit killing American entrepreneurship.”

Contact Joe Vardon at:jvardon@theblade.comor 419-724-6559.