be loaded or unloaded off
Smithfield Avenue. (Tom Croke)
Despite the prophecy of huge job cuts and lost productivity, the North American Free Trade Agreement (NAFTA) has had little impact on Rhode Island’s manufacturing industry.
And while a new study claims Rhode Island has lost more than 7,000 jobs as a result of a the trade agreement– which linked the United States, Canada and Mexico — economists and local manufacturers disagree, saying if there has been a loss in jobs it has been because of technology.
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Under NAFTA, the United States, Canada, and Mexico became a single, integrated market of almost 400 million people and restrictions on the flow and goods and services in those markets were eliminated. Signed into law by President Clinton on December 8,1993, the new guidelines went into effect on Jan. 1,1994.
Prior to NAFTA, Mexican tariffs averaged about 250 percent as compared to the U.S. duties. After the pact, about half the tariffs on trade between Mexico and the U.S. were eliminated and the remaining tariffs and restrictions on service and investments will be phased out over a 15-year period.
Since NAFTA was implemented exports to Canada have risen from $179 billion in 1993 to $350 billion, and imports from $111 billion to $229 billion. Mexican trade increased even more dramatically, rising from $42 billion to $112 billion.
Imports from Mexico have more than tripled from $40 billion to $136 billion.
But the trade agreement and its success have been frequently debated.
“The whole NAFTA debate, I think, was emotionalism more than economics,” said Leonard Lardaro, a professor of economics at the University of Rhode Island.
But others disagree.
“The North American Free Trade Agreement eliminated 766,030 actual and potential U.S. jobs between 1994 and 2000 because of the rapid growth in the net U.S. Export deficit with Mexico and Canada,” said Robert E. Scott, of the Economic Policy Institute, a non-profit think tank, based in Washington D.C.. “The loss of these real and potential jobs, is the just the most visible tip of NAFTA’s impact on the U.S. economy.”
According to a recent study conducted by the Economic Policy Institute, Rhode Island has lost more than 7,000 jobs as a result of NAFTA — 6,000 of those jobs being lost in the manufacturing sector.
“NAFTA supporters have frequently touted the benefits of exports while remaining silent on the impacts of rapid import growth,” Scott said in a policy paper about NAFTA. “But any evaluation of the impact of trade on the domestic economy must include both imports and exports. Ignoring imports and counting only exports is like trying to balance a checkbook by counting only deposits but not withdrawals.”
But John Grady, executive director of the Rhode Island Manufacturers Association, said he has heard little from his members about NAFTA, or its impact on the state.
“Any indication that we are losing jobs is definitely a problem,” he said. “But, we haven’t heard anything about the impacts of NAFTA.”
What may have shielded Rhode Island, Lardaro said, is that much of the state’s manufacturing industry had already moved south when the trade agreement went into effect.
“NAFTA didn’t have a giant effect on the state because the bloodletting had occurred early,” he said. “We had already lost a lot of companies to the south and then they got hit with NAFTA.”
Curt Ley, president and chief executive officer of BA Ballou, an East Providence-based jewelry and findings manufacturer, said his industry has felt few effects from NAFTA.
“I don’t believe that it has had any impact on our industry, at least not from my perspective,” he said. “They don’t have the labor (in Mexico) that we have here, and that’s a big difference.”
Ley said his competition isn’t in either Mexico or Canada, but instead is located overseas in Asia.
“The base metal market has all gone to China and that’s where my focus is right now,” he said. “Today we are chasing the business to China, not Mexico or Canada.”
If there have been jobs lost in the state’s manufacturing industry, Lardaro said it is most likely because of increased technology. In fact, this week’s
Providence Business News “Executive Poll” found that an overwhelming majority of respondents believe technology has been the dominating factor behind the loss of manufacturing jobs in the state. “If you look at employment numbers in manufacturing, someone could say it’s foreign competition causing the jobs loss, but I think it’s more because of modernization,” he said. “Firms have to be cost competitive, and that’s not a result of NAFTA.”
Economists also assert that because NAFTA was put in place at the tail end of a U.S. recession, the trade agreement has benefited from a long running-bull market. But with what appears to be an economic slowdown on the horizon, Lardaro said manufacturers locally and nationally might be affected.
“Where you are going to see jobs lost in manufacturing is in the next recession,” he said. “A recession is how an economy purges itself, and Rhode Island still has a lot of low-end manufacturers, and those people that haven’t moved ahead with technology will be eliminated.”
