To see why Trump’s anti-nafta talk touches such a nerve, visit Scottsville, Ky.

▶ A re­lo­cated fac­tory breeds anger in Ken­tucky and brings low-wage work to Mex­ico ▶ “Nafta is the worst thing that’s ever hap­pened to the U.S.”

Bloomberg Businessweek (North America) - - Contents - �Thomas Black and Is­abella Cota

Amid the rugged cat­tle farms that dot the hills of south­ern Ken­tucky, in a clear­ing just be­yond the Smoke Shack BBQ joint and the Faith Bap­tist Church, lie the re­mains of the A.O. Smith elec­tric mo­tor fac­tory. In the eight years since it closed, the build­ing’s blue-me­tal fa­cade has faded to a dull hue. Rust eats away at scaf­fold­ing piled up in the back lot, and crab grass is tak­ing over the lawn. At its peak the plant em­ployed 1,100 peo­ple, an eco­nomic jug­ger­naut in the tiny town of Scottsville (pop­u­la­tion 4,226).

Ran­dall Wil­liams and his wife, Brenda, were two of those work­ers. For three decades they helped as­sem­ble the her­met­i­cally sealed mo­tors that power air con­di­tion­ers sold across the U.S. By the end, each made $16.10 an hour. That kind of money is just a dream now. Ran­dall fills or­ders at a lo­cal farm sup­ply store; Brenda works in the high school cafe­te­ria. For a while their com­bined in­come didn’t even add up to one of their old fac­tory wages.

Just as the Wil­liamses were be­ing told by A.O. Smith that they’d be let go in 2008, a young Mex­i­can woman named Zo­raida González was hired 1,200 miles away in the hard­scrab­ble town of Acuña, just across the Rio Grande. To re­place its Ken­tucky out­put, A.O. Smith ramped up pro­duc­tion in lower-cost Mex­ico, a move fa­cil­i­tated by the im­ple­men­ta­tion 14 years ear­lier of the North Amer­i­can Free Trade Agree­ment.

González was brought in to help han­dle phone calls. Now 30 years old and in charge of pay­roll, she makes about $1.75 an hour, on par with wages earned on the plant’s assem­bly line. It may not seem like much by U.S. stan­dards, but to González the money has been lifechang­ing. It’s given her things she says her mother never had: a wash­ing ma­chine, ca­ble TV, a mini­van, and the hope that her 11-year-old son, An­gel, will be the first mem­ber of her fam­ily to at­tend col­lege.

González doesn’t know much about Nafta, and even less about Repub­li­can pres­i­den­tial can­di­date Don­ald Trump or the way he blames U.S. trade deficits with Mex­ico and China for the loss of jobs in Amer­ica. But Wil­liams sure does. He cau­cused for Trump in Ken­tucky. So did a lot of his neigh­bors. In Allen County, a col­lec­tion of eight towns along the Ten­nessee bor­der, Trump won 42 per­cent of the vote on his way to a nar­row vic­tory in Ken­tucky.

It was one of those kinds of re­sults— in the heart of South­ern Bap­tist coun­try, where sup­port was ex­pected to go to the so­cially con­ser­va­tive Ted Cruz—that re­vealed the ex­tent to which Trump’s anti-free-trade tack has touched a nerve with mil­lions of work­ing-class Amer­i­cans. “Nafta is the worst thing that’s ever hap­pened to the U.S.,” says Beverly An­der­son, a Scottsville coun­cil­woman who worked at the elec­tric mo­tor plant for 28 years.

Be­fore Nafta, trade be­tween the U.S. and Mex­ico was a rel­a­tively tame af­fair. The two sides al­ter­nated be­tween deficits and sur­pluses—small fig­ures, typ­i­cally no big­ger than a few bil­lion dol­lars. U.S. ex­ports quickly jumped af­ter the ac­cord went into ef­fect in 1994, but the im­ports pour­ing in from Mex­ico climbed faster, and by 2015 the U.S. was post­ing a deficit of al­most $60 bil­lion.

Robert Scott of the Eco­nomic Pol­icy In­sti­tute, a think tank crit­i­cal of free­trade deals, es­ti­mates the deficit with Mex­ico alone has cost 850,000 Amer­i­can jobs. This, in turn, has a “chilling ef­fect,” he says. “It ac­tu­ally causes wage losses for every­body who doesn’t have a col­lege de­gree.” Af­ter ac­count­ing for in­fla­tion, hourly pay at U.S. fac­to­ries has been stag­nant since the early 1970s.

Trump and, to a lesser ex­tent, Demo­cratic can­di­date Bernie San­ders have found so much suc­cess in ex­press­ing the work­ing man’s anger that no can­di­date, not even Hil­lary Clin­ton, whose hus­band signed the Nafta deal, is will­ing to fully em­brace free trade. Trump’s pro­posed

so­lu­tion is to im­pose re­stric­tions on im­ports, a strat­egy backed by al­most two-thirds of Amer­i­cans in a Bloomberg Politics na­tional poll con­ducted from March 19-22. Lit­tle if any talk on the cam­paign trail is ded­i­cated to the ben­e­fits of the surge in cheap im­ports, such as sub­dued in­fla­tion that pre­serves con­sumers’ pur­chas­ing power.

On the Mex­i­can side of the bor­der, the ben­e­fits are clearer. Hun­dreds of thou­sands of man­u­fac­tur­ing jobs have been cre­ated in the past two decades. Acuña has some 38,000 fac­tory work­ers to­day. The town’s pop­u­la­tion is 136,000, vs. 42,000 in 1980. While ev­i­dence of sharp wage growth is hard to find in these in­dus­trial com­mu­ni­ties, other data un­der­score the role Nafta has had in help­ing boost the lives of many Mex­i­cans: Gross do­mes­tic prod­uct per capita has climbed 23 per­cent since 1996. More im­por­tant, the decades-old surge of il­le­gal im­mi­grants cross­ing the bor­der in search of work has re­ceded. Since 2005, more Mex­i­cans have left the U.S. than have en­tered it, ac­cord­ing to Pew Re­search Cen­ter.

Acuña is a sun-drenched, dusty town carved out of the broad mesa that stretches across north­ern Mex­ico. On the op­po­site side of the bor­der sits Del Rio, Texas, home to Laugh­lin Air Force Base. Be­fore the fac­to­ries came, Acuña was best known for bars and strip clubs that catered to off-duty U.S. air­men, a cul­ture that rock band ZZ Top glo­ri­fied in a raunchy, racially charged 1975 hit, Mex­i­can Black­bird.

Some of those seedy el­e­ments re­main, but they’re sur­rounded by block af­ter block of res­i­den­tial and com­mer­cial de­vel­op­ments. Next door to the elec­tric mo­tor plant—which Re­gal Beloit ac­quired from A.O. Smith in 2011—there’s a Blue­line fac­tory, where work­ers make pa­per prod­ucts; far­ther down the street, Magna Seat­ing em­ploy­ees churn out car seats and seat cov­ers. Then there’s a textile op­er­a­tion run by Müller Tex­til, a Ger­many-based com­pany. Nei­ther A.O. Smith nor Re­gal Beloit re­sponded to re­quests for com­ment.

Across town, González and her boyfriend, Manuel Aragón, who works in the car seat fac­tory, live with their two chil­dren in a sub­si­dized-hous­ing com­mu­nity. Kids play in the mid­dle of the road. Dogs bark at pass­ing strangers. The houses are al­most all iden­ti­cal, save the dif­fer­ing shades of pas­tel paint that coat the ex­te­ri­ors.

Some in the neigh­bor­hood com­plain about the grind of fac­tory life. Not González. Sure, she’d like a bit more pay and a few more crea­ture com­forts, but “we have food to eat,” she says. “We’re to­gether, we have work and health.”

Back in Scottsville, such op­ti­mism is rare. Politi­cians “keep say­ing things are go­ing to get bet­ter,” Wil­liams says. “They’re not go­ing to get bet­ter.” Jeff Woods, another Scottsville res­i­dent, is still an­gry, too. His mother worked at A.O. Smith. To­day she’s a phar­macy tech­ni­cian, mak­ing a frac­tion of her old wage. “Some­body works there all their life, and you get to be fiftysome­thing years old and your in­come gets cut in half be­cause the place moves to Mex­ico,” he says. “That’s not right.”

The bot­tom line The eco­nomics of Nafta have left some U.S. work­ers un­der­em­ployed and an­gry while rais­ing parts of Mex­ico out of poverty.

Wil­liams

González

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