NAFTA struck El Paso hard, an exit by Trump could hurt more

El Paso, one of the poor­est US city, lost 29,000 man­u­fac­tur­ing jobs be­tween 1994 and 2016

The Gulf Today - Business - - VIEWPOINT -

TEXAS: The jeans Estela Or­tiz wears to work on ca­sual Fri­days are a last ves­tige of the job she held for 24 years at Levi Strauss, one of El Paso’s top em­ploy­ers be­fore the North Amer­i­can Free Trade Agree­ment clob­bered the town’s tex­tile in­dus­try.

The 1994 trade pact helped elim­i­nate the jobs of Or­tiz and thou­sands of oth­ers in the West Texas bor­der town, as man­u­fac­tur­ing plants in the area left for Mex­ico and else­where, and firms boosted im­ports.

But Or­tiz, like many oth­ers in El Paso, has come to terms with the changes. Now, as the ad­min­is­tra­tion of Pres­i­dent Don­ald Trump, a Repub­li­can, works to rene­go­ti­ate or scrap the trade deal, what wor­ries many is what kind of eco­nomic havoc elim­i­nat­ing NAFTA could bring.

Across the United States, busi­nesses and com­mu­ni­ties that have ad­justed, of­ten with dif­fi­culty, to changes NAFTA brought face the pos­si­bil­ity of yet more dis­rup­tion.

“We’ve ac­tu­ally suf­fered some of the pains of glob­al­iza­tion; I think we are in the po­si­tion now as a coun­try and as a state to reap the re­wards,” Dal­las Fed­eral Re­serve Pres­i­dent Robert Ka­plan said in a visit last month to El Paso.

Ka­plan said that trade with Mex­ico has, over­all, boosted US com­pet­i­tive­ness and jobs. “If we didn’t have this trad­ing re­la­tion­ship... we’d likely lose some of th­ese jobs in this hemi­sphere.” The trade agree­ment ne­go­ti­ated by the Repub­li­can ad­min­is­tra­tion of Pres­i­dent H.W. Bush and fin­ished by Pres­i­dent Bill Clin­ton, a Demo­crat, re­shaped El Paso’s econ­omy for both good and ill.

De­spite ini­tial job flight, the city of about 680,000 peo­ple has many more jobs than be­fore the trade pact signed by the United States, Canada and Mex­ico, and un­em­ploy­ment is down.

The new jobs are dif­fer­ent from the old ones, and wages in the area have not risen as quickly as in other parts of the United States.

Af­ter Levi Strauss closed its last US plants in 2002, Or­tiz took another job in the gar­ment in­dus­try. Laid off a few years later, she switched gears, even­tu­ally find­ing tem­po­rary work re­cruit­ing stu­dents to El Paso Com­mu­nity Col­lege.

Or­tiz, 61, now has a full-time po­si­tion there. Com­pared to her days at Levi Strauss when she was a hu­man re­sources man­ager, the pay is “way less,” she says. “But at least... as an ed­u­ca­tional in­sti­tu­tion, it can­not be af­fected so much by NAFTA.”

El Paso, one of the poor­est US cities even be­fore NAFTA, lost 29,000 man­u­fac­tur­ing jobs be­tween 1994 and 2016, Labor Depart­ment data shows. Not all of those could be at­trib­uted to the trade pact, how­ever, be­cause there were other fac­tors in­clud­ing dif­fer­ent trade agree­ments and in­creased au­to­ma­tion.

In the first six years of NAFTA, more than 22,000 work­ers in El Paso were cer­ti­fied by the Depart­ment of Labor as hav­ing lost jobs be­cause of the ad­verse ef­fects of trade. About 11,000 more jobs have been cer­ti­fied as lost since then. At least 17,000 of the to­tal job losses were linked to pro­duc­tion shift­ing to Mex­ico or to in­creased im­ports from Mex­ico.

A Reuters anal­y­sis sug­gests NAFTA also held down wage growth in El Paso, leav­ing res­i­dents’ av­er­age pay lag­ging far be­hind the rest of the United States. Av­er­age weekly wages are 69 per cent of the na­tional av­er­age. In 1993, the year be­fore NAFTA was signed, they were 75 per cent.

“In the broad­est pos­si­ble pic­ture, NAFTA prob­a­bly pro­vided a very mi­nor in­crease in real in­comes in the US,” said Univer­sity of Vir­ginia’s John Mclaren, who co-au­thored a 2016 study doc­u­ment­ing NAFTA’S ef­fect on US wages. “But for an im­por­tant mi­nor­ity of blue-col­lar peo­ple who al­ready had lower wages, it was a big neg­a­tive... El Paso was one of the most af­fected” places.

El Paso, on the Rio Grande across the U.s.-mex­ico bor­der from Mex­ico’s Ci­u­dad Juarez, has come back to some ex­tent from the early years of NAFTA. By some mea­sures it is bet­ter off than it was.

Un­em­ploy­ment was high in El Paso be­fore NAFTA and re­mained high for years, some­times in the dou­ble dig­its, even as the rest of the coun­try stayed mostly in the 4 per cent to 5 per cent range.

By 1999, that was chang­ing, with El Paso un­em­ploy­ment con­sis­tently below 10 per cent. In the en­su­ing years, the city has slowly closed the gap with the rest of the United States. Since the fi­nan­cial cri­sis in 2008, El Paso’s un­em­ploy­ment has mostly run within a per­cent­age point of the na­tional av­er­age; for the past sev­eral months it has run below it.

“That is a good de­vel­op­ment,” said Univer­sity of Texas El Paso econ­o­mist Tom Fuller­ton. “Can­celling NAFTA would not just wreck prospec­tive eco­nomic gains, it could dis­rupt ex­ist­ing busi­ness prac­tices very badly.”

For some in El Paso, NAFTA has meant cross­ing the bor­der to work. Ev­ery week­day, Ser­gio Balder­rama drives his red pickup to Juarez for his job as com­mod­ity man­ager at a plant that as­sem­bles elec­tronic parts for cars made by GM, Audi, Hyundai and oth­ers.

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