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Friday, July 23, 2004

The Globe and Mail NAFTA takes it on the road

The Globe and Mail
NAFTA takes it on the road

With job losses rampant, this year's U.S. election may end up repeating Canada's 1988 experience and turning on the issue of free trade. But before they map out their positions, politicians would be wise to follow DOUG SAUNDERS down the route of the I-69, the controversial 'NAFTA superhighway' being built from Canada to Mexico, where feelings run high -- in every direction

By DOUG SAUNDERS
Saturday, February 21, 2004 - Page F4

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BLOOMINGTON, IND. -- As your car follows the grey strip of asphalt out of Canada, across the St. Clair River, through the factories of Michigan and into the industrial wastelands of Indiana, you begin to hear a different sort of conversation in the truck stops and burger joints along the road.

Before you can follow this highway's future path into the Mississippi bayous and the Texas scrub and then deep into Mexico, it becomes overwhelming: Here in the industrial zones and campus towns of the central United States, all anyone wants to talk about is the 10-year-old trade agreement that has given this highway its name and destination.

"It's just the final insult that they're calling this thing the 'NAFTA superhighway,' " says Dave Spano, a young Indiana-based truck driver who is hauling car parts to Michigan and taking a break to gas up at a truck stop here on the edge of Bloomington, Ind.

"The people here lost all these jobs to Mexico, thousands and thousands of jobs, and now they want to spend billions of dollars of our money building a road to make it easier to send things down to Mexico?" He shakes his head and returns to his hot turkey sub.

The idea of tying three nations together with a thick ribbon of asphalt, linking Quebec City to Monterrey, Mexico, in a continuous high-speed truck route, was born 15 years ago when planners began to anticipate the doubling of Canadian-U.S. trade and the quadrupling of Mexican-U.S. trade that the North American free trade agreement would bring about.

When the construction of the final stretch -- from Indianapolis to Nuevo Laredo, Mexico -- begins as early as this year, it will meet fierce resistance here in the Midwest. But it will be heralded in other communities for its promise of trade-driven growth, or at the very least a flood of low-wage service and manufacturing jobs in places where there were no jobs at all.

Up and down the string of highways and county roads that will be collectively known as Interstate 69 once the zoning battles have been won and the tens of billions of dollars have been spent and the six lanes of asphalt have been carved through the fields, NAFTA and its namesake highway have become household words, dominating front pages and stump speeches.

The upcoming presidential vote is very likely to become the NAFTA election, a 2004 American counterpart to Canada's 1988 "free trade" election. Here in the rust belt, Democratic candidate John Edwards has won strong support for promising to cancel the deal outright.

"He wouldn't need any ads," Democratic strategist Greg Hass said of Mr. Edwards, "just saying the word NAFTA is like raising a red cape in the face of a bull."

John Kerry, the front-runner, has promised to renegotiate the deal if he becomes president (though he voted for it as a senator). And even George W. Bush has started making protectionist noises in speeches.

The highway has become an emblem of the trade deal itself. As the road passes from Ontario snowdrifts to Midwest cornfields to the swamps and scrublands of the South, you find yourself hearing the entire decade-long debate played out, a thick volume of rhetoric and wrangling stretched across the geography.

Back in 1994, when NAFTA came into effect, most U.S. residents paid it little attention. It already had been the subject of a great debate in a hard-fought federal election in Canada years earlier, and the object of passionate hopes and fears in Mexico. But a poll at the time showed that 49 per cent of Americans had never even heard of it.

Ten years later, the world has changed dramatically. At the north end of the NAFTA highway, Canadians have largely made peace with the trade agreement. It has brought an era of export-driven economic prosperity, benefiting many regions and sectors of the economy, albeit with an even mix of very good information-economy jobs and so-so service-sector jobs.

At the south end, Mexicans aren't as pleased. The deal has quadrupled exports and raised wages in manufacturing, badly hurt many parts of the agricultural sector by flooding markets with government-subsidized U.S. crops, and left Mexicans, on average, only slightly better off than before.

In both places, most people seem to agree with the conclusion reached in a major study released last month by the Carnegie Endowment: "Put simply, NAFTA has been neither the disaster its opponents predicted nor the saviour hailed by its supporters."

But in the United States, it often seems as if half the population has woken screaming from a 10-year nap. Here in the middle of America, NAFTA has become the hottest word in the political vocabulary. This year's election will be won or lost in these politically crucial and deeply undecided states in America's industrial middle.

Yet once you've driven a few more miles down this road, it becomes clear that the politics of trade are as complex and layered as a highway interchange -- a lesson that politicians who take a simple stance on NAFTA will learn the hard way. The road is not as straight as it seems.

If you want to find out why NAFTA has suddenly leaped onto the political menu here, it's worth following the highway's path into the industrial west end of Bloomington. For decades, this city of 60,000 has been known for the stark town-and-gown division between the comfortable lawns of its state university campus to the east and the trailer homes and tiny wood-shingled bungalows of its sprawling industrial district to the west. The past five years, though, have nearly wiped out the blue-collar side.

On this grey and slushy afternoon, at a dreary strip mall on the wrong side of the tracks, a short, muscular man with a salt-and-pepper mustache is having a coffee after finishing his shift at the General Electric refrigerator factory. He is, by his own account and according to Washington's top political operatives, exactly the sort of American who could decide this year's presidential election.

Jackie Yenna has worked in this factory for 34 of his 51 years. When he left the army in 1974, it only seemed natural that Mr. Yenna would return to a job in the factory. It employed 3,000 people, including his mother, at decent union wages. Not far away, the RCA television plant had 8,000 employees, and a dozen other manufacturing plants made this a boom town.

"When you went to work at the plant then, you knew you'd be making enough of an income to raise your family and have a mortgage, and there was enough job security that you knew you'd have it until retirement," he recalls.

The plant workers shifted their political loyalties over the years: Many of them were the "Reagan Democrats," working-class men who shifted to the Republican Party in the early 1980s. But the George W. Bush years have left them scarred, insecure and politically undecided.

The closings began about five years ago. The GE plant was among the first hit, cutting 1,400 jobs as it moved its operations to other countries, most notably Mexico. Then the RCA factory moved to Mexico, eliminating its last 1,100 jobs in 1998. The ABB electrical-parts plant moved out of town, idling 1,000. And last year, Otis Elevator cut its work force from 1,100 to around 500, transferring most work to its new plant in Nogales, Mexico.

Mr. Yenna kept was one of the lucky few to keep their jobs. He and his fellow survivors spend their days nervously awaiting the next bad news, counting the years to retirement and settling for mediocre pay raises, since the threat of shutdown always hangs over contract negotiations.

Before the layoffs hit, Mr. Yenna and most of his friends hadn't given a moment's thought to international trade. That changed quickly.

"It hit me real hard," he says in a nonchalant southern-Indiana twang. "I had a guy from the company come up to me, he said, 'Come outside,' and we were all supposed to go into these temporary trailers they had out there, one at a time. Most of us were told we'd be getting a severance. A friend of mine came out of the trailer and he said to me, 'I warned you about NAFTA, I told you it was going to hit us.' And I hadn't thought about it before then. Before NAFTA, you really didn't think about losing your job to Mexico."

Across the central United States, the story has been the same: For the past five years, manufacturing industries have closed and moved their operations to lower-wage nations, with an estimated three million jobs lost since 1999. While a range of economic factors is involved, workers in these states almost unanimously blame NAFTA -- a conclusion that is hard to avoid in a place like this, where Mexico has been the destination for so many of the jobs.

And now they're building a six-lane highway to Mexico through the centre of town. The town has risen against it -- city councillors have run for office and won multiple terms on anti-highway platforms.

Jackie Yenna is indifferent, saying the NAFTA superhighway won't make much difference. But many of his friends are taking it personally. "You talk to the guys at Otis Elevator, and they see the highway as the final blow. Their jobs went down south, and now they have to line up to get jobs helping build a road that'll make it easier to move things to Mexico."

Stories like this are the meat of the Democratic Party's electoral hopes. The angry and hollowed-out American Midwest, packed with unemployed and disillusioned voters eager to vent their disappointment with the Republicans, has become a central part of the political mythology.

Yet things are not quite so stark. Bloomington has not turned into a squalid ghost town of soup lines and unemployment benefits. Mr. Yenna says most of the guys who were laid off in his factory have taken advantage of training to find work in cleaner, better-paying industries, or they have started their own businesses. The unemployment rate in Bloomington is under 3.5 per cent, about as low as it can get, and the main question is whether you have a good full-time job or a bad one. While some rust-belt towns and cities have been hit harder, a lot more are like Bloomington: Changed in dramatic and permanent ways, but not all for the worse.

The NAFTA superhighway's route passes through Memphis, and then enters the cotton fields and swamplands of northern Mississippi's Delta region, one of the very poorest places in the United States. Down here, you start hearing a very different story about NAFTA, one that does not appear on Washington's political radar.

Shortly before it crosses the Mississippi River's winding course, the highway wends by the most sung-about crossroads in the world, the one at Clarksdale where Robert Johnson made a deal with the devil and got himself the blues. These days, people in the Delta are hoping for a different sort of deal, one that will bring much more than just blues singers and musical tourists.

Nobody here worries about the NAFTA highway taking jobs away. Jobs are scarce enough already. The region is desperate for any employment at all.

In the Midwest, the prospect of a burger-grilling job at a roadside fast-food complex sounds like a deep and wounding insult to someone who's spent his life working in a factory for $20 an hour. In the Delta, it's a real opportunity.

This region's deep poverty, health and sanitation crises, lack of education and rotting infrastructure have led many observers to liken it to a developing nation. And that's exactly the point being made by officials here when they welcome NAFTA's road: Mexico's low-wage border manufacturing districts aren't a threat, but a model.

"It'll mean a lot for our county, giving long-range benefits to our residents here and future opportunities for job growth," says Scott Luth, the young man who runs the economic development office for Cleveland-Bolivar County. He and other regional officials boast of the six million square feet of vacant industrial space in the Delta -- and the thousands of dirt-poor workers eager to fill it.

"The biggest thing we have to offer is our availability of labour. The labour in the region, it's not mobile. We have around 2,000 folks unemployed in this county and our wages here are lower than most other places in the United States."

Those low wages, the lack of business taxes and Mississippi's anti-union laws could make the Delta a competitor for companies that want to be cheap and flexible but aren't quite up to moving south of the border, perhaps because of the increasing political stigma of such a move. All they need is a decent highway.

This part of Mississippi isn't yet calling itself "Mexico North," but that is the implication: We want what the guys in Nuevo Laredo have got. We want to be the end of the road.

But Mexico isn't quite what you would expect, either. The stretch of ramshackle cities that hug the Texas border are famously known as maquiladoras, low-wage manufacturing centres created in the 1980s as a tax-free, regulation-proof stateless netherworld that has attracted thousands of poor Mexicans seeking any steady work, even in terrible conditions, even for $2 an hour with no benefits.

The NAFTA superhighway reaches its end in Nuevo Laredo, a muddy enclave of high-security industrial parks and cinder-block housing across the border from the South Texas town of Laredo. Here you will find a Sony DVD factory, a Caterpillar engine-parts plant, and dozens of other small and medium-sized manufacturing plants.

You would think that NAFTA would be a kind word in this place, at least. It is one of the more successful towns in one of the three northern Mexican provinces that have experienced wage growth and increased employment from NAFTA (the rest of the country has seen little measurable benefit). A million new jobs have been created in this region since 1994, at average wages 37 per cent higher than those in Mexican domestic industries.

But the past few years have not been good for these border towns. The blue-collar residents of Bloomington may peer angrily down at Mexico, but many Mexicans are now finding themselves in much the same position as Bloomington's layoff-plagued workers.

As poor as the workers here seem, the maquiladoras are actually losing jobs because their wages are too high. NAFTA has put them in competition with the rest of Mexico, and globalization has put them in competition with the rest of the world. Since 2001, more than 240,000 jobs have been lost to Mexican towns deeper in the heartland, where people will work even cheaper, or to China and southeast Asia, where workers can be found for a couple dollars a day. In Nuevo Laredo, a third of the jobs have disappeared, turning it into Mexico's own rust belt.

"Mexico is becoming less competitive in the world," Jeffrey Davidow, the former U.S. ambassador to Mexico, said at a recent panel discussion. "Mexico's advantage in the world has gone to China. Mexico should focus on India as a competitor, not China." He was referring to India's recent growth, driven by a highly educated work force and high-technology industries that provide a step beyond mere assembly.

This may be a goal for Mexico's government, but it's not about to happen in these northern factory towns, where manufacturing jobs offer nothing but money. Universities, training programs and incentives to move workers above the bottom rung do not exist here. At the end of the long road, the Mexican border is proving to be not so much a source of fear as a subject of pity.

And this is where our road comes full circle. The question that Mexico is now beginning to ask itself -- how to move beyond the prison of assembly-line labour -- has already been most thoroughly answered, it turns out, by the people of Bloomington. The Indiana residents may not know it yet, but they have followed the path of their Canadian neighbours, out of industrial labour and into a service economy.

It becomes apparent as you cross the tracks. A decade ago, Bloomington's largest employers were General Electric and RCA. Today, they are the state university, followed by a major hospital and then a large number of new high-technology industries, most of them in biomedical and computer-related fields, that have made Bloomington's east side a boom town.

This, it turns out, is the main reason why the town is so upset about the NAFTA superhighway. While a few of the industrial workers may be upset about the danger of more jobs disappearing to Mexico, most of the opponents say the biggest threat is the prospect of more heavy industry, not less. They see that economy as a thing of the past.

"Bloomington's economic advantage -- our competitive edge, our attractiveness for investment -- is all the things the interstate degrades," says Andy Ruff, a city councillor who has won two terms of office with a single-issue, anti-highway campaign.

"Bloomington offers a cultural, educated, natural environment that attracts the sort of companies that want to do work in the knowledge-based economy. You put an interstate through here, and you're just going to homogenize it. Those trucks are based on an economy that we put behind us."

Mr. Ruff lives in a pleasant two-storey house in a heavily treed neighbourhood with access to parks, restaurants and organic supermarkets. It is the sort of area that has attracted employers such as XJD, which makes mouse pads and other computer peripherals; Cooke Inc., which makes medical devices such as catheters; and a number of fledgling software firms.

People on this side of town believe that tying the region to the heavy-industry NAFTA corridor would actually drive those businesses away. It has become a zero-sum equation: Either you go for the knowledge-based, elite companies whose plants look like quiet campuses, or you go for the ugly, grey low-wage industries that park themselves along freeway interchanges. It's one or the other.

"The highway is going to destroy the character of the place," says Steve Higgs, the editor of the local weekly paper and a teacher at the university, "and drive away the kind of business we should be attracting. The future of Bloomington is not in factories and heavy industry and highways. It's not that kind of place any more."

It is, in truth, a place much like the areas of Ontario perched at the top of the road. There, the old blue-collar jobs of the chemical and auto industries are still holding on, but they're no longer the driving force. In much of Canada, the growth is in the service industries -- an equal mix of really good jobs, requiring education and skill and offering better pay than the old blue-collar work; and bad but plentiful jobs, requiring little skill and offering little stimulation, providing rudimentary salaries and little security.

The new economy, with or without NAFTA, has taken us down a strange and winding road, where Mississippi wants to be Mexico, Mexico is turning into Indiana and Indiana is trying to look away from Mexico and be more like Canada. Meanwhile, Canada, its passion for trade debates long spent, is struggling to stay aloft at the top of the highway.

Doug Saunders writes on foreign affairs for The Globe and Mail.

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