Down Mexico way.

• Author: Zelenko, Laura
• Position: North Carolina manufacturers facing hiring of Mexican factory workers upon approval of North American Free Trade Agreement - International Business Report

Is that where Tar Heel jobs will be headed if the North American Free Trade Agreement is approved?

Jack Stanfield hasn't been afraid to make dramatic changes to keep his Greensboro-based hosiery company afloat, so it's no surprise that he plans to be ready when Mexican trade barriers fall.

In his 14 years as president, Stanfield has moved Hampshire Hosiery Co.'s production from the Northeast to the low-wage Sun Belt and introduced automation at his company's plants in Spruce Pine and Concord. Now, with the North American Free Trade Agreement signed, Stanfield, 61, believes establishing a foothold in Mexico may enable his $50 million-a-year company to stay competitive.

NAFTA appears to have a good chance of congressional approval. Like the 1989 free-trade agreement between the United States and Canada, the Mexican pact would reduce and eventually eliminate quotas and tariffs that regulate U.S. trade with its southern neighbor. Tariffs on about half the products traded between the United States and Mexico would vanish as soon as the agreement went into effect, and the remainder would be lifted over five to 15 years. NAFTA would create a trillion-dollar North American common market stretching from Alaska to the Yucatan Peninsula and encompassing 363 million people.

For North Carolina manufacturers -- particularly apparel makers and others in low-wage, labor-intensive industries -- the agreement means opportunity to hire Mexican factory workers, who make just 10% to 30% as much as their American counterparts. For some North Carolina workers, it could mean trading low-paid jobs now for better jobs in the future.

Apparel -- an industry in which labor now accounts for 31% or more of production costs, compared with 22% to 25% for textiles -- depends on a large pool of workers to do tedious handwork. In North Carolina, that pool is drying up. "There are a number of places that you can't find enough workers at the wages that the apparel industry has to pay to remain competitive," says Carl Priestland, chief economist at the Arlington, Va.-based American Apparel Manufacturers Association. "In a sense, the apparel industry is pricing itself out of the U.S. market."

Union leaders and other NAFTA critics fervently assert the agreement will trigger a dramatic shift of apparel and textile jobs to Mexico. Bruce Raynor, international vice president of the New York-based Amalgamated Clothing and Textile Workers Union, says as many as 250,000 jobs could be lost nationwide within the first 12 to 18 months after NAFTA. U.S. Labor Secretary Lynn Martin, an avid supporter, has conceded that NAFTA could cost the country 150,000 jobs over 10 years.

"There's no question that more labor-intensive industries will be those that tend to set up quicker along the border, and our mix of industries tends to be labor-intensive," says Christopher L. Scott, president of the North Carolina AFL-CIO in Raleigh. "The theory of the free-trade agreement is that in the long run we'll get other jobs, we'll move into higher-technology sectors and so on. But there's no question that North Carolina has lots and lots of folks who need the kinds of jobs that we have here and will not do well in an economy that's devoid of the guts of manufacturing."

Others insist NAFTA will put few Tar Heels out of work. "We don't see this great loss of jobs and great need for retraining," says Doug Galyon, public-affairs director of Greensboro-based Guilford Mills. "We think there are going to be new jobs created."

"History has shown always when trade expands, wealth is created. Most people seem to feel if you export you win, if you import you lose. Any time somebody trades, wealth is created," UNC-Greensboro finance professor Donald Jud says. "If you buy something from Mexico, you're doing that presumably because it was a better deal for you. It saves you money, and it may enable you to spend more on something else. So keep your eye on the long term."

Economists and most business leaders say it's a gross simplification to view NAFTA as little more than a license to pay Third World wages, avoid U.S. environmental regulations and pocket huge profits, while leaving North Carolina's low-paid factory workers to their fast-food fate. For the state's manufacturers, the trade agreement also means an opportunity to sell goods in Mexico without paying the tariffs that make their products more expensive south of the border. The Institute for International Economics in Washington projects that, while 150,000 unskilled U.S. factory jobs would be lost because of NAFTA, the agreement would result in 325,000 new jobs by 1995. Guilford Mills CEO Chuck Hayes thinks the free-trade agreement will prompt a "renaissance" of the textile industry in the United States: "We very nearly lost our industry to the import of garments from the Far East, and we need to find some place to make garments that can be sewn as cheaply as in Malaysia, and we've found it -- Mexico."

Donald Jud ticks off a few industries likely to prosper through selling to Mexico...