The following message bounced to me, because the attached report made it too big (800Kb+) to be distributed to the list. I'm forwarding it without the attachment, so those of you interested in reading the report will have to go to www.mitc.com. Sorry for the inconvenience.
Jon
Date: Mon, 12 Jan 2004 13:52:50 -0500 Subject: NAFTA report From: Robert Kates <[EMAIL PROTECTED]> To: reality tour listserve <[EMAIL PROTECTED]>
Today's BDN carried this story and I have attached the report. Do we want to discuss this on Saturday?
Bangor Daily News - Print this Article By Deborah Turcotte, Of the NEWS Staff e-mail Deborah Last updated: Monday, January 12, 2004
Economy's ills beyond NAFTA
BANGOR - Any of the 18,000 manufacturing workers statewide who lost their jobs in the last three years will say their positions were eliminated as a result of increased foreign trade. Usually the angry cry from the workers is just one acronym - NAFTA.
But that's only partly true, according to a report issued last week by Planning Decisions Inc., a public policy consulting group in South Portland. NAFTA - the 10-year-old North American Free Trade Agreement that will phase out tariffs on imports and exports among the United States, Canada and Mexico over 15 years - is not the sole reason for the ailing economy in at least two-thirds of the state.
Only 4,400 jobs were directly lost because of trade pressures from Canada and Mexico between 1993 and early 2003, according to the report, which outlines winners and losers throughout the state as a result of NAFTA. The other 13,600 manufacturing job losses, and the reduction of thousands of other jobs in communities that were supported by manufacturing purchases and wages, are attributable to other foreign economic pressures. Those include U.S. companies moving production overseas, to the Caribbean or Asia, or low-priced imports from foreign countries.
The U.S. Department of Labor certified the NAFTA-related unemployment numbers after reviewing applications for trade adjustment assistance benefits for laid-off workers which were submitted to the federal government by the Maine Department of Labor.
The report, titled "The Effects of NAFTA on the Maine Economy," was commissioned by the Legislature and prepared by Planning Decisions for the Maine International Trade Center. Its 73 pages outline increased imports and investments primarily from Canada into Maine's economy, and gains in exports from Maine to Canada. Maine experienced export gains in fishing and related products, while lumber, wood and paper exports have dropped off by 12 percent.
"Since 1993 Maine's exports and imports have more than doubled, creating more export-based jobs and providing wider purchasing choices to Maine's businesses and consumers," according to the report. "Canadian firms have made important investments in Maine's natural resource industries. Increased specialization within the geographically natural economy that Maine and the Canadian Maritimes comprise has strengthened the global competitiveness of potatoes, blueberries and aquaculture."
Yet the report's writer, economist Charles Lawton, admits in the publication that not every positive or negative impact of NAFTA on the state could be identified, and that some highly visible industries are hurting more than others as a result of the trade policy. Wood products, food processing and some segments of the metals industries have experienced tremendous net job losses, Lawton said.
"This study is not a comprehensive analysis of gains and losses from NAFTA," Lawton wrote. "Such a study would require greater analysis of consumption gains and investment flows as well as job and trade flows."
What's evident, however, is that Maine and the rest of the country have benefited from increased investment from Canada. Between 1993 and 2000, Canadian investment increased nine fold to more than $27 billion, according to the report.
Canadian companies are viewing Maine as an entry point into the American marketplace even though U.S. companies don't look to the state as a place to do business because of its high energy rates and taxes. Numerous companies, such as Emera Corp. of Halifax, Nova Scotia, J.D. Irving of Saint John, New Brunswick, Brascan Corp. of Toronto and its subsidiary, NexFor-Fraser Papers, and McCain Foods of Florenceville, New Brunswick, have invested hundreds of millions of dollars in businesses throughout Maine.
Three major paper mills and eight lumber mills are owned by Canadian firms, while half of Maine's forestland still in industry hands is owned by Canadian paper companies, according to the report. Maine and Canadian blueberry growers and processors participate in joint branding and marketing programs, and the flow of petroleum and wood pulp products through the port of Portland has created new jobs, the report stated.
Timothy Woodcock, a Bangor attorney who is active in promoting an economic union of New England and Atlantic Canada as a cooperative marketplace, said Maine is attractive to Canadian firms because its natural environment is similar to that of the Maritimes.
"Maine is a logical place for them to expand," Woodcock said. "They have the capital to do it. As much as we are seeing the Canadian investment, what we're not seeing is commensurate U.S. investment. NAFTA has nothing to do with the U.S. investing in Maine."
He said that when Georgia-Pacific Corp. announced last year that it would shut down a machine at its Old Town mill, it also announced an $80 million investment in a machine in Louisiana. The loss of jobs in Old Town wasn't attributable to NAFTA and wasn't included in economist Lawton's report.
The reasons U.S. companies aren't investing in Maine - such as business permitting, high taxes and energy rates - are something state policy-makers "have to get their hands around" and turn around, Woodcock said.
The Legislature's recent request to review NAFTA, he said, was long overdue and actually should have been started in 1988, when Canada and the United States entered a pre-NAFTA era with the U.S.-Canada Free Trade Agreement. That agreement contributed to a "largely permanent alteration of Maine's economic terrain," Woodcock said.
Not included in the report were the thousands of jobs lost at Great Northern Paper Inc., Kent Inc. in Fort Kent, and Hathaway Shirts in Waterville. Increased foreign trade or a company's desire to move production overseas were the reasons for the job losses, but the pressures came from countries other than NAFTA members Canada and Mexico, according to the report.
"During the same time that NAFTA has been implemented, the U.S. and world economies have gone through a full business cycle from recovery to boom to bust and now back to recovery, the value of the Canadian dollar has dropped 18 percent, and U.S. trade with China has doubled," Lawton wrote.
U.S. Rep. Michael Michaud said all foreign competition, whether from Canada, Mexico or China, is having a negative impact on Maine that isn't measured in the report. He said he believes the unemployment numbers to be "woefully inaccurate" because they don't reflect the small businesses dependent on manufacturers that had to lay off workers when business slowed or closed altogether. Those small businesses, he said, weren't eligible for trade adjustment assistance and therefore the federal or state government wouldn't know about them.
"I think there are holes in some of the analyses that need to be flushed out," Michaud said.
For example, Great Northern in the 1980s employed 4,500 people and produced 75 percent of directory paper sold in the United States. Now, 50 percent of the directory paper sold in the United States is imported, Michaud said.
The true price of products can be perceived as a double-edged sword under NAFTA, according to the report. The trade agreement offers Maine consumers and businesses lower prices from lower-cost imports, which frees up personal income for other uses. Yet, the substitution of lower-cost imports from Canada and Mexico for U.S. goods reduces jobs and income in Maine, the report stated.
Michaud said that under NAFTA, consumers actually do not save any money because of lower-cost imports. The reduction of good-paying manufacturing jobs means less tax revenue into the state and more people dependent on state services such as unemployment benefits and health care coverage.
"We've got to look at the rippling effect of losing these good-paying jobs," he said. "Are the [lower-cost imports] really less or a figment of people's imaginations?"
Michaud has co-sponsored bipartisan legislation to repeal NAFTA, introduced legislation to repeal the Trade Promotion Authority Act of 2002, which allows the up or down vote in Congress for the passage of a trade agreement without any amendments, and signed on to at least seven other measures he believes are detrimental to Maine's ability to compete with foreign competitors.
On the state level, the report suggests that the Legislature:
- Establish a working group on the competitive effects of comparable state and provincial tax and regulatory policies;
- Promote a Maine-Atlantic Canada economic corridor, an effort already under way by Gov. John Baldacci, MITC, Woodcock and others;
- Link federal trade adjustment assistance programs to longer-term education in the state's university and college systems, and link the assistance programs for firms to other state economic development assistance programs;
- Mandate an annual "State of Globalization in Maine" report to be delivered to the Legislature by MITC.
The report can be found at www.mitc.com.
Jonathan Falk
RR 2, Box 7162
Carmel, ME 04419
(207)848-2433
