Expert Says Canadians Profit Most From NAFTA

By Ed Oliver
May 2003 Print Edition

Sidebar: Made In Massachusetts

The people who benefit the most from NAFTA are the Canadians, our biggest trading partner, says Jack Healey, Director of Operations at the Mass. Manufacturing Extension Partnership Program. He acknowledged that NAFTA will soon expand all the way South.

When Ross Perot said there would be a giant sucking sound of jobs going South, they really went East, says Healey.

		"We pay more for one month of an employee's health care than they pay an employee all year," says Healey. "This is a national issue. We've lost over two million manufacturing jobs in the last two years in this country. No one gets upset." But, on the other hand, "There was no discussion in the governor's race about loss of manufacturing jobs" says Healey.
Every job at Cranston Print Works creates 2.37 additional supporting jobs.

Two-thirds of the manufacturers in our state have fewer than twenty employees, 82% have fewer than fifty employees and 92% fewer than a hundred says Healey.

"It's a small business, a real small business. They don't have Chambers of Commerce speaking for them. They can't leave their places of employment and go out to lobby. They are trying to make payroll," says Healey.

Healey said a large part of our workforce is not highly educated and cannot work in industries like biotechnology, but he doubts that lower-end manufacturing like shoe companies can come back here because of competition with foreign companies.

American shoe companies buy their products offshore and import them, he says, either from Korea, China, Sri Lanka or some other place.

Shoe companies were a traditional industry for Massachusetts, says Healey. We also made machinery to produce shoes and ended up making machinery for other industries. Until ten or fifteen years ago, machinery and equipment was the biggest industry we had in our state, he says.

That has disappeared primarily because we have not enacted tort reform for product liability, he says.

For example, if you make a machine in Massachusetts and put the name of your company on it, a hundred years from now a person who uses it for a purpose it wasn't designed can sue the owner of the company.

Many states have broken the chain of liability for the original manufacturer when a person removes safety devices and substantially modifies a machine for a purpose it wasn't intended, but we have a lawyers lobby here preventing such reform, says Healey.

One thing the Massachusetts legislature can do for manufacturers besides tort reform is to provide an education for kids who do not go on to college or don't finish college, so they are able to get a gainful job.

Healey asks who is going to train kids for a job? We don't have a system in place for technical training, he says.

Big manufacturers used to train workers, but we have lost 50% of manufacturers with over 500 employees. The ones that remain don't spend an awful lot of money on training employees, he says.

The lower tier companies end up learning how to train their own employees. They used to live off people leaving the large companies and coming to work for them, says Healey.
The workforce-training fund established by the legislature in 1999 was a good response, says Healey. It works and should be supported.

The money comes from a surplus in the unemployment insurance fund, but it was raided by the legislature to support the deficit, he says.

The cost of hospitalization in Massachusetts is far in excess of other states, and is a serious issue that will continue to drive businesses away, says Healey.

One thing we do well in this state is produce things more efficiently, which cuts costs, says Healey.

The Mass. Manufacturing Extension Partnership works with small and medium sized manufacturers to help them improve their productivity, showing them ways to remain competitive in today's business climate.

Headquartered in Worcester, the non-profit M.E.P. charges for services but also receives state and federal subsidies that may be eliminated, he says.

With the state providing $850,000 for the program, the federal government in turn provides a much larger grant. The M.E.P. produces $9.5 million in state taxes annually through increased productivity, says Healey.

The National Governor's Association has asked Congress to provide full support this year for the M.E.P., which the administration has targeted for a 90 percent reduction in funding. The program has 400 centers nationwide.

Manufacturing provides slightly more than 50% of the economic base of Massachusetts. The base is described as the part of the economy that actually produces wealth, says Healey.
In Boston, 38% of the base jobs are in manufacturing. But if you go outside of Route 495, the manufacturing base number is 74%, he says.

"For a little more than one third of the salaries, it stands to reason that we would be about 70% of the economic base," says Healey.

"Manufacturing drives the economy. When people look at numbers of jobs, they don't understand the economic impact. Outside of Rt. 495, without manufacturing we're Vermont without the cows."

Manufacturing is in a contracting period right now. It has the ability to come back, and it will, but it has these ebbs and flows, says Healey.

He tells MassNews that people think job-losses are a reflection of how friendly or unfriendly the state is toward manufacturing, but he says that is not necessarily true.

North Carolina, which is viewed as a business friendly state, has lost more jobs than Massachusetts since April 1998, he says.

First and foremost, says Healey, all manufacturers have been affected by the overvalued dollar.

Companies in Canada are delivering essentially the same machines we make here for 40% less.

"That's been a severe problem for manufacturers in this state in terms of promoting their products," he says.

Also, many of our manufacturers sell to larger manufacturers, who eventually sell overseas. Overseas sales have been depressed, he says.

So first, there is the very vast price differential, says Healey.

The second thing is the Far East, especially a very aggressive China that has been going out of its way to produce products and to get market share he says.

There have been real concerns about whether this country is enforcing its trade laws. There are all kinds of indications of currency manipulations in the Far East, says Healey.

It gets complicated, he says, but the issue here is we are competing but we don't have a Department of Commerce that is really enforcing its own trade regulations.

Referring to comments by Rep. Asselin D-Springfield to MassNews that there are no more manufacturing jobs coming in, Healey tells MassNews that Springfield and the whole western Mass. area had a lot of mold makers. Three out of four molds are now imported, says Healey. "We give incentives for American companies to go offshore. It's cheaper for them." For all intents and purposes, China can sell to us with no trade barriers but for us to sell to them to them we have a 17.5 percent duty, says Healey. "Much of the problems we have are on the micro level, but on the macro level, the government has to take a firmer hand," he says.
		Rep. Christopher Asselin (D-Springfield) says there are no more manufacturing jobs coming in and we must allow gambling.

So, the national government has to do something about the dollar, currency manipulations and has to start enforcing our trade laws, says Healey.

Countries are also selling below cost and dumping products on the U.S. market, says Healey. The government did do something about steel dumping by putting on tariffs, he says, but only because it was a big issue and the president wanted both Pennsylvania and Ohio in the election.

Sidebar:
Made In Massachusetts

Massachusetts makes a wide range of products including electronics, pharmaceuticals, golf balls, plastics, razor blades, textiles, telecommunications hardware, missiles, industrial machinery, precision measuring tools, chemicals, medical instruments and paper.

Manufacturing brings new money into the state and generates new, supporting jobs. It represents half of our "base" economy jobs. Base economy jobs are those which produce growth through exports.

According to Mass Insight's "Made in Massachusetts" report, manufacturing is divided into three categories:

High-Tech includes aerospace, ships, computer hardware, telecommunications, semiconductors, medical instruments, other instruments.

Traditional Durable includes machinery, fabricated metal and other traditional Durables.
Non-Durable includes chemicals, plastics and others.

Using Mass. Taxpayers Foundation data, the report says that in Greater Boston, non-manufacturing jobs represent 60% of the base economy with management consulting, software, private universities and financial services.

Outer Massachusetts beyond I-495 has a dominant manufacturing sector, with 31% of base economy employment in Traditional Durable, 25% in non-durable, 17% in high-tech manufacturing.

The Cape and Islands have very little manufacturing. The Central and Connecticut Valley regions have a lot of traditional manufacturing, especially in durables, and the small Berkshire region has a disproportionately large share of non-durable manufacturing.