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Cheap labor lures firms to foreign markets

December 15, 2003|by JULIE E. GREENE

GST AutoLeather, Berwick Offray, Statton Furniture, local apple growers - all have been affected by growing international competition fueled in large part by cheaper labor costs.

GST AutoLeather is the most recent and obvious casualty as company president and chief operating officer Mark Lecher announced in November that the automotive leather manufacturer's cutting plant near Williamsport would close by early 2004 and that work would be sent to Mexican plants in Nuevo Laredo and Saltillo.

The move will cost approximately 245 local jobs and led some members of the Union of Needletrades, Industrial and Textile Employees to blame the North American Free Trade Agreement (NAFTA) that was approved by Congress in 1993.


The automotive leather manufacturer also is expanding operations in China, but Lecher has said those plants won't cost local jobs because the intention is to sell the products made in China to clients in Asia.

Whether it's trade agreements, tariff structures or other factors making it easier for international companies to compete in the U.S., local firms need to find ways to become more competitive to survive. Tariffs are taxes on exports and imports.

Trade agreements like NAFTA allow companies to send work to foreign countries that have cheaper labor and don't have labor and environmental laws to abide by that U.S. companies do, said Don Forcino, president of the Central Maryland Labor Council, AFL-CIO.

"We're eventually being a country of a bunch of warehouses that distribute products made in foreign countries, and, of course, our workers are suffering because you now go from a decent-paying job in manufacturing to a lower-paying distribution or service type job," Forcino said.

According to an analysis by the Economic Policy Institute, every state has experienced a net loss in jobs that were lost because of NAFTA between 1993 and 2002.

The mantra for many U.S. union workers and companies had become "fair trade, not free trade."

Generally speaking, tariffs on U.S. manufactured products exported to foreign markets have been higher than tariffs on foreign products being imported to the United States, said L. Michael Ross, president of the Franklin County Area Development Corporation.

A U.S. company that pays $15 an hour plus benefits could be competing with Chinese companies that don't pay benefits and pay an average wage of 61 cents an hour, Ross said.

Other advantages China, specifically, has are government subsidies that prop up manufacturers that otherwise would go out of business and higher tariffs on imports to China that are being phased out, said Scot Montrey, spokesman for the National Association of Manufacturers in Washington, D.C.

Tom Statton, vice president of Statton Furniture Manufacturing Company in Hagerstown, said the company announced layoffs for six workers this past week, in part because of Chinese imports driving down the price of furniture and furniture parts.

The company is competing directly against Chinese manufacturers when it comes to making chairs because chairs are labor intensive, Statton said.

Statton said the industry has filed a complaint with the U.S. Department of Labor about China pegging their currency to the U.S. dollar.

By tying its currency value to the dollar, the Chinese are making their exports artificially cheap and U.S. exports to China artificially expensive, Montrey said.

"Screwing around with your currency. That's not a natural competitive advantage. That's cheating and that's what the Chinese have done for a long time," Montrey said.


Lecher said he doesn't know how much of an impact trade agreements like NAFTA made on GST AutoLeather's ability to do more work outside U.S. borders because he entered the global business world after those agreements were already in place.

What he does know is he is trying to maintain GST AutoLeather's financial viability as it competes with companies around the globe, Lecher said.

That means using a regional manufacturing strategy and moving cutting work to Mexico where labor is cheaper and the work is done closer to customers, Lecher said.

U.S. companies need to adopt lean manufacturing practices, using technological advances to be quicker and more flexible so they can remain competitive, Lecher said.

Officials with GST AutoLeather, formerly known as Garden State Tanning, are looking at putting more efficient equipment in place at the finishing plant on Clear Spring Road, Lecher said.

Companies need to use technology to create more efficient production processes that lower costs and increase output without increasing the number of workers, Ross said.

But, the government has to help, too, Ross said.

The nation's trade agreements need to be re-evaluated to make sure they are fair, Ross said.

Montrey said many people want more tariffs imposed on foreign imports, but that would drive up prices of consumer goods.

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