The factories' last gasp?

The job losses are real ... the recovery isn't

The factories' last gasp?

Not only locally but across the nation, manufacturing jobs continue to disappear. With competition from China, some say U.S. manufacturing is in grave danger.

By PHIL FAIRBANKS and JERRY ZREMSKI
News Staff Reporter
10/20/2003
Buffalo News

It's not just Buffalo. It's not just upstate. And it's not just the Rust Belt.

Upstate's three largest metro areas have lost 44,000 factory jobs since 2000, but just about every state in the union is bleeding manufacturing jobs.

And for those on the front lines - company presidents, shop foremen, skilled machinists - it sounds like a final death knell for America's economic lifeblood.

"There will be one global economic power, and it won't be us," said Lawrence Higbee, head of Higbee Inc., a longtime gasket manufacturer that employs 52 people in East Syracuse.

Instead, it could be China.

That's where manufacturers in upstate New York and nationwide place the blame for plant closings and job losses that just won't quit, dragging down states from coast to coast.

Economists say China's unfair trade practices explain why so much of this country has joined, and even surpassed, upstate New York when it comes to job loss.

Ten years ago, jobs were moving from older factories upstate to newer factories in North Carolina and Texas. Now, even plants in the South are closing and moving to Southeast Asia.

"The Chinese pay people $1 an hour, and I pay people $26 an hour," said Jack Davis, the president of a small manufacturing firm in Akron, who has launched a personal battle for trade sanctions against the Chinese. "Nobody in manufacturing can compete with that kind of difference in wage rates."

Job figures suggest Higbee and Davis - and manufacturers nationwide have good reason to be afraid:

The Buffalo, Rochester and Syracuse metro areas each lost 17 percent to 20 percent of their factory jobs since 2000.

Each of those three communities gained jobs in other sectors, but those gains pale in comparison to the loss of manufacturing jobs. Rochester, for example, created 4,900 new jobs in other sectors but lost 21,000 factory jobs.

More than half of the 50 states, including Michigan, Ohio and North Carolina, lost jobs at a faster rate than upstate, and Rust Belt regions that showed signs of revival five years ago are again losing population.

Economists say that this recession is far different, and far worse, than the four that preceded it over the past three decades.

In previous downturns, they say, the job losses were temporary. Employers laid off plenty of workers but brought most back when times got better.

This time around, companies are simply eliminating jobs.

The proof lies all along the Thruway and all across the country.

In Syracuse, 5,000 Carrier Corp. workers either have lost their jobs or will next year. The world's largest maker of heating, air-conditioning and refrigeration systems is shutting down two plants and moving 1,200 jobs to Singapore and Georgia.

In Rochester, 12,000 employees at Kodak lost their jobs over the past five years. The city's largest employer has reduced its work force from a high of 62,000 in 1982 to about 21,000 today.

Meanwhile, Michigan has lost 296,700 jobs in the past three years, almost all in manufacturing. North Carolina has lost about half that many, and Oregon has seen jobs disappearing at three times the rate of upstate New York.

Economists nationwide echo what Steve George, a union leder in Rochester, said about the jobs lost there.

"Those jobs are gone. I don't ever see them coming back," said George, business agent for the Union of Needletrades, Industrial and Textile Employees.

Where the jobs are going

One of the reasons such jobs are not coming back is where most of them are going: halfway around the world.

They're going to China and to other Asian countries, and they're going in one of two ways.

Some companies, such as Leica Microsystems of Depew, move jobs from America to the cheap-labor countries of the Far East.

And others, such as Davis' I Squared R Element Co., see Chinese companies undercutting their prices and stealing their business.

China can do that, in part, because it is artificially keeping the value of its currency low. Whereas most countries allow their currency's value to float freely on international markets, China keeps its currency artificially tied to the dollar at the same rate it has traded at since 1994.

That means the Chinese currency, the yuen, is undervalued by upwards of 40 percent, experts say. That discounts the cost of everything China exports to the United States.

Davis found that out the hard way nine months ago, when Chinese heating elements - similar to those his company makes in Akron - showed up on the American market at a third the price of his products.

"A communist country is defeating us," Davis said. "They don't have to send missiles. They're sending over cheap goods and destroying our industry."

That's also why upstate's economic plight - a 30-year decline in good-paying factory jobs - is now spreading across America.

"We were in a strange way the leading edge of what is now happening elsewhere," said Sen. Hillary Rodham Clinton, D-N.Y.

She blames not just the Chinese for the downturn, but also American businessmen.

"We have a generation of American business leaders who have apparently forgotten they are American citizens first and foremost and that by virtue of being American citizens they have been given more blessings than anybody anywhere could ever count," Clinton said.

"And how do they repay this country? By looking after themselves first and foremost and by chasing the quarterly bottom line to the extent that nobody envisioned prior to the last 10 to 20 years."

Congress debates tariffs

The manufacturing collapse has left both the Bush administration and Congress struggling to respond.

China's manipulation of its currency will be one of the topics President Bush raises when he meets with Hu Jintau, China's president, during an economic conference this week in Bangkok, Thailand.

"I'm going to say that where there (are) trade imbalances, countries need to be mindful that we expect there to be fair trade," Bush recently told a group of Asian journalists.

Congress agrees on the need to change China's monetary policy, but its members differ widely on how to pressure the Chinese. The arguments range from quiet diplomacy to tariffs.

"I believe some tariffs would work," said Rep. Jack F. Quinn, R-Hamburg, and he's not alone.

Twelve senators, half of them Democrats, the other half Republicans, have signed on to a bill by Sen. Charles E. Schumer, D-N.Y., imposing a 271/2 percent tariff on all products imported from China unless the world's biggest nation agrees to raise the value of its currency.

Similarly, 60 House members have signed onto a bill that would add a tariff that equals the effect of China's manipulated currency.

"We simply cannot allow countries like China to continue their illegal, anti-free market trade policies," said Rep. Mark Green, R-Wis., a sponsor of the House bill.

In addition to tariffs, Clinton said America should pursue a trade violation case against the Chinese, since currency manipulation violates World Trade Organization rules.

Most-favored-nation status

Schumer, like many members of Congress, is relatively new to China-bashing.

He joined Quinn and Reps. Thomas M. Reynolds, R-Clarence, and Amo Houghton, R-Corning, in voting for most-favored-nation trade status for China in 1999, although Quinn reversed his vote a year later, saying he was unwilling to give China a permanent place at the free trade table.

Was it a mistake to give China that free-trade boost?

No, Schumer responded.

"In those days, we didn't have the huge trade deficit that we have now," he said. "It's only in the last number of years that China has started doing what it's been doing."

Chinese exports to America have tripled since 1995, and China now exports six times as much to America as America exports to China.

Those numbers worry free-trade advocates like Houghton, former chairman of Corning and the only former CEO of a Fortune 500 company to serve in Congress.

"If we're not careful," he said, "we could have decapitated companies."

Anti-trade politics

An entirely new trade politics may emerge, with the longtime bipartisan consensus for free trade crumbling.

Even some longtime supporters of free trade are now speaking out, saying America can no longer act as if open markets are always a panacea.

Davis, for one, last week goaded the Erie County Legislature into passing a resolution asking the federal government to consider tariffs "to restore equity and fairness to the international economic playing field." He now plans to push similar resolutions across the country.

Some businessmen take an even blunter approach. When Edwin G. Nelson, of Waterloo in the Finger Lakes Region, recently got a letter from the Republican Party asking for money, he wrote back a scathing response.

"Until I see some action on this unfair-trade issue, I'm not sending any money to the Republicans," said Nelson, whose company, Timber Harvester, has cut its work force from 20 to 10 due to competition from China. "I'll send it to my creditors instead."

A bipartisan chorus

While liberal Democrats have long had doubts about free trade, some conservative Republicans in Congress are joining the chorus.

"The Chinese cheat on their trade agreements," said Sen. Lindsey Graham, R-S.C., who joined Schumer and Clinton in calling for possible tariffs against China. "In my home state, I've seen the devastating impact illegal Chinese imports have on our domestic textile industry." Conservative Republicans from Wyoming and Kentucky are also supporting the tariff proposal, and Schumer said support for it is bipartisan and very strong. The bill is likely to come to the Senate floor in the next few weeks, and when it does, the widespread support for it "will knock people's socks off," Schumer said.

Yet few in Congress expect such measures actually to pass. Instead, Clinton said Congress can merely "send a message" to the Chinese.

The actual policy effect of growing protectionism is more likely to be felt when the Bush administration completes future trade agreements and finds a Congress reluctant to approve them, congressional sources said.

And that means Washington will be doing little in the short term to help people like Alfred Audi, president of Stickley Furniture outside Syracuse.

"We're working harder every day, but we're concerned about the future," said Audi, whose company employs 1,300 people. "We don't want American companies to become shell corporations. We have to hold on to our manufacturing base."

e-mail: pfairbanks@buffnews.com

e-mail: jzremski@buffnews.com