150,000 jobs at risk under pact Estimate is first by administration

September 11, 1992|By New York Times News Service

WASHINGTON -- Labor Secretary Lynn Martin conceded yesterday that the North American Free Trade Agreement could put up to 150,000 Americans out of work, while Democrats asserted that President Bush's plan to help the people who lost jobs was inadequate.

Under persistent questioning by members of the Senate Finance Committee, Ms. Martin became the first administration official to provide an estimate of U.S. jobs that would be lost with the elimination of trade barriers among Canada, Mexico and the United States.

U.S. Trade Representative Carla A. Hills has been asked repeatedly for an official figure in various congressional hearings and briefings but has stressed only the many economic studies showing that job gains would exceed job losses overall.

Some economists suggest that if the agreement changes the mood of U.S. executives toward Mexico, making them more inclined to invest there, then job losses could be heavy, and blue-collar wages in the United States could be lowered.

Partly because investment psychology is difficult to quantify, most studies have focused on the tiny size of the Mexican economy, the shortage of educated workers there and the existing low level of U.S. tariffs on imports from Mexico.

These studies have concluded that the elimination of trade barriers will not make a big difference in persuading companies to build factories there to supply the U.S. market.

Ms. Martin said the administration would set aside $330 million a year for five years to help workers who lose their jobs because of the agreement, and was prepared to spend up to $750 million a year if necessary.

But Democratic senators criticized the plan because it would require Congress to triple spending on job-training programs next year and because the administration has not suggested any specific spending cuts or new taxes to pay for this, planning instead to include the programs in next January's budget and pay for them out of general revenues.

Sen. Max S. Baucus, a Montana Democrat, asked Ms. Martin several questions about how the Labor Department calculated the need for the extra money.

She eventually responded that the program was based on a loss of up to 150,000 jobs over 10 years, and said this was the highest job-loss figure among 20 studies her department had reviewed, including a University of Maryland study commissioned by the department.

Under further questioning by Sen. Bill Bradley, a New Jersey Democrat, Ms. Martin said that the AFL-CIO had predicted the loss of 500,000 jobs but that her department had not included this estimate in its review. The AFL-CIO opposes the free trade accord even if it is coupled with a retraining package, because, ++ union leaders contend, there will be few jobs for the retrained workers.

House Majority Leader Richard A. Gephardt of Missouri on Wednesday called for the renegotiation of the pact, saying its labor and environmental provisions were inadequate. Mrs. Hills said at a seminar on Latin American issues at the State Department yesterday that it was not feasible to reopen the negotiations.

Mrs. Hills told Congress this week that if companies sought low wages alone with their foreign investments, many poor countries would be economic powerhouses. She has also asserted many times that nothing prevents U.S. companies from moving to Mexico now.

U.S. companies have already built many factories in northern Mexico because of a rule allowing them to assemble products there from U.S. parts and then ship them duty-free back to the United States. Employment in these factories climbed to 500,000 last year, from 120,000 in 1980.

The effects of this shift have been little analyzed. A Stanford University study estimated last year that the average low-wage U.S. worker's annual earnings in 2000 would be $50 lower with a free trade agreement than without one. But if heavy investment in Mexico accompanies the agreement, the average annual earnings would be $200 lower, the study found.

The same study found that high-wage workers would gain more than low-wage workers would lose, suggesting that the agreement would have a positive effect on the nation's economy.

But another study this summer by the Institute for International -- Economics, a Washington-based research group, concluded that "the main factor determining the relative wage prospects of unskilled workers is whether public and private programs enable them to shed their unskilled status."

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