Buffalo Area Warily Eyes The Renegotiation Of NAFTA

Oct 29, 2017
Originally published on October 30, 2017 8:28 am

Shortly after World War II, a young Buffalo company — Speed Motor Express — began transporting commercial freight around western New York.

As it weathered the ups and downs of the local economy over the decades, the company slowly expanded its fleet of trucks.

Then in 1994, the North American Free Trade Agreement, or NAFTA, expanded trade among the United States, Canada and Mexico. Buffalo faces Canada along the Niagara River.

Today, the freight company is called Speed Global Services, and it transports a wide array of goods, from bras to lighting fixtures, many of which were made in China.

Speed Global Services also stores the items in more than a million square feet of warehouse space. Most of its customers are Canadian companies looking for a distribution center in the U.S.

"We send now probably around eight trucks a day to Canada, and that's just going into the Greater Toronto area," company President Carl Savarino says. "It's the largest population in Canada, and it's 90 miles away. So there's a lot of goods moving back and forth."

Global trade has cost plenty of jobs in Buffalo over the years, helping to shrink the region's once-mighty manufacturing base. Today, many in the city view trade pacts with a jaundiced eye.

"We've lost hundreds of thousands of jobs in the industrial workforce. This was the third-largest manufacturing city in North America," says Richard Lipsitz Jr., president of the Western New York Area Labor Federation, which represents 100,000 workers.

Today, only about 11 percent of Buffalo's workforce is involved in manufacturing, compared with about 34 percent before 1980, he noted. Perhaps as a result of the changes, voters in the greater region turned out heavily for Donald Trump and his anti-trade message in the 2016 election, although the city of Buffalo voted for Hillary Clinton.

Lipsitz says NAFTA has helped accelerate the decline of U.S. manufacturing by sending jobs to Mexico, where pay is lower and worker protections are much less rigorous.

But that's only one aspect of changes in the local economy. Here's another: because Buffalo is so close to its neighbor, with Ontario just a quick trip over the Peace Bridge, NAFTA has created opportunities for many of the region's companies.

And many of them want to be part of a web of international commerce.

"You can be a buyer or a seller right here in western New York. You can jump in your car, visit a facility or a supplier or buyer in Hamilton (Ontario), work out a deal and be back here for dinner. That's the beauty of this relationship," says John Manzella, president and CEO of World Trade Center Buffalo Niagara.

Buffalo's Niagara Transformer Corp. makes devices that help regulate the flow of electricity from its source to its users. Because transformers cost a lot and take months to build, Canadian customers have long been reluctant to buy them if too much uncertainty were attached to the purchase, says the company's president, John Darby.

"Many customers would be worried, for example, that maybe the duties would change. Maybe the taxes would change at the border. So the economic calculation that they did perhaps might not be in effect when that transformer arrives at the border," he says.

NAFTA has changed that, stripping away the duties and other costs associated with Canadian trade. Today, Niagara Transformer has customers in more than 80 countries, including a large number just over the Canadian border. The transactions flow in the other direction, too: Darby buys specialty steel from an Ontario mill that would be tough to get elsewhere.

Darby notes that companies in low-wage countries such as China can easily undercut him on price, but they lack his proximity to Canada, which means they can't provide the same level of service.

The prospect that NAFTA could be renegotiated or even scrapped altogether, as President Trump has sometimes called for, would upend the business relationships Darby's company has built up.

"There's a high level of concern about instability. There's also a high level of concern about, well, what does renegotiation mean? What does that mean in terms of cost? What does that mean in terms of duties we might be faced with that we don't know about?" Darby asks.

That worries Niagara Transformer employees, such as 56-year-old Craig Duncan.

Duncan, who operates a computerized machine that customizes steel parts, has worked at one manufacturing plant after another over the years, only to see them shut down or leave the area. He's been at his current job for 15 years, his longest stretch ever.

"I've been put out of work before by other factors. Hopefully, we don't lose business because of a change in trade agreements. Something like that would affect me directly," he says.

Lipsitz, of the labor federation, says many of the jobs lost since NAFTA took effect have gone to Mexico, not Canada, where wages and worker rights are comparable to those in the U.S.

Still, he sees the renegotiation of NAFTA as a chance to reverse some of the trends that have done so much damage to Buffalo's economy over the years.

"We're concerned that the renegotiation of trade packages be done on a fair basis, not on a — quote — free basis, that it isn't just a question of capital moving more freely, but it's also a question of labor rights," he says.

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LULU GARCIA-NAVARRO, HOST:

Canada may have more to lose, but there are American businesses that are also worried about losing NAFTA. Across the country and the border, Jim Zarroli visited Buffalo, N.Y., where NAFTA has created jobs in areas that were economically depressed.

JIM ZARROLI, BYLINE: At Speed Global Services, workers carry goods around the vast warehouse floor using motorized hand trucks. The company started out in trucking more than 70 years ago, carrying goods around western New York. As manufacturing slowed, it turned to warehousing. Today, Speed Global stores and transports products such as bras and lighting fixtures around North America, products made in China and Mexico. Company President Carl Savarino says it mostly works for Canadian companies.

CARL SAVARINO: We send now probably around eight trucks a day to Canada. And that's just going in the greater Toronto Area. It's the largest population in Canada. And it's 90 miles away. So there's a lot of goods moving back and forth.

ZARROLI: Savarino says it wouldn't be possible without NAFTA. Buffalo was once filled with great, hulking manufacturing plants. Richard Lipsitz of the Buffalo AFL-CIO says many of the jobs are now gone.

RICHARD LIPSITZ: We've lost hundreds of thousands of jobs in the industrial workforce. This was the third-largest manufacturing city in North America - Buffalo, N.Y., was.

ZARROLI: Lipsitz says many of the jobs fled to low-wage countries decades ago. And NAFTA accelerated the process. Buffalo has adjusted by taking advantage of its border location. NAFTA has connected Buffalo to a web of international commerce. John Manzella heads the World Trade Center Buffalo Niagara.

JOHN MANZELLA: You can be a buyer or a seller right here in western New York. You can jump in your car, visit a facility or a supplier or buyer in Hamilton, work out a deal and be back here for dinner. And that's the beauty of this relationship.

ZARROLI: And that's been a lifeline for companies such as Niagara Transformer. The company makes large devices that help regulate the flow of electricity. They take months to build. CEO John Darby says, before NAFTA, Canadian companies didn't like to do business with U.S. companies like his.

JOHN DARBY: Many customers would be worried, for example, that maybe the duties would change. Maybe the taxes would change at the border. So the economic calculation that they did perhaps might not be in effect when that transformer arrives at the border.

ZARROLI: NAFTA has changed that. Darby now has large Canadian energy companies and utilities as customers. He buys specialty steel from an Ontario mill, and he employs Canadians under a special visa program. Mechanical engineer Eric Pelzer (ph) commutes from Ontario every day.

ERIC PELZER: When I first started working over here, they all - you know, I said, well, yeah, I work in the States. They go, work in the States? How can you do that? But now everybody - there's so many more people that work over here. So they commute back and forth and work in different places.

ZARROLI: For companies such as Niagara Transformer, the prospect that NAFTA could be renegotiated is a huge concern. Fifty-six-year-old Craig Duncan has worked at one manufacturing plant after another. One company moved to Ohio. Another was sold. Today, Duncan operates a computerized machine that customizes steel parts at Niagara Transformer. He's been there 15 years.

CRAIG DUNCAN: I've been put out of work before by other factories. Hopefully, you know, we don't lose business because of change in trade agreements. Something like that would affect me directly.

ZARROLI: But the AFL-CIO's Richard Lipsitz sees rewriting NAFTA as a chance to reverse some of the worst trends in manufacturing employment.

LIPSITZ: We're concerned that the renegotiation of trade packages be done on a fair basis, not on the, quote, "free" basis. It isn't just a question of capital moving more easily, but it's also a question of labor rights.

ZARROLI: Lipsitz says this is an especially big problem with Mexico. After NAFTA, many of the best jobs fled south of the border, where pay is much lower and worker rights are limited. The question is whether those concerns can be addressed without also hurting the Canadian trade that keeps Buffalo going. Jim Zarroli, NPR News.

GARCIA-NAVARRO: The NAFTA negotiations will continue into next year. And Canada is now talking tough and continues to eye other markets like China. Later in the show, we'll take a look at a planned pipeline expansion meant to increase Canada's oil exports to Asia. Transcript provided by NPR, Copyright NPR.