Gap Widens Between Trade Winners, Losers

As the US steams to a record trade deficit, controversy over its impact gains speed.

Flavio Dealmeida and Nancy DeWent have each punched factory time clocks for more than 20 years; they make about $11 an hour; and their fortunes have radically changed because of freer trade.

Ms. DeWent learned last month that her employer, stapler-maker Swingline, is moving her factory job, and 200 others, from Long Island City, N.Y., to Mexico.

Free trade has been kinder to Mr. Dealmeida. His company's textiles - but not his job - have gone to Mexico ... and Europe, Latin America, East Asia, and the Middle East.

Trading up

Five years ago his employer, Quaker Fabric Co. in Fall River, Mass., launched into an export binge. Now his pension and health insurance benefits have dramatically grown. "I see a long future for me at this company," Dealmeida says.

Freer trade for the United States has long produced a wide gap between workers like Dealmeida and DeWent.

But if job losses from trade persist, experts expect trade to return as a front burner political issue.

Trade numbers from the Commerce Department this morning will likely show the US near a record deficit, more than $200 billion this year.

A big trade deficit usually means the loss of millions of jobs, as US consumers shift their purchases from "Made in America" to goods produced on foreign shores.

But the picture has become more complex. The US increasingly depends on exports for jobs and economic stimulus. Although exports make up just 12 percent of gross domestic product (GDP), they fueled more than 40 percent of the economy's growth from October last year until June this year.

As trade plays a bigger role in the economy, it brings loss or gain to more workers. "The numbers of workers on both sides of the balance sheet are getting bigger," says C. Fred Bergsten, director of the Institute for International Economics in Washington.

The greater number of winners and losers makes trade more controversial. "There will be rising tensions over trade in the next several months," says Robert Lawrence, professor of trade and investment at Harvard's Kennedy School of Government in Cambridge, Mass.

"Inevitably, as America becomes more active globally, people develop a perception that their hardship is the result of trade," he says. Such resentment will flare if the six year economic expansion flags and unemployment rises, analysts say.

Surplus of trade politics

Already, the trade deficit has reemerged as a prickly issue, complicating efforts by President Clinton to win from Congress greater power to negotiate "fast track" deals with trading partners. Experts say the political tension will probably rise as the deficit expands because of several persistent forces:

* The high value of the dollar makes imports cheaper and exports more costly. Since July 1995, the trade-weighted value of the dollar against 18 currencies has risen 14.8 percent. The resulting trade deficit has only begun to grow, because it can take two years for a currency shift to alter trade patterns.

* Companies in the troubled economies of Japan and Southeast Asia will step up shipments to the US in coming months. They see exports as a source of economic health. China, with the second biggest trade surplus with the US after Japan, aggressively uses exports to pull itself toward prosperity.

* The robust US economy, with more than 3 percent growth this year, continues to lure imports. because economies of its trading partners remain weak. The difference in economic vitality accounts for about half of the trade deficit, says Mr. Bergsten.

* Americans show no sign of saving more and will probably continue to borrow from overseas. Most dollars spent on imports eventually are invested in US securities or Treasury bonds.

Even prior to this year's record deficit, the two-edged sword of trade left its mark across much of working America. The umbrella labor organization, the American Federation of Labor-Council of Industrial Organizations, estimates that 250,000 to 420,000 workers have lost their jobs this decade because of freer trade with Mexico. Government estimates are lower.

At the same time, 12 million US workers would not have their current jobs if not for foreign markets, according to the US Department of Commerce. For many companies, exports offer new markets for growth and some of the sweetest profit opportunities. Also, cheap imports are keeping inflation in check.

"If you think of how freer trade has helped keep inflation down and the economy growing, then the whole picture of imports changes," says I.M. Destler, a professor of public policy at the University of Maryland. Free trade advocates note that although the deficit is high in dollar terms, it is smaller in relation to GDP than during the mid-1980s.