MARTINSVILLE, Va. — Gene Teague lost two jobs in two years as clothing manufacturers in his hometown bowed to pressure from offshore competitors and closed their local operations.
Mr. Teague, 41, now works at a third apparel company, Nautica Enterprises. But he’s not terribly worried that it will pack up and leave town.
“They don’t make anything,” says Mr. Teague, a customer-service manager at Nautica’s distribution center and part-time mayor of this small town. “They’re a company that buys all of its products [from other manufacturers]. So I think their longevity is pretty secure.”
The problem for Martinsville, a town of more than 15,000 on the border with North Carolina in the foothills of Virginia’s Blue Ridge Mountains, is that the local economy used to be based on making things — especially clothing and furniture. But NAFTA, enacted in 1994 amid the rising tide of globalization, hurt Martinsville and dozens of other U.S. manufacturing towns.
In this series, The Washington Times examines Martinsville and two other small cities — Cortland, N.Y., and Lewiston, Maine — that suffered massive layoffs amid wrenching economic changes. Each is at a different stage in efforts to retool by replacing traditional industries with new companies and new jobs: Martinsville continues to struggle, Cortland is slowly making progress, and Lewiston has recreated its job base.
The three towns were in the path of competition that, in the past several decades, increasingly forced domestic, labor-intensive manufacturers nationwide to become more efficient, scale back or close. Millions of factory jobs disappeared or moved overseas, often to Mexico and China. The trend meant that these towns, traditionally reliant on one or two companies or industries, had to make difficult transitions from manufacturing hubs to something else.
For workers and politicians in Martinsville, the decade-old NAFTA (North American Free Trade Agreement) ushered in a new economic model that cost their town thousands of jobs. The trade agreement with Canada and Mexico also coincided with new technology and a competitive push by developing nations that allows more products to be made cheaply overseas and then imported by U.S. companies.
Worried about the future
In 1992, manufacturing employed an average of 14,792 workers in Henry County, home of Martinsville. That number has dropped by more than half, state figures show.
The town and the county, with a total of nearly 58,000 residents, tried to counter the layoffs by recruiting small companies and encouraging existing businesses to expand locally, rather than go to Mexico or China. But that battle is being lost.
“Manufacturing in the South, in the entire United States, is a dinosaur. If people think jobs are going to come back from China, that is very wishful thinking,” says Earl Reynolds, city manager of Martinsville from 1992 through 2003.
“But the city is not dying. The city is transitioning,” says Mr. Reynolds, who left Martinsville in December for a new job with the housing authority of Roanoke, his hometown.
Economic transitions are nothing new for Americans. Agriculture employed 40 percent of all workers at the turn of the 20th century. Today, fewer than 2 percent of the labor force works on farms, according to the Bureau of Labor Statistics.
In the early 1900s, tobacco factories along with flour and corn mills were the major industries in Martinsville. The town later welcomed furniture factories as the taste for plug tobacco waned; it found new prosperity as textile and apparel industries moved production from New England to the South.
But today’s economic transition isn’t easy. Martinsville’s unemployment rate is the highest in Virginia — 16.2 percent in February — and its population is declining.
The outskirts of town include typical suburban retail outlets, Wal-Mart among them. But the town center, with a mix of once-stylish midcentury buildings and generic municipal architecture, feels all but abandoned. A visitor sees open parking spaces in abundance and numerous storefronts without tenants. Massive, boxlike factories stand idle.
Many workers, businessmen and political leaders blame NAFTA for the deterioration of the local economy, the emptying of stores, the shuttering of factories and the loss of opportunity.
“It’s been devastating,” says Thomas Harned, director of economic development for Martinsville. “[NAFTA] may have been good for the country overall, but it has not been good for Henry County.”
Clothing and fabric makers
Tultex Corp., VF Corp., Sara Lee and Pillowtex have laid off thousands of textile workers in Henry County.
The Tultex closing was especially difficult. The company employed more than 1,700 people in Martinsville, including Mr. Teague, but dismissed them all soon after declaring bankruptcy in 1999. The town’s unemployment rate shot from 9.3 percent to almost 20 percent.
Pillowtex, a Kannapolis, N.C., firm known for bed and bath products sold under the Fieldcrest and Cannon brand names, closed 16 textile-manufacturing and distribution facilities in July. Pillowtex laid off about 6,450 workers nationwide, including 970 from a towel manufacturing and warehouse facility in Fieldale, Va., a small town about five miles from downtown Martinsville.
“For well over two decades, the U.S. textile industry has been under constant pressure to reorganize while facing fierce competition from overseas manufacturers,” Michael Gannaway, Pillowtex chairman and chief executive, told employees.
Businessmen who tried to regroup and revitalize the industry also stumbled. In February, clothing manufacturer Active Wear Inc., set up in November 2002 by former VF executives in part of VF’s old plant, announced that the company would close.
“Unfortunately, customers are primarily concerned with price today. The American consumer no longer demands American-made apparel products,” Chief Executive Tony Worthington says.
Martinsville recently attracted promises of investment from MZM Inc., a defense contractor, and MasterBrand Cabinets, a manufacturer. These ventures are expected to create several hundred jobs in the next few years. But the area has a long way to go.
“What they’ve gotten in doesn’t come anywhere near to replacing the jobs that were lost,” says William F. Mezger, chief economist with the Virginia Employment Commission’s Economic Information Services Division.
NASCAR notion
Martinsville, next-door neighbor to North Carolina, also tried to latch onto the rising popularity of auto racing and NASCAR.
The town parlayed its speedway into a tourist draw. It opened a small community-college program to teach future auto-team mechanics and managers.
Kyle Petty, a team owner and driver, donated automotive parts. Tobacco commission funds allowed Patrick Henry Community College, the county’s lone institution of higher learning, to retool a derelict building into headquarters for a motor-sports training program and to rev up the curriculum.
“We’re actually getting people jobs,” motor-sports instructor Mike Sharpe says, standing among brightly painted car bodies, reinforced racing frames, powerful engines and high-tech calibration equipment.
But Martinsville has yet to transform itself from a manufacturing town to that elusive something else, to attract new residents or to stop the flow of young people out of town and on to better opportunities.
“There is a genuine concern about what the future is going to bring, the opportunity we’re going to have and our children are going to have,” says Mr. Teague. “You’re gonna have to be asleep to not be concerned.”
March to free trade
The United States negotiated and entered into eight major trade agreements in the past three decades, including separate free-trade pacts with Israel and Jordan, NAFTA with Canada and Mexico, and wide-ranging pacts that led to creation of the 146-member World Trade Organization. The Bush administration recently wrapped up free-trade negotiations with five Central American nations, plus Australia and Morocco.
NAFTA, of course, sparked some of the most intense debates.
“NAFTA will cause a giant sucking sound as jobs go south,” business tycoon Ross Perot famously predicted in 1992, assailing the pact during his independent campaign for president.
But Bill Clinton won the White House that year and pushed NAFTA into law with bipartisan support. Its implementation coincided with sustained economic expansion and job creation in service and manufacturing sectors, muting trade as a national political issue. Virginia saw net nonfarm employment rise from 2.9 million in December 1992 to 3.55 million in December 2003, according to the Virginia Employment Commission.
The overall growth came as some companies and industries suffered setbacks. The Labor Department certified that 16,200 jobs were lost in Virginia as a result of NAFTA from 1994 through 2002, the last year it tracked such numbers. Martinsville was one of the hardest-hit communities in the country.
The losing end
Many in Martinsville blame the Clinton administration and a compliant Congress, as well as both Bush administrations, for establishing trade policy that put them on the losing end of the jobs equation.
Local worries about jobs took on national resonance as the Democratic candidates for president roundly criticized Bush and Clinton trade policies.
“We need a president who’s going to fight for trade that’s fair,” Sen. John Kerry said in January during a primary debate in South Carolina. Mr. Kerry, Massachusetts Democrat, voted for NAFTA.
And trade deals sometimes are misunderstood.
“You can’t correct [NAFTA]. It has cost jobs, it has sent jobs from this state to Asia and other places,” the Rev. Al Sharpton said during the same debate, without explaining how a trade agreement with Mexico and Canada could send jobs to Asia.
Trade policy alone, however, has not determined the outcome of recent national elections. Rep. Richard A. Gephardt of Missouri had the strongest resume opposing free trade, but was the first Democratic presidential candidate to bow out this year.
Mr. Sharpton was correct in identifying Asia as a major concern. Job losses in cities such as Martinsville galvanized congressional demands that the Bush administration slap tariffs on narrow segments of Chinese clothing and fabric imports.
More than 90 lawmakers last year signed a letter saying knit fabric, bras, dressing gowns and robes imported from China were sold below fair-market value in the United States. In November, the administration said it agreed.
Textile and apparel manufacturers want the administration to do even more.
“U.S. trade policy is encouraging a relentless outsourcing of U.S. jobs and U.S. wealth,” an industry coalition said in January, demanding an end to new trade agreements and stronger action against foreign competition.
The China threat
Congress and industry groups also were caught off-guard by new global competition in the furniture industry.
Martinsville remains a manufacturing hub for wooden desks, chairs, bookcases and other staples of office and home furnishings. The industry’s local roots reach back to the early 1900s, when furniture factories replaced chewing-tobacco factories as major employers. The companies used an abundant supply of hardwood trees to make their products, and rail connections to ship them.
Furniture companies didn’t directly get caught up in competition from Mexico, but must cope with an influx of products made in China. The result for one of Martinsville’s biggest remaining employers is fewer workers but higher profits.
“I think China is by far the biggest opportunity and threat to domestic furniture manufacturers,” says Paul Toms, chairman of Hooker Furniture, a company based in Martinsville that employs about 2,000 people.
China is a threat because much wooden furniture can be produced cheaper there and then sold in the United States, undermining items made locally with more expensive labor.
“There’s nothing made in this country’s furniture plants that can’t be produced in China for less money,” Mr. Toms says from the company’s main office, which abuts a minor-league baseball field and a lumber yard stacked high with wood. “We compete in every category.”
In response to pressure from Chinese imports, Hooker in 2001 cut capacity at its Martinsville facility by 50 percent. In August, Hooker closed a plant, in North Carolina, for the first time in its 80-year history.
Hooker, as one of 27 companies in the American Furniture Manufacturers Committee for Legal Trade, formally complained to the government in October about Chinese exports of wooden bedroom furniture. The U.S. International Trade Commission in January agreed that American manufacturers were suffering, setting the stage for further investigation and, potentially, tariffs that would make the Chinese products more expensive.
Mr. Toms says his company simply wanted to see whether the imports were being sold unfairly and did not necessarily support tariffs; in February, Hooker withdrew from the coalition.
The right price
Any trade barriers would be a mixed blessing for Hooker.
The company imports some of that foreign-made furniture and sells it in the United States, broadening the product line while boosting sales and profits. All of the company’s growth stems from its import division, Mr. Toms says.
The good fortune is evident in Hooker’s 600,000-square-foot distribution center near Martinsville. Traffic around the facility is heavy as trucks haul the latest imports. Inside, the place teems with horn-tooting forklifts and workers who are loading, unloading and assembling products from China.
In part because of increasing import sales, the company’s stock value nearly tripled in the past two years. That’s good news for many employees, who are also shareholders.
And consumers, who are offered a wider variety of furniture at lower prices, appear pleased.
“Country of origin is not a factor in purchases,” Mr. Toms says.
China has found a willing customer in American consumers across the board. That country saw imports rise more than 20 percent from 2002 to 2003 and surpassed Mexico as the second-biggest source of U.S. imports. Canada is the United States’ top trade partner.
Growing through trade
Martinsville leaders know that globalization is not likely to be slowed.
And not all job losses are a direct result of trade agreements. Such pacts require signatories to lower tariffs — taxes placed on goods when they reach a foreign market — and also to make substantial policy changes that sound dull but can speed buying and selling internationally.
Trade pacts often eliminate quotas, harmonize customs procedures and technical standards, limit subsidies and protect investor rights, among other changes.
Outside influences, such as currency values, domestic policies, technology and consumer trends, also affect trade volumes.
Countries such as Mexico and China, for example, reformed their economies and began to compete more intensely in the global market, the International Trade Commission said in a study released in August. New transportation and communication technology also eased the way for companies to make purchases and operate overseas. Growing incomes fueled consumer appetite for foreign goods.
Together, the five biggest trade agreements of the past three decades account for 15 percent to 25 percent of the growth in U.S. trade during the quarter century ending in 2001, the study said. International trade quadrupled to $2.5 trillion. The trade deficit also grew enormously, to 3.6 percent of economic output from 0.3 percent.
Trade-related opportunities benefited numerous companies, and strong, broad-based business lobbies back past and pending agreements. Consumers also benefit from a wider variety of less-expensive goods.
But although the benefits of free trade are spread out across the economy, the costs can be focused locally, especially in communities such as Martinsville that grew dependent on one or two industries.
“I know in a capitalist society that the free-trade argument makes sense,” Nautica’s Mr. Teague says. “But somewhere down the road our country’s jobs have to be protected or we’re just going to be one big service sector, and we’re not going to have the wherewithal to make the products we need to make.
“I think it will be 10 years before the government will really wake up and realize that.”
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