Outsourcing doesn’t affect Nevada as much as other states

By Karoun Demirjian

Saturday, Sept. 24, 2011 | 2 a.m.

For months, Senate Majority Leader Harry Reid has blocked consideration of any free trade agreement until Congress first approves a federal program to help retrain U.S. workers whose jobs are outsourced.

“I’ve told Sen. McConnell, I’ve told the president, I’ve told anyone who will listen. I told Speaker Boehner. There will be no trade agreements unless trade adjustment assistance passes,” Reid said, referring to the program last week.

Reid’s distrust of free trade agreements runs deep: He’s said often that he doesn’t think they’re fair, and that in pressing for Congress to take up treaties to remove trade barriers without offering displaced workers some compensation, Republicans “are more concerned about what jobs are being created in Colombia or Panama or Korea than what are being created here in America.”

Trade-related outsourcing is a real concern for many states, but the impact in Nevada is small.

Trade adjustment assistance, or TAA, is offered to workers who have been hurt by competition from imports, or by companies moving their U.S. operations to a foreign country with which the U.S. has a free-trade agreement.

Last fiscal year, almost 16,000 displaced workers in Pennsylvania were certified to receive the benefits.

In Nevada, there were 63.

In fiscal 2009, when the recession hit and companies all over the country started to shed jobs, the Labor Department certified employees of 199 Michigan-based workplaces as eligible for TAA assistance.

In the same fiscal year in Nevada, the Labor Department certified five companies. The year before, it certified one; six employees received benefits.

In fact, through the past decade Nevada has ranked among the bottom handful of states for workers seeking such assistance.

“There’s not much going on there for Nevada’s economy,” said Elliott Parker, chairman of the UNR economics department and a professor of international trade. “When Sen. Reid makes that argument, he’s thinking about it on a national scale and not a state scale ... The truth is, Nevada does not have much of a history of a manufacturing base, and that is the area that has been harder hit by free-trade agreements.”

In other words, Nevada’s 13.4 percent unemployment may be the worst the nation, but it isn’t because foreigners have been picking off our jobs.

Foreign competition has had an effect on Nevada’s workforce, but not in a way that can be blamed on a free-trade agreement.

For example, a cocktail waitress cannot petition the federal government for redress because her high roller tippers are getting their drinks at baccarat tables in Macau. That may be frustrating, but it’s not outsourcing.

“It doesn’t quite fit us, because we’re providing a service, not a good,” Parker said.

The stimulus bill temporarily expanded the assistance to service workers, and also workers whose jobs have been outsourced to some countries we don’t have free-trade agreements with. That didn’t do much here, though: The labor department counted the change as helping an extra 61 Nevadans.

The stimulus definition is what the Senate voted to adopt Thursday by a vote of 69-28; both of Nevada's senators voted for extending the program. But before President Barack Obama sends the three pending free-trade agreements — with South Korea, Colombia and Panama — to Congress, it has to pass an unfriendlier House, which won't take up the TAA extension — part of a greater trade bill — until next month.

Obama, like Reid, has said he won’t get the ball rolling on those until a TAA extension passes both houses of Congress.

Local experts say that order of priorities means help for Nevada's economy is delayed, particularly for its fledgling manufacturing sector.

According to statistics from the Commerce Department’s International Trade Administration, Nevada’s exports to the three countries in question nearly doubled between 2005 and 2009 — data that would suggest Nevada’s doing just fine without the aid of a free-trade partnership.

But that’s not the whole picture, says the longtime director of the Nevada Commission on Economic Development, Alan DiStefano.

Free-trade agreements dramatically increase exports because U.S. products are more competitive when tariffs are reduced or eliminated, DiStefano wrote in an email. He cited the growth in imports to Canada and Mexico after implementation of the North American Free Trade Agreement and compared them with Korea, Panama, and Colombia during the same period.

Between 1994, when NAFTA was approved, and 2010, Nevada’s exports to Canada almost quintupled for an increase of $633 million in gross revenues, or about 3,500 jobs, and Nevada’s exports to Mexico went from $13 million to $212 million, a jump worth about 1,100 jobs.

In 1994, Nevada’s exports to South Korea were actually worth more than trade with Mexico: $15 million vs. $13 million. But in the past 16 years, it’s grown a lot more slowly — exports to South Korea only amounted to about $80 million last year.

Comparing Nevada’s exports with South Korea and Singapore, which the United States signed a free-trade agreement with in 2000, yields a similar picture. In 2000, Nevada sent $17 million worth of exports to South Korea and $21 million worth to Singapore; a decade later, the state’s Singapore portfolio was worth $114 million — even though it’s a country with only about one-tenth of the population and one-quarter of the wealth of South Korea.

Of course, there are specific considerations in each of those relationships. Nevada companies primarily send Mexico electronic circuits, polystyrene and parts of passenger vehicles and airplanes; they send South Korea more centrifugal and liquid pumps, copper ores, and measuring instruments than electrical components.

An estimate by the liberal-leaning Economic Policy Institute this year also concluded that Nevada had lost 3,700 jobs over the life of NAFTA to Mexico alone because of the removal of trade barriers — numbers that may not all show up in the TAA tally, but if correct, outweigh Nevada’s estimated job gains from NAFTA for that country.

Still, local economists say that shunning free-trade agreements because there has been some ebb and flow of jobs is ill-advised.

“It’s not a position I find very strong,” Parker said. “It is a misdiagnosis for the causes of trade deficits: the fundamental issue is that Americans don’t save, and as a result, we borrow from the rest of the world. Every dollar we borrow from them is a dollar we lose from our exports.”

But at a time when foreign debts are high, domestic employment is low and U.S. lawmakers are trying to censure our biggest trade boogeyman, China, for artificially suppressing the value of its currency, telling U.S. workers to trust another few global compacts without first putting some protections in place is risky politics.

“One job lost because of foreign trade is one job too many. That’s why Sen. Reid has consistently opposed free-trade agreements throughout his career,” Reid’s spokesman, Zac Petkanas, told the Sun. “Sen. Reid respects the diversity of views on this issue and believes they deserve a fair hearing. However, he believes we should protect the interests of the American worker first.”