Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, November 19, 1993 TAG: 9311190269
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: GREG EDWARDS and SANDRA BROWN KELLY STAFF WRITERS
DATELINE: LENGTH: Long
Singer Furniture has been seriously exporting to Mexico only about 18 months, but already has a distribution center in Mexico City.
At the Roanoke-based company, as at other American manufacturers, there was lip-licking anticipation Thursday of the North American Free Trade Agreement's impact. If it passes the Senate, it would eventually remove tariffs on goods traded among Canada, the United States and Mexico.
"Shipped" is a key word for Norfolk Southern Corp., which sees more trade as more movement of goods.
But not everyone was happy with Wednesday night's 234-200 House vote for NAFTA.
Most vocal in their disappointment were union leaders who opposed the pact, fearing it would cost American jobs.
Gerald Meadows, president of the Roanoke Central Labor Council, said he will be making labor's case to Sen. Charles Robb, a Democrat, before the Senate vote. Meadows won't waste his time with Republican Sen. John Warner, whom he expects to support NAFTA.
The agreement is expected easily to gain Senate approval. Neither Robb nor Warner has said where he stands on it.
Anticipating pasage, companies not already selling to Mexico intend to. No group is more eager than furniture manufacturers, including Singer, Pulaski Furniture and Bassett Furniture Industries in Western Virginia.
"Our business now in Mexico is more than $1 million and we hope to greatly expand," said John Wampler, executive vice president of Pulaski Furniture Corp.
John Albanese, director of marketing communications at Bassett, said his company views Mexico "as a brand-new, open market."
Albanese and other furniture companies' executives stressed that NAFTA is not "a new manufacturing opportunity.
"It means we now have access on a very level playing field in which to sell," Albanese said. "And we expect to get aggressive and we certainly are plotting strategy."
Larry Ryder of Hooker Furniture Co. said, "Up to now we have waited for Mexican retailers to come to us at markets in High Point [N.C.], Dallas and Atlanta.
"I think now we're going to look to see what kind of markets we can develop down there."
Mexico has a population of 87 million and more than 80 percent have incomes above the poverty line.
Mexico is not just a country of cardboard shanties like those in photographs Ross Perot showed during his NAFTA debate with Vice President Al Gore, said Tom Edwards, Hollins College economics professor.
Edwards, who directs the graduate studies program at Hollins, taught an international finance graduate course this summer at the University of Americas in Puebla, Mexico. He said he saw "lots of evidence of Mexican purchasing power" during his six weeks there.
He said he also "was struck" by how much more advanced the Mexican students were than American students in their thinking about world finance. Edwards said NAFTA will allow Mexico, "which has always had rich elite" to build a larger middle class.
But Meadows, who also is president of the International Union of Electronic Workers at Salem's General Electric Co. plant, said Mexico's gain will be the United States' loss.
Meadows thinks that high-wage as well as low-wage U.S. jobs will be lost to lower-paid workers in Mexican plants.
"It's a shame we help [President Clinton] get elected and he uses our tax money to bribe Congress to cut our throat," Meadows said, referring to criticism that Clinton made many promises to gain House passage of NAFTA.
"I think we were betrayed by the Clinton administration and [Vice President Al] Gore, too," Meadows said.
Among NAFTA's supporters, there may be no company sitting better than Sara Lee Corp.
Chicago-based Sara Lee has knitwear mills in Martinsville and a L'eggs distribution center in Salem. Last year it bought Rinbros Co., which makes underwear, and Mallorca, a sheer hosiery company, both in Mexico.
"Our current Mexican sales in apparel is about $100 million," said Nancy Young, director of corporate affairs. "We think that can double in the next three years."
Young said NAFTA would mean that men's socks made in North Carolina under the Rinbros label can be priced to compete in Mexico.
"One of our major customers is Wal-Mart, which just opened its largest store in Mexico City. We want Hanes and L'eggs on the shelves there to be priced as competitively as the Mexican companies' products."
Luther Dickens, president of RADVA Corp. in Radford, has been a strong NAFTA supporter; he said he sent a letter to Rep. Rick Boucher, D-Abingdon, the morning of the vote to try to convince him to change his opposition.
"I think it's going to have an overall positive effect on us. The sale of machinery and equipment for [polystyrene] building panels will be helped, not hindered." RADVA is a maker of prefabricated building panels.
"The impact on the type of business we're in - the domestic business - should be enhanced because we will be producing packaging materials for products that will be shipped to Mexico as well as to Canada as we have in the past."
He said RADVA produces panels that go to northern Mexico and "We expect an increase in that business."
RADVA has sold to dealers in southern Mexico in the past and "I expect increased activity with them," he said.
"But the idea of having a market area the size of Mexico, the U.S. and Canada is pretty exciting."
Vinod Chachra, president of VTLS Inc., an automated library computer systems developer in Blacksburg, said he expects to see an immediate impact if NAFTA is passed.
"We're very pleased and I think our business is going to go up," he said. "As industries in Mexico are developing, companies will have to develop infrastructure and that will benefit us."
Chachra said VTLS, an 80-employee company in Virginia Tech's Corporate Research Center, conducts about 17 percent of its business in Mexico.
Among banks with Virginia operations, NationsBank already is making plans to open branch offices in Mexico under terms of the agreement. NationsBank already has a corporate affairs office in Mexico City.
Unlike other Southeast banks, NationsBank has branches operating in Texas across the Rio Grande from Mexico.
First Union Corp. has no plans to move into Mexico, said spokesman David Scanzoni. "Our strategy is to grow in our own region," he said, and the current focus is on Virginia.
Christine Chmura, an economist with Crestar Bank in Richmond, said "overall it's going to be good for the economy of the United States and Virginia as well."
Virginia exports only 1 percent of its products to Mexico, she said, yet the amount increased by 129 percent from 1988 to 1991. That trade was a $146 million business for Virginia in 1991.
Because of this opportunity, Chmura sees a growing export business for high-tech firms in Virginia.
The state's biggest farmers organization, the Virginia Farm Bureau Federation, supports NAFTA and sees it providing a bigger market for the state's farm products. For instance, Mexicans may be eating more Virginia hams because of NAFTA.
Chmura expects apparel jobs to run off to Mexico when the 30.1 percent tariff on textiles is dropped because apparel is a labor-intensive industry.
She said NAFTA should mean more export business and more jobs in the United States and Virginia in the fields of transportation, equipment, industrial machinery, chemicals and computers.
Because free trade increases competition, she said, the treaty is good news for consumers and for the fight against inflation.
Norfolk Southern strongly supported NAFTA and with its eventual passage expects its Mexico-related business to grow vigorously.
"Anything that opens up two land-connected markets is simply a transportation man's dream," said Henry Watts, executive vice president of marketing.
The railroad's business with Mexico has been growing and generates gross revenues of $20 million - small change when compared with total gross revenues of $4.6 billion last year.
But with NAFTA's passage Watts said he could see the Mexican business "doubling, tripling, quadrupling in a very short period of time."
For the most part, NS's Mexican business has been southbound into Mexico. That, said Watts, surprised him, with all the criticism that NAFTA would hurt American business.
NS transports Mexican-bound freight to Memphis, Tenn., or New Orleans where it is transferred to another railroad. The railroad also is examining the possibility of transporting some freight to Gulf Coast ports, where it would be put on ships for Mexico.
A significant portion of the business developed in the past two to three years has been in transporting aluminum to Mexico for making cans. Mexicans, who have traditionally used mostly bottles, are becoming acquainted with the aluminum can.
David Orr, chief economist with First Union Corp. in Charlotte, N.C., said history won't dwell on how "ugly" the NAFTA vote was.
"Rather," he said, "it will be seen as a late 20th century renewal of America's competitive spirit."
Staff writers Rick Lindquist, Mag Poff and Michael Stowe contributed to this report.
by CNB