Scripps Howard News Service
Don't Blame NAFTA

By Fariborz Ghadar

Corning Asahi's announcement that it will close its State College, Pa., plant in less than eight weeks, throwing all 1,000 employees out of work and selling off equipment and land, led to the usual flurry of finger pointing, political positioning, and the assignment of blame.

It is becoming a common refrain among manufacturers, and even some politicians, to blame the loss of jobs, including the closing of television picture-tube maker Corning Asahi, on the North American Free Trade Agreement. It may make for a good sound bite, but it is not accurate.

Corning spokesman Paul Rogoski's recent comments that production has shifted to lower-wage economies across the Pacific Ocean echoes similar challenges faced by other mature businesses: U.S. businesses have difficulty competing with the cost for producing materials.

Corning specialized in traditional curved picture-tube face plates, but the industry trend is now toward flat screens. While Corning invested $300 million in its State College plant, the market for conventional cathode-ray tubes had gone too soft for American-made parts production. The product was old and standardized, and Corning could no longer remain price competitive on it.

American manufacturers must stop blaming the decade-old NAFTA for the loss of jobs. In order to manufacture price competitive products, American manufacturers must reinvest in new process technologies, and new products. The College Township plant was the last one in North America to make TV picture tubes as production has shifted to lower-wage economies across the Pacific Ocean. Corning simply couldn't compete with the cost for producing materials in Asia. Corning needed to develop new product lines.

I am not claiming that NAFTA has not contributed to the loss of jobs, but, while it will not console unemployed workers, we are living in an area of rapid globalization, and it has had a profound impact on the world's economic landscape. Developing economies offer access to untapped market potential for products and services and low-cost labor to drive down the cost of production.

Corning, like many other manufacturers and service providers, must become a different company for a different world in order to survive. The low-cost manufacturing trend has migrated from North America to Latin America, Eastern Europe and now resides within India and the Far East. Globalization has encouraged fast growth, cheap imports, new technologies, foreign competition and increased investment opportunities.

At the same time, globalization has reduced jobs in wealthy advanced nations because of the lower cost of wages in developing nations. In addition to this, there has been a fall in unskilled labor wage levels in developed nations as skill and knowledge is essential to survive in developed economies.

Today, global economic integration has disintegrated the manufacturing process on a whole. Several corporations are 'virtual' in nature, as they coordinate flow of funds and various components from different suppliers worldwide. For example, a Dell Computer is assembled in Austin, Texas, from 4,500 parts sourced from several suppliers in Malaysia, Korea, Taiwan and China.

The forces behind globalization - faster communication, transportation, and financial flows - have erupted into a raging torrent of exchange and businesses have expanded into newly opened markets. Technological innovation and dispersion have accelerated as product lifecycles have grown shorter.

In response to the quickly changing market and shorter product lifecycles, businesses must forge internal and external strategic alliances. Through strategic alliances, businesses must develop new capabilities, leverage limited resources, share investment risks, hedge technology developments, and improve the speed, cost, and quality of innovation.

If the business is competitive and has wonderful products the customer demands, globalization is a real opportunity. If the business has old, mature products at unreasonable prices, globalization is unforgiving. It is neither NAFTA's doing nor its fault.

Dr. Fariborz Ghadar is director of the Center for Global Business Studies at Penn State.

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