Prices Go Down But Jobs Leave

Joao Sousa was working two years ago as a quality manager for Philips Electronics’ plant in Roxbury, Morris County, when he was handed his pink slip and given an explanation: The company was shipping his job to Hong Kong.

Sousa, 34 of Woodridge, Middlesex County, understood. After all, he said, he’s only a small player in a global economy that is growing more competitive by the day.

But as he returns to school in a bid to reinvent himself, he can’t help but wonder: “If all the jobs are gone from here, how is anybody going to buy anything?” Sousa’s sentiments aren’t unusual. New Jersey workers, from low-skilled manufacturers to highly skilled engineers, have seen their jobs sent overseas during the past decade, and they have had a tough time finding replacements.

Their struggles are magnified as the economy remains sluggish and the Obama administration pressures Congress to approve free-trade agreements with three more countries — Colombia, Panama and South Korea.

Not on board

Most economists argue that new markets increase the size of the economic pie for everybody. But the fact that the new trade agreements have languished in Congress, in some cases for three years, is a sign that Americans aren’t embracing the idea.

The cost of trade is more visible than the gains, said Howard Rosen, a senior fellow at the Peterson Institute for International Economics, a Washington, D.C., research group. “Therefore, it gets our attention and is an issue.”

The United States has free trade agreements with 17 countries, from its biggest trade partner, Canada, to its smallest, Bahrain, giving U.S. companies the chance to sell their products tax-free in those countries. Ideally, they open new markets and help to increase sales.

Companies can trade with counterparts in other countries, although their products are taxed.

In the global market, some employers have found they can become more profitable by setting up shop in other countries, too, helping them provide a product or service less expensively.

Economists say it helps countries focus on what they do best. And it helps economies work more efficiently.

Put in practice, however, it can be messy. A U.S. consumer can purchase an inexpensive, state-of-the-art television made in Taiwan. But U.S. workers who developed the skills needed to make television sets suddenly aren’t needed.

“The basic idea is, trade can be beneficial for both countries, and it can expand the size of the pie, but there are distributional effects,” said Jack Worrall, an economics professor at Rutgers University-Camden. “Some people benefit, and some people pay in terms of the gains and losses from trade. The size of the pie gets larger in general. Prices of products tend to get lower. But in the process, workers may lose their job and they may have to transition to other industries.”

Sousa was one of them. He worked for Philips for six years, essentially as a go-between for the marketing department that came up with ideas and the manufacturing department that turned the ideas into products. But the company consolidated, and Sousa lost his job.

It took just two months of fruitlessly searching for Sousa to decide he needed to change gears. With the help of the federal Trade Adjustment Assistance program that provides workers whose jobs are outsourced with training, unemployment benefits and subsidized health insurance, he enrolled in Middlesex Community College in Edison to study electrical engineering.

Outsourced

This type of fallout occurs frequently. In fiscal 2010, nearly 283,000 workers nationwide were eligible for the trade assistance program because their positions were outsourced, according to the government.

In New Jersey, 3,531 workers were eligible for the trade assistance program, accounting for about 1 percent of outsourced workers nationally, even though the state accounts for about 3 percent of the nation’s work force — a sign New Jersey fared better than other states.

Trade being a two-way street, the U.S. benefits, too. The clearest example? Schar Inc., headquartered in South Tyrol, Italy, makes gluten-free food that it began selling in the U.S. about four years ago.

With sales growing, the company recently announced a plan to build a $15 million manufacturing plant near 295 in Logan but close to its distribution center in South Plainfield, Middlesex County.

Construction is scheduled to begin March 15. It plans to open in the first quarter of 2012. And it expects to employ 50 workers, who will make items from bread to spaghetti, to sell in the U.S., Paul Altieri, director of U.S. manufacturing, said.

Food has “a finite shelf life,” Altieri said. “To have a location in the U.S. to distribute products in the U.S. makes the most sense.” Other benefits from global trade are murkier. FabriTrak, a Cranbury-based company with 10 employees, sells wall coverings that control sound to distributors in about 20 countries.

The company’s exports have doubled in recent years. It orders more from its manufacturer, which in turn charges it less per order. And it has helped the company become more profitable, Steven Frost, vice president, said.

“It’s been a big, big chunk of our business,” Frost said. “As the economy here has not done well, we’ve held our own primarily because of export sales.”

Only consumers?

Still, even supporters of free trade say the equation is missing a key component. The United States needs to create jobs for displaced workers. Otherwise, it threatens to turn the country into one whose citizens produce very little and consume a lot.

Bob Loderstedt, president of the New Jersey Manufacturers Extension Program, which helps manufacturers become more efficient, said the state’s political leaders should develop a manufacturing policy to revitalize a sector that many have written off.

One aspect: Show industrial companies how they can make their workplace efficient enough to justify staying in New Jersey. It would give the state the benefits the come with both selling products overseas and hiring workers at home.

“In a world economy, what does a trade barrier do except put a fence around us?” Loderstedt said. A vibrant manufacturing sector “opens up a vast amount of opportunity in the middle class to have good-paying jobs and say, “I can move up over my career.'”

Without domestic jobs that can replace jobs that are outsourced, Joao Sousa seems to have a point: How can U.S. consumers purchase anything if they don’t get steady paychecks?

Back in school, Sousa expects to earn his associate’s degree this spring. He plans to search for a job after he graduates. And then he plans to continue to take classes at night.

“I’ve been looking online at job websites and there seems to be more positions available now than two years ago,” Sousa said. “To find the exact (same) pay, I think it will be a little tough. But I’m willing to start over and work my way up.”

Reach Michael L. Diamond at (732) 643-4038 or mdiamond@njpressmedia.com.