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April 30, 2001 02:00 AM

Free trade deal a mixed blessing for rubber firms

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    Unions, environmentalists and other anti-globalization activists have a beef with the movement toward an Americas free trade agreement. President Bush and other pro-big business politicians favor it.

    Where does that leave the rubber industry? In a mixed situation.

    Economists have varying views about the details, but agree the overall impact of a Western Hemisphere free trade zone to the U.S. would be positive. The removal of trade barriers would foster trade between the nations, and many economists feel the U.S. and Canada would be the major beneficiaries.

    For the rubber business, and extended NAFTA-like agreement is bound to help larger companies constricted by trade policies designed to protect local businesses. The largest tire and automotive goods, chemical and other supplier concerns already have a presence in Latin America. These businesses serve to local markets, but also - particularly the tire companies - take advantage of lower labor rates to export goods to North America.

    The other side of the coin for the rubber industry is that when tariff protection is lifted, North American industries that can't compete on cost will lose. The historical example for rubber companies is what happened to the footwear business in the early 1980s. As cheaper-made imports flooded the U.S. market, the Reagan administration refused to impose protective duties, preferring to sacrifice American footwear manufacturing to free trade.

    For globalized rubber companies, a similar scenario is hardly threatening. But for a small maker of a rubber product that can be duplicated at lower cost in Latin American, the result could be devastating.

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    Rubber News wants to hear from its readers. If you want to express your opinion on a story or issue, email your letter to Editor Bruce Meyer at [email protected].

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