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The Wall Street Journal news clips — Joel Millman


A Good Job Spoiled: the Golf Exodus --- Mexicans Making Parts For Clubs Now Lose Work To China, in Bitter Trend

By Joel Millman

995 words

24 July 2002

The Wall Street Journal


(Copyright (c) 2002, Dow Jones & Company, Inc.)

CARLSBAD, Calif. -- They play a lot of golf in this posh San Diego suburb. They make a lot of golf clubs, too.

Sounds like a round made in heaven. But the thwack of each ball on the sun-gilded fairways here punctuates the transition to a new business model in which Mexico loses jobs and suppliers scurry to serve two very different markets.

Callaway Golf Club Co. has a factory in Carlsbad, as does Adidas-Salomon AG unit TaylorMade-Adidas. Titleist and Cobra, both part of Fortune Brands Inc., of Lincolnshire, Ill., also manufacture clubs here. Nearby are the headquarters of many of the companies that supply the grips, shafts and heads from which golf clubs are assembled. For years, the suppliers typically sought cheap labor in Mexico, passing the savings on to their customers.

Yet even as duffers continue to lay out substantial sums for clubs -- they spent nearly $2 billion last year on drivers, putters, sand wedges and the lot -- their outlays no longer translate into job security south of the border. This year, more than 3,000 club-related jobs in Mexico have been cut as Southern California companies such as foundry Coastcast Corp. and grip maker Lamkin Corp. respond to competitive pressure from Southeast Asia.

The general response: Go out of business or set up in China.

Golf-club assembly is just one small niche of the North American economy, but for Mexico the flight of these jobs points to a troubling development: the portability of even relatively sophisticated manufacturing work, from what would appear to be an ideal low-cost location on the U.S. border to a still less costly site half a world away.

Among the recent departures: makers of electronic circuit boards, cordless telephones, video-games and garments.

So many jobs have fled across the Pacific this year that Mexican Trade Minister Luis Derbez says he suspects China is offering unfair incentives. Mr. Derbez this month announced an investigation into whether some 5,000 small manufacturers transferring operations to China since 2000 received illegal subsidies. If so, he says, Mexico will complain to the World Trade Organization.

Yet as the retail price of golf gear drops, now to as little as $200 for a set of eight irons and three woods, the suppliers say they hardly need such special incentives to propel them across the Pacific. Lower prices threaten the profit margins of U.S. manufacturers, which in turn look to pay their suppliers less for the parts. Even those suppliers that choose to stay in the area are hedging their bets, setting up satellite operations in Asia and reducing capacity in Mexico.

These days, they must serve two masters: With cheap knockoffs, also produced in China, only exacerbating the competitive crunch, suppliers are racing to keep their high-end customers happy and, at the same time, ensure the flow of shafts and heads to the low-cost manufacturers making inroads in the golf game.

"We consider Tijuana a suburb of San Diego," says Peter Mathewson, president of Aldila Inc., a Poway, Calif., maker of graphite shafts, which opened its first Mexican factory in 1990. Eventually, Aldila would have three facilities in Tijuana, employing more than 600 workers. Today, Aldila has 200 Mexican workers, having shifted much of its production to China.

The cuts were deeper at Coastcast, whose foundries cast metal golf club heads in both Tijuana and Mexicali. From a peak of more than 3,000 employees in the mid-1990s, Coastcast's Mexican work force is down to 1,500. Coastcast's sales to big-volume customers like Callaway and Cobra have dropped, again under the relentless competition from cheaper foundries in China, which today make 70% of the metal club heads assembled in the U.S.

Another local foundry, Cast Alloys International Inc., went out of business in February, closing five plants in Tijuana and sending nearly 2,000 workers to the unemployment line.

"Mexico was once our cost-cutting opportunity, and for a while we did quite well," says Randy Kelch, Cast Alloys' former president. In the late 1980s, when the company started working in Mexico, few California foundry managers imagined China would ever compete in producing the stainless-steel and titanium alloys the golf industry demands for high-performance clubs.

Now, says Mr. Kelch, "China has proven it can produce a quality product. And the cost factor is just so dramatic." The average worker making golf club parts in China today gets a wage of $75 a month; in Mexico, about $288 a month.

The club-component manufacturers' cuts pale in comparison to job losses at the region's large electronics maquiladoras, or assembly plants. Baja California has lost more than 67,000 assembly jobs since December 2000, mainly from the Korean companies LG, Daewoo and Samsung. Yet, in some ways, losing jobs in golf-club assembly is more painful, Mexicans say, because while the Koreans' exodus is linked to a global downturn in demand for their products, the golf-club makers are thriving. And they are thriving just a few miles away.

"Our feeling is we should be able to keep the golf-club industry down here," says Rodrigo Contreras of the Baja California state economic development agency. "Especially since they sell so many golf clubs in California."


Playing Through
U.S. makers of golf club parts once flocked to Mexico for its

low-cost labor. Now, with still lower costs in China, some are setting

up shop there, some are weighing it -- and some are defunct.



Coastcast Heads 3,000 1,500

Cast Alloys Heads 2,500 0 (not in business)

Aldila* Shafts 600 200

Lamkin* Grips 350 350

Golf Pride Grips 600 500

*Recently set up operations in China

Source: company reports

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© 2002 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.

Factiva Dow Jones & Reuters


Beefed-Up U.S. Border Patrolling Fails to Curb Illegal Immigration

By Joel Millman

608 words

17 July 2002

The Wall Street Journal


(Copyright (c) 2002, Dow Jones & Company, Inc.)

SAN DIEGO -- A study due out today says increased enforcement along U.S. borders has failed to reduce illegal immigration and may have contributed to a swelling of the population of undocumented workers, particularly Mexicans, between 1994 and 2000.

The report, by the San Francisco-based Public Policy Institute of California, says that despite tripling the total annual budget for border control since 1995 -- to more than $2.5 billion this year -- the total number of unauthorized immigrants residing within the U.S. is at an all-time high: between seven and nine million people. The main reason: Mexican migrants, which make up the majority of illegal immigrants, are less likely to return to Mexico, and those who do return do so after longer stays here.

"Overall, the picture is one of a large and rapidly growing population of unauthorized immigrants," says Hans Johnson, one of the study's authors, who notes that the increase in the number of illegal residents through the latter half of the previous decade coincides with increased spending on border control.

According to Mr. Johnson, as a result of increased manpower patrolling the border (the main use of additional budget outlays), would-be Mexican migrants are forced further from large cities like San Diego and El Paso, Texas, and now try to enter the U.S. from isolated crossing points in the desert. That has led to an increase in migrant fatalities -- from 57 in 1994 to more than 200 in 2001 -- and the greater likelihood of migrants seeking the services of organized smuggling rings. In 1994, fewer than 70% of illegal migrants used coyotes, as the smugglers are called; last year about 90% did.

The increased demand for smugglers' services has also raised their price, the report says. Paying as little as $800 to travel from Tijuana to Los Angeles in the mid-1990s, migrants pay anywhere from $1,500 to $5,000 for a guide to bring them across the desert. This higher cost to enter the U.S. labor market is one reason migrants are increasingly less likely to return to Mexico after finding jobs here and why those who do go back now do so after much longer stays.

The Public Policy Institute's Belinda Reyes, another of the report's authors, says, "It is so much harder to come across, the pattern has changed: much less back-and-forth migration. It's more important to become legal, so more are staying."

Mario Villarreal, spokesman for the Border Patrol in Washington, disputes the conclusion that more migrants staying for longer sojourns means border enforcement has failed. Mr. Villarreal, who hasn't reviewed the report, points to the sharp drop in apprehensions as proof that would-be migrants have been deterred. Through the end of May, the Border Patrol stopped just under 640,000 attempted crossers, a decline of 300,000 would-be crossers over the same period in 2001, and a decline of almost 600,000 from the same period two years ago. "We've made it very difficult to cross the border," he says.

Border agents in the field largely agree. "We used to see a lot more commuter aliens. They're not really doing that any more," says Joseph Dassaro, head of local 1613 of the Border Patrol agents' union in San Diego. Mr. Dassaro adds that emphasis on security since Sept. 11 has actually made patrolling the Southern border tougher as experienced agents are deployed to locations along the border with Canada, or lured to better-paying jobs as air marshals.

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House Advantage: Indian Casinos Win By Partly Avoiding Costly Labor Rules --- Sovereignty Helps Shield Them From Unions and Lawsuits, Can Limit Worker Benefits --- Some Say It Beats Field Work

By Joel Millman

2,303 words

7 May 2002

The Wall Street Journal



(Copyright (c) 2002, Dow Jones & Company, Inc.)

ALPINE, Calif. -- Fetching orange juice jugs from a walk-in freezer at the Viejas casino here, Mario Villarreal says he felt "a bomb" go off in his chest. Staggering out of the frigid vault, the 55-year-old busboy was rushed to a hospital and treated for a heart attack.

Mr. Villarreal's on-the-job injury in late November might have entitled him to thousands of dollars in medical benefits and many months of paid leave under California law. But the casino's owner, the Kumeyaay Indian tribe, is a sovereign nation. It can essentially decide for itself how such laws apply in specific cases, thanks to an unusual federal law. The tribe sent Mr. Villarreal $440 of vacation pay that he was already owed. State disability benefits paid him $1,100. Though he would have liked a longer rest, Mr. Villarreal was back clearing tables at Viejas in early February. "I needed the money," he says.

Workers like him are attractive to the Kumeyaay and other local tribes, which are at the forefront of a boom in Indian-owned casinos. The Kumeyaay, who have five casinos near San Diego, barely total 2,000 adult members, yet employ more than 8,000 people. Many are Mexicans with green-card work permits who commute for several hours daily to serve food, wash dishes or clean restrooms at casinos for the minimum wage or slightly above.

In dealing with their workers, whether Mexican or American, the tribes hold all the cards. They can dismiss pro-union workers, or even those who get sick or injured, without worrying about the National Labor Relations Board. They can evict pickets. "We have letters from management threatening workers if they talk about the union on their breaks," says Jennifer Skurnik, an organizer with the Hotel Employees and Restaurant Employees Union.

Treaties struck over the past 200 years have granted most Native American tribes on U.S. soil the status of tax-free sovereign nations. When tribal casinos began proliferating in the late 1980s, Congress passed a law called the Indian Gaming Regulatory Act, requiring them to respect minimum-wage, safety and certain other regulations, such as not hiring felons for money-handling jobs. The act also required each tribe to make a compact with the state it's in, spelling out to what extent the tribe will be bound by such regulations as no-smoking rules, building codes and state employment laws. In practice, how tribes interpret these obligations is largely up to them.

California, for instance, has elaborate rules on how an employer must compensate injured workers. It requires employers to help injured workers get all they are entitled to, which might include retraining for a less-onerous job or even the construction of a ramp to get into their homes. The tribes say they are committed to following these rules. But because they're sovereign, it is next to impossible to use the courts to require a specific tribal response in a given case.

"Every month I get a call from a casino worker with an injury," says Felipe Hueso, a San Diego plaintiffs' lawyer. "I'm Mexican-American, but I can't help my own people because they work on a reservation where I have no jurisdiction."

After a runaway garbage container struck a patron in the parking lot of a Tesuque Pueblo casino in New Mexico, leading to $20,000 in medical bills, the state's supreme court ruled last month that the tribe wasn't liable.

There are tribal courts, but lawyers say litigating there would effectively let a tribe decide a case against itself. The head of a workers' compensation attorneys' committee in California says he knows of no injury case litigated in a tribal court.

As for California's Gambling Control Commission, it says its staff of only 30 concentrates on making sure the nearly four dozen Indian casinos don't employ felons. The commission leaves oversight of other provisions in the compacts to other state agencies.

In dozens of interviews, Mexican workers at Indian-owned casinos described work conditions that wouldn't be tolerated elsewhere. One, who requested anonymity because of a relative's employment, said she was fired after she had a miscarriage on the job. Others told of managers abruptly sending workers home without pay when business is slow.

Despite such conditions, many Mexicans readily trade field work for a spot in an air-conditioned casino. Miguel Munoz totes sacks of coins to refill slot machines at the Golden Acorn in Campo, Calif. Previously, he hauled 50-pound cartons of lettuce. "You can make more picking lettuce, but field work's a lot harder," says the 41-year-old, whose commute to and from Mexicali often totals five hours a day, counting time waiting in line to cross into the U.S.

A trade group, the California Nations Indian Gaming Association, says the casino jobs help both Indians and non-Indians get off welfare. Steven TeSam, chief of the Kumeyaay tribe's Viejas band, says, "Gaming has assured our independence as a fully self-reliant people, a position where we have not been since the Spanish invasion in the 1500s."

The trade group says California tribes pay millions of dollars each year settling claims by workers injured on the job, and risk having their casinos shut down if they don't honor the terms of the state compacts. But the group acknowledges that the day-to-day enforcement effectively lies with the casino operators -- specifically, the dozens of individual tribal gaming agencies empowered to make sure casino managers treat workers fairly. The tribal-state gaming compact itself says enforcement is the responsibility of these tribal gaming agencies.

"The compact protects workers' rights," says Susan Jensen of the trade group.

Tribal gambling got started two decades ago as bingo parlors alongside the freeways leading to Las Vegas. The parlors soon began to flower into full-blown casinos. Now there are 200 tribal casinos in the U.S., which gross $12 billion of the $30 billion annual revenue of the entire U.S. casino-gambling industry. California tribes now have 47 of these casinos and are racing to build more.

The state's top gaming regulator, John Hensley, estimates each Indian slot machine takes in an average of close to $300 a day. That's at least 50% better than Nevada's average, he says, because California tribal casinos are monopolies on reservation land. Their estimated $5.1 billion yearly revenue exceeds Atlantic City's and is more than half that of Nevada, a state with 401 casinos.

Workers at the tribal casinos have both state and federal income tax withheld from their checks. But the tribes operate tax-free, Mr. Hensley notes: "no property tax, no corporate tax, no sales tax." The tribes report their revenue and earnings to the U.S. government, but the government says it isn't obliged to disclose any of this data except a single overall revenue figure.

Tribes in San Diego County have been among the quickest to the tables and now are among the wealthiest. The Pauma, Pala, Campo and San Pasqual reservations all opened new casinos last year, investing a total of $200 million. Two other tribes in the county plan to build casinos this year. Many of these tribes are too tiny to set up casinos on their own. Trump Hotels & Casino Resorts Inc. operates a casino for the 29 Palms tribe in Riverside County, which has a total of 13 adult members. Paragon Gaming of Las Vegas will operate a casino for a sovereign nation known as the San Augustine Band, a tribe that has one remaining adult member.

All this action takes a lot of workers, and in five years, the state tribes' payrolls have surged to 60,000 from 16,000, says the trade group. "Casinos are adding capacity every day," a spokeswoman notes.

The good times are on a roll at the Kumeyaays' Viejas casino. Looking like an old adobe village, the 250,000-square-foot casino 30 miles east of San Diego adjoins an outlet mall of earth-toned stucco shops. Inside, a sea of slot machines bubble with calliope sounds and the clatter of coins falling into trays.

Twenty years ago, the tribe seemed headed for extinction. Only a few elders still lived on reservations east of San Diego, inhabiting shacks and old trailers. In the 1990s, they discovered casino gambling. Today, five of the 12 federally recognized sovereign Kumeyaay bands operate casinos in San Diego County, taking in estimated yearly revenue of almost $1 billion. The revenue has helped the tribe to upgrade a health clinic, pave reservation roads and hire more teachers. The tribe also has diversified, opening an outlet mall and buying 70% stake of a local bank.

Motorboats sit in the driveways of many tribal members. The tribe's Viejas band, owner of the casino in Alpine, has just 200 adult members. The band declines to say how much each member earns from its casino. It's around $100,000 a year, someone familiar with its affairs estimates.

Two million potential customers live within 70 miles of the Viejas casino, including some of America's wealthiest retirees, a core market for the slots. But the local unemployment rate is 3.8%, so it isn't easy finding people who will work for the minimum wage. Mexicans will.

"The fun has no boundaries," reads a billboard for Viejas casino looming over the San Ysidro-Tijuana border checkpoint, where 50,000 Mexicans cross into San Diego County each day to work. Some are headed for the Viejas casino, where a heavily Latino work force vacuums the carpets, serves the food and trundles bags of coins.

To make it easier for tribal members who live in Mexico to work at the casino, the Kumeyaay have joined three other casino-owning tribes in Arizona and Texas in lobbying Congress to give U.S. citizenship to their tribal members across the border.

Tribes don't have to open their employment records to the state or federal government, and most decline to say how many Mexicans are on their payrolls. At a casino on the Kumeyaays' Barona reservation northeast of San Diego, about 40% of the 2,200 workers speak Spanish and about 200 live in Mexico, says the human-resources manager, Veronica Gomez. "Some partner-up and rent studio apartments near here. We encourage them not to sleep in their cars," she says.

Guillermo Higuera has no car. Living with his parents in Tijuana, the 25-year old janitor rises at 5:20 for an 8 a.m. shift. After waiting in a pedestrians-only line at the border that rarely holds fewer than 1,000 workers, Mr. Higuera catches a trolley into San Diego, and then switches to a suburban line to catch the free bus taking early-bird gamblers to the casino. The trip takes two hours. His take-home pay is about $225 a week, not enough to afford a local apartment. "It's not much of a job, but there's nothing really wrong with it," he says.

For Mr. Villarreal, the man who had a heart attack at the Viejas casino, the route to casino work was circuitous. He arrived in the U.S. illegally in 1972 and found work picking up trash at a golf course in Riverside, Calif. Over the next 20 years, he did restaurant work, picked sugar beets in Wyoming and harvested lettuce in Arizona, and along the way got a green card through an amnesty. In 1994, after a well digger he was working for went broke, he signed on at the casino.

He started at $4.75 an hour. Eight years later, he earns $8.10 an hour at the Viejas, one of only two unionized Indian casinos in the state. "I used to pick vegetables in the fields. Now I pick forks and plates off tables," he says with a slight grin.

Mr. Villarreal bought a battered old trailer from the well digger. Some casino workers live in trailers on tribal land. A coworker of Mr. Villarreal's pays a week's wages, about $250, to do so. But Mr. Villarreal saved money by moving his trailer to Mexico. There, in the town of Tecate, he found a rent-free site for it, right alongside a roaring highway to Ensenada. He, his wife and two sons share a front yard with the base of a billboard.

Mr. Villarreal understands that casino work may be the best job America can offer him at this stage of his life, even if he risks worsening his heart condition by hauling tubs of dirty dishes and silverware for eight hours each day. So he is back in his old routine, rising in the middle of the night to get ready for work. By 4 a.m., he swings his pickup truck into line at the Tecate border crossing. After waiting an hour or so to cross, he races 55 miles along dark country roads, punching in at the casino at 7:30.

Mr. TeSam, the Viejas chief, says casino jobs are a blessing for such workers: "We are proud of our employees from Mexico, who make the sometimes-difficult effort to commute to the Viejas Reservation each day, since such job opportunities are limited below the border."

(See related letter: "Letters to the Editor: We're Poud of the Jobs Our Casino Offers Mexicans" -- WSJ June 7, 2002)

(See related letter: "Letters to the Editor: Tribal Casinos Offer Competitive Wages" -- WSJ June 24, 2002)

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Factiva Dow Jones & Reuters


Mexican Border Workers Suffer as Plants Relocate South

By Joel Millman

Staff Reporter of The Wall Street Journal

889 words

26 March 2002

The Wall Street Journal



(Copyright (c) 2002, Dow Jones & Company, Inc.)

LAREDO, Texas -- For 30 years, Mexican border workers like Jose Aranda commuted to factory jobs up north, enjoying all the benefits of working in the U.S. without leaving home. Now, with global competition pressuring profit margins, those opportunities are disappearing.

"I'm one of the statistics now," says the 35-year-old native of Mexico, whose $270-a-week job here ends Friday when R.G. Barry Corp. of Pickerington, Ohio, begins shutting down its footwear plant.

The factory, which will close for good in June, is the last one in Laredo operating under the so-called Twin Plant plan that split factory work between two border cities. Its 160 jobs are moving across the Rio Grande to an R.G. Barry plant in Nuevo Laredo so Barry can take advantage of cheaper labor and the elimination of tariffs under the North American Free Trade Agreement. There, the workers replacing Mr. Aranda will earn around $60 a week doing exactly what he used to do.

The job losses at R.G. Barry, the largest manufacturer of bedroom slippers in the U.S., will barely dent the border's booming trade economy, which last year saw more than $50 billion of commerce pass through this busy crossing point. But they are part of an important trend: the shift of U.S. factory jobs from a region where deep pockets of poverty endure. For two generations, those jobs put a rung on prosperity's ladder within reach of Mexican workers by providing U.S. minimum-wage salaries they could earn without emigrating.

While Nafta promised -- and delivered -- thousands of new service jobs to the region, Nafta also cost cities like Laredo, Brownsville, El Paso and McAllen much of its manufacturing. The number of manufacturing jobs located in those Texas border cities peaked at about 80,000 the year after Nafta's launch in 1994. Since then, those four cities have lost thousands of factory jobs. The alternative: janitorial or warehouse jobs that pay less.

"Just in El Paso, we're down 16,000 manufacturing jobs since the early 1990s," says Tom Thomas of the city's chamber of commerce. He estimates that commuters crossing the Rio Grande each day from Ciudad Juarez held half of those jobs.

Mr. Thomas lists toy maker Hasbro Inc., audio-equipment manufacturer Harman Consumer Group Inc. and computer maker Acer Inc. among the big employers that closed their El Paso operations after Nafta's passage. Among the other positions lost: thousands of denim-cutting jobs at contractors to companies like Levi Strauss & Co. and VF Corp.'s Wrangler, which once merely assembled jeans in Mexico but made the parts themselves in Texas. El Paso was also where finished pants were laundered and dyed. Now, all that work is done south of the border.

The victims of these cutbacks are the thousands of Mexican workers who for years embodied the border's aspiring middle class, the most ambitious of whom often became U.S. citizens. "Those jobs offered a route to a better life," recalls border economist Lucinda Vargas, who grew up in a Ciudad Juarez neighborhood called Los Nogales.

In the 1970s, Ms. Vargas, then a teenage commuter student at the local campus of the University of Texas, held a bookkeeping job at Valley Fashions, an El Paso pants manufacturer. She later passed that job on to her sister, and her sister passed the job on to another girl from the neighborhood. Today, all three women are professionals; Ms. Vargas eventually became chief economist at the El Paso branch of the Federal Reserve Bank in Dallas.

For many industries, the Nafta treaty set a timetable by which tariffs designed to protect jobs in the U.S. were gradually phased out. Parts for blue jeans lost their duty protection two years ago. Protective duties for suitcases disappeared in 2001. Duties on footwear parts, once as high as 15% of their wholesale price, disappeared in January -- the reason R.G. Barry opted to close its Laredo plant, as well as another in San Angelo, and move its entire production to Mexico.

"It gives us some breathing space," says Manuel Rodriguez, the Laredo plant manager, explaining that competition from Asia is driving down the price of slippers everywhere. Mr. Rodriguez says only a handful of his workers will be crossing with him to Mexico, with promotions to supervisor when the new plant opens.

Mr. Aranda, a father of three, isn't one of the lucky ones. Losing his job, which some seasons paid as much as $400 a week with productivity bonuses, is a challenge, he says, but not a catastrophe. He will qualify for weekly Texas unemployment benefits as high as $150, and he may be eligible for retraining under a federal program aimed at helping workers hurt by Nafta-related cutbacks. If so, he intends to earn a license as a long-haul trucker.

Even if he could, he wouldn't take his old job at Barry's Nuevo Laredo plant, he says. A naturalized U.S. citizen since 1998, Mr. Aranda notes that he would be an undocumented "illegal" if he went back to work in Mexico. That, he says, "would be a step backwards."

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Marketing & Media

U.S. Candy Industry Sweetens As Nafta Ships Jobs to Mexico --- Youthful Market, Cheap Labor and Sugar Contribute to Bottom Line

By Joel Millman

Staff Reporter of The Wall Street Journal

857 words

14 February 2002

The Wall Street Journal Europe



(Copyright (c) 2002, Dow Jones & Company, Inc.)

Ross Perot once warned of the "giant sucking sound" you would hear as Mexico pulled jobs south of the border, where U.S. business could pay less and reap the benefits of the North American Free Trade Agreement. In the candy industry these days, you can hear that sucking sound loud and clear.

Mexico has attracted top U.S. candy manufacturers looking for cheap labor, cheap sugar and a youthful Mexican market with a sweet tooth. U.S. confectioners are also using Mexico as a platform to export back into their home market, helping Mexico more than triple its candy sales in the U.S. to around $150 million (171.1 million euros) last year from less than $50 million in 1993, the last year before Nafta went into effect.

That sales surge is behind a shrinking candy work force north of the border. All of the Big Three U.S. candy makers -- Mars Inc., Tootsie Roll Industries Inc. and Hershey Foods Corp. -- operate plants in Mexico. Mars expanded down south in December with the acquisition of Monterrey's Grupo Matre SA. Meanwhile, Brach's Confections Inc. will close its flagship Chicago plant next year and move 1,100 jobs to a plant currently under construction in Linares.

Labor costs are part of Mexico's draw: Mexican workervisirn as little as one-tenth of what workers in U.S. factories earn. Canada also competes on labor costs, thanks to the weak Canadian dollar, which has depreciated nearly 20% against the U.S. dollar since Nafta's passage.

But an even bigger reason for the flight of the lollipop and sourball makers is the U.S. price of sugar. Candy manufacturers operating in Mexico and Canada pay world rates for raw sugar -- about half the federally supported U.S. cost -- and can easily undercut U.S. competition. "I just got tired of paying welfare to Big Sugar," explains Greg McCormack, president of Bob's Candies Inc., of Albany, Georgia, which recently opened a plant in Reynosa, Mexico.

The same price pressures are being felt across Candy Land by producers large and small. Last year, Hershey Foods announced a $275 million restructuring and the layoff of 1,000 employees with the closure of plants in Colorado and Pennsylvania. Last month, Philip Morris Cos.' Kraft Foods announced the closing of a Life Savers plant in Michigan. Lesser-known confectioners such as Gilliam Candy Brands Inc., of Paducah, Kentucky, also are hurting. Gilli