A few years ago, these looms had been busy churning out the patches that go on the sleeves of Customs and Border Patrol agents — a steady source of income that helped the 116-year-old Lion Brothers to ride out the ups and downs of other business. But suddenly, in late 2013, the agency changed the specs of its contract from “Made in America” to “Made in America and trading partners.” Which, in practice, meant “made somewhere else.”
That left Lion Brothers reeling. Ganz had to shut down the looms, leaving boxes of intricate leftovers stacked in the old factory’s recesses, and lay off dozens of people. But it wasn’t the end of the enterprise: With the help of a small government agency that advises businesses that have been caught in the crossdrafts of international trade, she was able to open a much smaller, high-tech facility in leased space down the road and start looking towards new markets. For Ganz, the hand up was a welcome relief.
“Instead of, 'I’m from the government and I’m here to hurt, it was I’m from [the Mid-Atlantic Trade Adjustment Assistance Center] and I’m here to assist,’ ” she says. “It allows us to do a couple things at once rather than one thing at a time.”
Trade Adjustment Assistance has long been a bargaining chip in fights over free trade agreements, with labor unions pacified by the money that goes to help retrain people who have lost their jobs to import competition. The massive fight over whether to grant President Obama the power to “fast track” trade deals through Congress is no exception — liberals say the proposed funding level of $610 million yearly is too low, while conservatives say it’s an expensive welfare program that shouldn’t exist at all.
It’s true, the part of the program that helps individuals — which takes up the vast majority of the money — has shown limited success in getting people back to work. If people do manage to replace the jobs they lost, the engagements tend to pay less; a 2012 study commissioned by the Department of Labor found that the costs of the program far outweighed the benefits.
But the tiny slice that goes to help companies, which has been funded at between $10 million and $16 million per year since 2002 — and dropped from $15.8 million to 12.5 million in 2015 — has a pretty good track record. According to a Government Accountability Office report from 2012, the program helped small firms boost sales and productivity and retain employees, enabling some to survive where they otherwise may have gone under entirely. And that’s probably more cost-effective than trying to retrain someone for a job that may not exist.
Now, as Congress stands ready to pass a measure that would expedite approval of the Trans-Pacific Partnership, a massive trade deal with Pacific Rim countries, the program’s defenders are wondering why more money isn’t going towards helping companies adjust to all the new disruptive forces that will result.
“Let’s say you have a firm with 250 employees, and you can save those jobs, you don’t have to pay unemployment insurance, or pay for retraining and healthcare,” says Joni Waddell, who runs the Trade Adjustment Assistance Center in Denver. “It is kind of odd timing that just as the Trans-Pacific Partnership might be passed, our program has just gotten a pretty gigantic cut, considering we’re pretty small in the first place.”
After losing the Customs and Border Patrol contract, Ganz kept the factory open for months, hanging on to her employees in hopes that the agency would change its mind. Her longtime bankers abandoned her. At times, she wondered whether it was possible to maintain any domestic manufacturing at all — no stranger to globalization, Lion Brothers has had a factory in China since the 1980s for more labor-intensive products, including university logo-wear and jerseys for major sports leagues.
But finally, a partnership came through with one of her longstanding clients: The Girl Scouts of America. Lion Brothers had long designed their merit badges and elaborate ceremonial patches, and the Scouts agreed to bring all the production that had taken place in China back to the U.S. That gave Ganz the wherewithal to entirely reinvent production: She leased space in a nondescript office park and filled it with high-tech machines that do the stitching, backing, and finishing by themselves. In fact, she doesn’t even call it a factory.
“We wanted everyone to think of tiny,” Ganz says. "We wanted to be accurate in selling expectations. So instead of a factory, we called it a micro facility.”
In business jargon, that’s known as “lean manufacturing”: A way to make all processes as efficient as possible. The new facility delivers product in a fraction of the time. That inherently means less labor, and Ganz did have to make some painful layoffs — though many of her unionized employees were close to retirement anyway. Those who stuck with her learned to do almost entirely different jobs, overseeing machines rather than operating them.
Take Laura Williams, a 28-year Lion Brothers veteran, as she lines up a cloth full of “9”s in a digital cutting machine and types some instructions into the computer terminal right beside it.
“You got to tell it what to do,” says Williams, with satisfaction. “I enjoy it, because it’s a challenge. And it comes out perfect. No raggedy edges.”
That’s where trade adjustment assistance came in. Ganz was struggling to make everything work, and needed some help to evaluate the new business model and make sure it was sound. She also had started doing more research and development at the new facility, but didn’t quite have the bandwidth to commercialize the new technologies they were coming up with. Finally, she needed help figuring out what other markets might be accessible beyond athletics and other logo wear — perhaps fashion, with the shimmering appliqués they were learning how to bake onto fabric.
As for jobs, Lion Brothers employs only 10 percent of the 350 people it had at its peak payroll. But now, they’re positioned to start expanding again.
“Will we get back to 350? I’m not sure,” Ganz says. "But if it was at that level, we’d be producing a lot more goods.”
Those are only a few of the ways in which the program helps turn around firms. It could be marketing, or better financial management, or figuring out how to offer design services as well as simply goods for sale. Often, factories that have been producing commodity goods need to find more specialized, higher value-added product lines, and look for clients that benefit from the flexibility and speed of having production located nearby.
The value of assistance is capped at $75,000, and must be matched by the recipients themselves, to make sure they’re also invested in their own success — like getting McKinsey to come help out, at half the price. Sometimes, firms need help understanding what is happening to them.
“These folks, once upon a time , they were quite successful and competitive. and when they get hit with imports, they don’t know it,” says William Bujalos, who runs the Mid-Atlantic Trade Adjustment Assistance Center. "Their immediate reaction is to start using working capital to reduce their prices. By the time they realize that wasn’t what they should’ve been doing, three or four years go by, and they’re introduced to us.”
Occasionally, the 11 Trade Adjustment Assistance Centers across the country encounter companies that they know they can’t save. But the Pacific Northwest’s David Holbert says that there’s usually some way to keep them in business.
“Small companies are surprisingly flexible, and they are experts in their niche, and there’s almost always a direction to go in to remain viable,” he says. He thinks there are more firms out there to help, but refrains from advertising his services, for getting people’s hopes up when there’s not enough money to go around.
“It’s so small it’s a speck, really, so it’s unknown” how much demand exists, Holbert says. “We do as much outreach as we need to to serve the firms we have the funds to serve.”
Of course, the larger truth around trade adjustment assistance is that it’s probably too little, too late.
The vast majority of America’s factories and jobs were lost over the last 30 years, as the North American Free Trade Agreement and then permanent normal trade relations with China allowed industrialists to relocate production overseas. Thinking of manufacturing as a second-world strength, the U.S. did little to retrofit factories to keep some production at home, says Mike Galiazzo, president of the Regional Manufacturing Institute of Maryland, a coalition of companies in the state.
"They just kind of capitulated. They just said 'Oh, we can’t compete with the Chinese,’ ” Galiazzo sighs. And now, the number of firms around to save is approaching zero. "There are good programs, but we’re running out of places to go knock on the door and ask them to turn in an application.”
That’s one tack that labor groups have taken to hammer the Trans-Pacific Partnership — international trade has gutted the manufacturing bases of middle-class cities, which has had an outsized impacts on communities of color. In an ad that ran this week, the AFL-CIO featured a steelworker from Baltimore who made the connection between shuttered factories, racial inequality, and urban blight. Galiazzo says there’s some truth to that line of argument.
“I believe that we have to pay attention to who were the people who were the casualties of all this,” he says. “And I think that just as African Americans were beginning to be treated more equally at work, when we were having desegregation, we moved the damn facilities."
However, Galiazzo and Ganz are both agnostic on the Trans-Pacific Partnership. Domestic companies need foreign markets, they think, so if the trade deal opens them up, that would help. Much research has been done on the potential for metropolitan areas to grow through exports, if they focus on the right products and develop cutting edge technology.
But existing companies — and perhaps even future ones — need help understanding the new landscape of making and selling stuff in the global economy.
“If we don’t understand it, then we will not gain it back,” Ganz says. “There will be dislocation, but there’s opportunity to get people to the other side.”