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Associated Press

Sen. Barack Obama speaks during a town hall-style meeting held at Munster Steel Company in Munster, Ind., May 2.

Indiana is trying to keep competitive with a combination of low taxes and an aggressive economic-development effort, says Nathan Feltman, Indiana's commerce secretary. Republican Gov. Mitch Daniels completed his third trip to Japan last fall, leading to an agreement by Toyota Motor Corp. to produce Camry sedans at Fuji Heavy Industries Ltd.'s Subaru plant in Lafayette, creating 1,100 jobs. Honda Motor Co. has promised to create 2,000 jobs when it begins production at a new plant in Greensburg this year.

Still, Indiana isn't immune from the economic slowdown. While the state's unemployment rate remained the lowest of its Midwest neighbors, it increased to 5.1% in March from 4.6% in February.

Toyota's factory in Princeton recently cut production to 80% of capacity because of poor sales of Tundra trucks, which have been dented by high fuel prices. The Subaru plant in Lafayette had a similar slowdown in the first three months of the year.

Meanwhile, North Carolina has positioned itself as a biotech and banking capital, anchored by Bank of America Corp. and Wachovia Corp. based in Charlotte and the research park in the Raleigh-Durham-Chapel Hill metro area, which boasts the highest average wages in the state. Monday, in a stop in Durham, Sen. Obama addressed employees at Cree Inc., which makes energy-efficient light-emitting-diode, or LED, lightbulbs.

But unemployment has soared in the rural parts of the state where textile mills and furniture factories have been hard hit by foreign competition. Unemployment fell to 3.8% in Durham County last year even as it hit 7.5% in Edgecombe County in the eastern part of the state. In an earlier stop in Wilson, N.C., Sen. Obama lamented the closing of VF Corp.'s Wrangler denim factory.

Polls show that free trade is more unpopular today than at any point in the past decade, and the Democratic candidates have made clear their opposition to new trade deals that don't have stronger labor and environmental standards.

Still, some Democratic voters say they see benefits in their lives from increased trade.

"Perhaps we should negotiate new deals," says Jack Henricks, 63 years old, who owns a paint-manufacturing business in Anderson, Ind. He says business has slowed recently, but he adds, "It's still doing OK. I think there have been some strides at the state level."

Judith Babinsky, 45, lost her tractor-manufacturing job in 1999 when the factory moved to Taiwan. But the South Bend, Ind., resident says, "I'm OK with free trade if it helps lower prices."

Write to Nick Timiraos at nick.timiraos@wsj.com²

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