Californians Gear Up For Impact of Free Trade
Adjustments expected across wide range of industries if border opens
CALIFORNIA broccoli growers worry about a bin-bursting supply of cheap vegetables coming up from Mexico. Peach growers believe they will find millions of new customers south of the border.
Computer firms see a bonanza, too. But apparel manufacturers fear a massive loss of jobs to low-wage stitchers in Mexico.
From the vast asparagus fields of the San Joaquin Valley to the clacking sewing plants of this city's garment district to the boardrooms of banks, California is bracing for the consequences of a possible free-trade agreement with Mexico and Canada.
Even as debate over the North American Free Trade Agreement (NAFTA) reaches a crucial stage in Congress this summer, anticipation and anxiety redound in border states that will be most affected by the pact.
In California, most agree that the treaty would affect everything from immigration patterns to the daily routines of millions of workers and businesses.
"Better than half the California economy would be touched by free trade," says Philip Romero, chief economist to Gov. Pete Wilson (R).
California is the nation's leading trading state and the second- biggest exporter to Mexico behind Texas. Since the mid-1980s, when Mexico began to liberalize its economy, California has quadrupled its exports to that country. The volume reached $6.6 billion last year.
To a certain extent, free trade would accelerate trade patterns already under way rather than result in wholesale changes, analysts say.
Computers and electronic equipment have been among the top exports to Mexico. Companies such as Apple Computer have already expanded their presence in Mexico in the wake of looser trade rules instituted by the government of Carlos Salinas de Gortari. Tariffs on printers and a host of other electronic goods would disappear under the treaty, opening up new opportunities for California high-tech companies.
High-wage, high-skilled industries are expected to be the big winners under an open trading arrangement. As foreign investment in Mexico grows, treaty enthusiasts talk wistfully of California's becoming the financial hub of an emerging North American empire that includes money pouring in from Asia and elsewhere. Prospects for growth
The state is considered well positioned to help Mexico develop ports and to offer transportation services, steel, machine tools, and other goods that an industrializing country needs.
"It is going to be a business opportunity for us," says Jack Kyser, chief economist of the Economic Development Corporation, a private group here.
A recent study by the Office of Planning and Research under Governor Wilson, who supports the treaty, estimated that, even with the negative effects in some industries, California would gain 30,000 to 40,000 jobs as a result of free trade.
Some economists, in fact, think state and local authorities have not done enough to promote the idea. They say Texas has been far more aggressive in establishing business ties with Mexico.
"Southern California is in such a crisis of confidence that it is not looking at the possibilities under free trade," says Joel Kotkin, a fellow at the Center for the New West.
Others see pain, not potential. The treaty is likely to thud hardest on low-paying, labor-intensive industries that will compete with bantam-wage rates in Mexico. Thus some analysts fear an exodus over the border of glass making, garment manufacturing, cannery, and assembly jobs.
Bernard Lax, president of the Coalition of Apparel Industries of California, cites another problem for his industry: other countries funneling cheap goods through Mexico. While only Mexican or Canadian goods are supposed to be duty free, he contends Customs officials won't be able to inspect all garments to determine their origin.
"Mexico will turn into the prime third-world dumping ground," he says.
Treaty boosters concede some jobs will be lost in the apparel industry, which employs 150,000 in California, but say corporate offices and high-end manufacturing - $90 Nikes as opposed to $20 Keds - will remain here.
Most problematic may be agriculture, California's No. 1 industry.
Farmers who grow crops not produced in Mexico - apples, pears, peaches, plums, table grapes, nuts - stand to reap a horn of plenty by selling south of the border. Beef and diary farmers will likely benefit as well. Stiff competition
But growers of winter crops such as broccoli and cauliflower, as well as producers of canning tomatoes, face competition from Mexican farmers who have cheap land and labor, and fewer pesticide rules.
Some farmers may have to switch crops or set up operations on both sides of the border.
"It will make people relook at production and how they conduct business," says Matt McInerney of the Western Growers Association.