Huge gray warships are moored in startling proximity to pleasure boat marinas, hotel resorts and gleaming downtown office buildings. The U.S. Navy’s Pacific Fleet has held its position in the harbor despite a decade of phenomenal population growth and a shift in the city’s character to high technology and light industry.
Long gone is San Diego’s image as a “sleepy Navy town.” The nation’s sixth-largest metropolis occupies a conspicuously strategic spot: Not only does it border Mexico, but it is a potential gateway to the Pacific.
Economists forecast that this geographical distinction could secure San Diego a prosperous future as a player in the dynamic economic sphere of the Asia-Pacific region.
But hold that abacus. The city continues to suffer from serious infrastructure problems--most notably its small and inadequate “international” airport--and it is resisting the opportunity to establish a unique trading niche, critics say. San Diego may miss out on the Pacific boom by default.
Residents are asking whether the city’s rhetorical aspirations as a Pacific Rim capital are worth the risk of losing the quality of life that makes San Diego the desirable place that it is. San Diego has long wrestled with containing high growth, density, pollution and other urban ills plaguing its neighbor to the north. Will Pacific prosperity hasten its transformation into something akin to present-day Los Angeles?
“The idea of becoming a nouveau Hong Kong is terrifying,” said Peter Navarro, chairman of a coalition of slow-growth, environmental advocacy groups called Prevent Los Angelization Now (PLAN).
“If we’re going to become a hub of international trade, we feel it’s necessary to manage growth and attract only the appropriate kinds of business,” Navarro said. “We don’t need to pin our hopes on the Pacific.”
Still, with prospects high that Mexico will join Canada and the United States in the North America trade agreement--now under negotiation--a new tide is coming.
The vision is a triangular flow of increasing economic activity: from the parts-supplying operations of Asian investors to Mexico’s foreign-owned maquiladora factories--clustered south of the border in Baja California--and then to the U.S. and Canadian consumer markets. The assumption is that this trade would pass naturally through San Diego.
But that may not be possible. Proponents of the Pacific dream concede that the city has no container port, an essential facility for modern oceangoing trade, and no plans to build one. The Navy doesn’t want congestion in the harbor, and many civilians would object to such an eyesore amid their idyllic residential setting.
Worse, the San Diego region has no airport capable of accommodating transpacific flights. This not only stifles business, Pacific advocates say, it also thwarts growing numbers of affluent Asian tourists from reaching top-rated attractions such as Sea World and the San Diego Zoo. Instead, visitors must take an inconvenient side trip from Los Angeles. Cargo bound for Mexico can skip San Diego completely.
Even in railroad transit, San Diego has only an old rail spur from its nemesis megalopolis to the north.
“There’s been an attitude in San Diego that just by being on the Pacific Ocean, the gold will wash ashore--without any effort on our part,” said Ron Roberts, a City Council representative with mayoral aspirations. “But we’re really on the periphery, and I’m afraid opportunities on the Pacific are going to bypass this city.”
Roberts is a leading advocate of the controversial “TwinPorts” plan, which envisions building a $1.5-billion airport with a 12,000-foot runway on Otay Mesa, a mostly undeveloped area on the U.S. side of the Mexican border, adjacent to Tijuana’s existing airport. Under the plan, which has been debated for years, the two airstrips would share terminals and flight control operations and collaborate on such things as immigration procedures for international flights.
Realistic or not, the airport scheme suggests the lengths to which planners are groping for ways to resolve the fundamental problem of Lindbergh Field, the tiny commercial airport in the middle of the city that critics say is dangerous and woefully inadequate--even without further population growth.
Other options would involve deals with the Navy, which has a chokehold on prime real estate.
The Navy and related defense spending accounts for 20% of the local economy--a $56-billion gross regional product, or the value of all goods and services produced. That share is far less than in the old days, when the Navy was the area’s largest employer, but it is still large and may rebound if Naval forces based in the Philippines are consolidated here.
Meanwhile, light manufacturing in biotechnology and electronics--spawned by local leading-edge institutions such as UC San Diego’s scientific faculties and the Salk Institute--has taken the lead role in generating wealth for the San Diego area’s 2.5 million inhabitants. Domestic tourism also contributes heavily.
Both sectors are ideally suited for Asia-Pacific markets, said Lawrence B. Krause, an economist at UCSD’s Graduate School for International Relations and Pacific Studies. With a suitable airport, San Diego’s state-of-the-art medical and biotech industries could compete across a vast ocean, he said.
“The military is San Diego’s past,” Krause said. “The Pacific is what lies ahead.”
For now, the city is finding that the recession is hitting even its vaunted high-technology and defense industries, which have lost 4,000 jobs--7% of their work force--since last year, the San Diego Business Journal reports. With an uncertain economic picture looming, Krause is concerned that San Diego residents are drifting without direction.
“I think if the Pentagon announced the closing of one of the Navy facilities, then this community would be galvanized and start to think of what we are going to do with it,” Krause said. “The city has to start facing up to its future.”
A considerable amount of Japanese investment has found its way to San Diego, suggesting that some of the leading strategists on the Pacific Rim have identified the city as a good bet.
“The Japanese know we’re here, and they’re aware of our potential,” said Daniel O. Pegg, president of the San Diego Economic Development Corp.
Last year, Japanese investors pumped slightly more than $1 billion into the city, ranking it third after Los Angeles and Honolulu, according to accounting firm Kenneth Leventhal. Much of the money has been invested in resort development and real estate, but the consumer electronics industry has also taken interest.
Kyocera, a high-tech ceramics and electronics concern, for example, has its North American headquarters in San Diego and operates two maquiladora plants in Tijuana.
Sony, Matsushita and Hitachi are among Japanese companies that have established some 40 maquiladoras near the San Diego-Tijuana border, assembling such products as color televisions and video recorders. South Korea’s Hyundai, Samsung and Gold Star conglomerates have joined the fray, capitalizing on the $1.25 hourly wage standard in Mexico.
Problems exist with the maquiladora industry--the United States and Mexico are negotiating which percentage of a local product’s contents must originate in North America before it qualifies for tariff-free status under the proposed trade agreement.
Japanese manufacturers are reportedly disappointed in the quality of some domestic suppliers, who seek government protection from competing foreign parts. And Mexicans want to move into more sophisticated industry, away from labor-intensive assembly.
But many economists predict that Mexico will have one of the world’s fastest-growing economies in the years ahead, and San Diego’s proximity to the border gives it an advantage over its Pacific Rim rivals on the West Coast--Los Angeles, Portland, Seattle and Vancouver--that should help it cash in.
Trade statistics reveal how the city’s foreign commerce is already dominated by Mexico.
San Diego’s two-way trade more than doubled between 1985 and 1990 to $7.7 billion, according to the U.S. Census Bureau. But Mexico accounted for 91.9% of last year’s total, with Japan ($246 million) and Korea ($70 million) and the rest of Asia lagging far behind. By comparison, $35 billion in trade with Japan passed through Los Angeles in 1990.
Matt Miller, a seasoned Asia hand who settled in San Diego last year, chastened the city for its “cavalier attitude toward Pacific trade and investment” in his column in the San Diego Union earlier this month.
“San Diego hasn’t learned how to sell itself,” Miller wrote. “And those who believe that Chinese, Japanese or Korean investors will flock to San Diego with suitcases full of yen or won or New Taiwan dollars because of pleasant ocean breezes, Sea World, golf courses or a proximity to the Mexican border are sadly mistaken.”
But San Diego’s greatest strength may ultimately depend on its ability to retain the environmental qualities that Los Angeles and other big U.S. ports lost long ago. Slow-growth advocates say its desirability as a place to invest, live and work far outweigh the importance of its strategic perch on the Pacific Rim.
“The link between Mexico and Asia is symbolically important, and maybe essential in the long term,” said Richard H. Davis, a business consultant specializing in Japan and a believer in the Pacific future. “But if Tijuana went away tomorrow, 90% of San Diego’s economy would still be here.”
San Diego Demographics:
Population: 1.1 million
Annual Growth Rate: 4% (1990)
Native American: 0.045%
Gross Regional Product: $55.8 billion
Per capita: $22,320
Economic Growth Rate (1990): 8.3% Value of Major Industries:
Military: Military payroll $4.7 billion, Defense contracts, $5.1 billion Source: San Diego Chamber of Commerce
San Diego’s Foreign Trade (Southland Edition, D2) The city’s foreign trade totaled $7.7 billion in 1990. Below is a breakdown.
Top Trading Partners:
1) Mexico: $7 billion
Exports: $3.3 billion
Imports: $3.7 billion
2) Japan: $264 million
Exports: $21 million
Imports: $243 million
3) South Korea $60 million
Exports: $20 million
Imports: $40 million
With Asia-Pacific Nations: $509 million
Total Exports: $3.4 billion
Total Imports: $4.3 billion