Why California’s Economy Should Never Go Nativist : Politics: Calls to limit, or eradicate, foreign influences are heard throughout the state. But what would happen if the Asians picked up and left?

After decades of ever-increasing cosmopolitanism, economic distress, mixed with changing demographics, have reinvigorated one of California’s most venerable, and deplorable, political traditions--nativism.

As in previous eras, increasing immigration from Asia, as well as the emergence of Japan as an economic power, have sparked the latest calls to limit Asian influence. Although opposition to Chinese emigration set the tone, the cry “the Japs must go!” was first raised in 1887, before there were more than 400 Japanese in the state. Roughly 20 years later, Japan, fresh from its military victory over Russia, was the villain in “The Valor of Ignorance.” Written by a young American military officer, the book warned of the ultimate conquest of California by better organized and racially homogeneous Japanese.

The nativists’ demands to restrict the rights and business opportunities of Asians vexed diplomatic relations between Washington and Asia. Frustrated by the Asian-baiting in California, President Theodore Roosevelt complained that the state was too small to be a country and too large to be an insane asylum.

Today’s nativism, as yesterday’s, draws on a diverse combination of interests. At the fringes are the openly racist groups. Toward the middle are such mainstream organizations as labor unions, which fear increasingly aggressive and often anti-union Asian firms locating in the state. Some of the most vociferous voices of the new nativism are self-described “progressives” who worry about Taiwanese investing in McDonnell-Douglas, while others want to change local laws to put foreign companies at a competitive disadvantage. Leading African-American activists also have tapped nativist sentiment in criticizing the practices of Korean merchants.

Whether nativism remains an option in California’s political debate rests largely on public perceptions of the relative benefits of the region’s deep involvement with foreigners, most particularly the Japanese, who have sunk an estimated $200 billion into the state over the past decade. To be sure, it’s easy to catalogue the shortcomings of foreign-owned businesses in the state--their tendency to exclude local employees, their reluctance to transfer important technologies and skills to the local economy. But what would be the effects of a phased withdrawal of foreign interests from our region, other than to turn nativist scowls into smiles?

Largely because of increased trade with Asia, California’s overseas commerce almost quadrupled during the 1980s, with the state’s share of total U.S. trade jumping from 12% to more than 18%. At the Port of Los Angeles-Long Beach, now the nation’s largest port of ocean-going commerce, Asian countries account for eight of the 10 largest trading partners, led by Japan and Taiwan.

The positive effects of such trade are not hard to come by. Among the fastest-growing categories of jobs in Los Angeles are warehousemen, truckers and other trade-related workers. The export component of this trade has been growing and, by 1989, surpassed $58 billion, the bulk of it in high-technology manufactured goods. The most frequent destination for exports shipped out of Los Angeles? Japan, Taiwan and South Korea.

The critical nature of its foreign connection is evident in California’s three largest industries--agriculture, aerospace/high-tech and tourism. Asia remains by far the state’s largest agricultural market. Shipments from the giant California-based Sunkist co-operative account for two-thirds of all citrus imports to Japan, with Japanese orange imports increasing fourfold during the 1980s.

Aerospace and high-technology, too, would be severely hurt by an Asian withdrawal from California. For example, Japan is the largest customer of Boeing Corp.’s aircraft business, which, in turn, subcontracts billions of dollars annually from California companies. McDonnell-Douglas’ survival has been linked to its ability to sell stakes--and potentially aircraft--to Asians, most notably Taiwanese and Chinese.

Much the same pattern persists in other electronics industries. Indeed, while California companies have cut back or threatened to move to other states, Japanese, Chinese and Korean firms have continued to invest in manufacturing, research and development. Asians, who account for roughly 40% of the entering class at three UC campuses, already constitute upward of one-third of the state’s engineering and technical talent, particularly in the high-tech electronics sector. They also are emerging as creators of our most competitive high-tech companies, such as San Jose’s Solectron Corp., winner of the Commerce Department’s Baldridge Award for manufacturing excellence.

Tourism, which now employs more than 360,000 workers in Los Angeles alone and, along with international trade, is one of California’s strongest job creators, depends increasingly on foreign visitors, whose numbers have been growing nationwide at better than four times those of domestic tourists. Japanese tourists exceed visitors from Britain, France and Germany combined and spend far more money per capita. Other increasingly affluent Asians are also coming to town. Last year, the number of Korean visitors to the United States jumped 44%, with those touring such attractions as Universal Studios up 133%.

Perhaps most important in this time of economic discontent, foreign interests--again largely Asian--continue to show confidence in California. Sony’s and Matsushita’s investments in Hollywood, as well as many smaller moves by other Asia-based as well other foreign companies, have helped keep entertainment companies above water, even spurring construction of new studios and sound stages. Foreign sales, and most particularly in Asian markets, increasingly account for a greater portion of Hollywood’s overall profitability.

But the foreign influence doesn’t end there. Firms controlled from overseas or founded by immigrants make up a growing, perhaps dominant portion of the garment business in San Francisco and Los Angeles, including some production transferred from the other side of the Pacific. Exports of California wine--largely to Britain, Japan and Canada--have helped offset a drop-off in domestic consumption. And even as the politicians and their union backers moan about the closure of GM’s Van Nuys assembly plant, they virtually ignore the larger--and expanding--Toyota-GM facility in Fremont.

Finally, if the recession has slowed speculative real-estate spending, foreign-owned headquarters operations, which more than tripled during the 1980s, have expanded at a time when many larger, locally based companies have cut back their investments and their payrolls. According to a recent survey of 500 overseas-based firms by KPMG Peat Marwick, foreign companies invested nearly $1 billion last year in new plant and equipment in Southern California. This year, nearly 20% of the companies, the largest group of whom are Japanese, planned to increase their job rolls during the current year.

Enumerating the unmistakable benefits of foreign investment in the state isn’t enough to fend off the nativist tide, however. What’s required are new attitudes and approaches by overseas-based companies. As Tachi Kiuchi, president of the Japan Business Assn. of Southern California, has admitted, California’s foreign companies--most notably Asian--have been “very poor communicators,” often remaining silent as invective is poured upon them. Hiring slick public-relations firms or high-powered lobbyists to do the talking won’t help much, either.

Instead, overseas firms and investors need to become full-fledged contributors to the state’s long-term competitiveness, particularly during this period of economic restructuring largely brought on by the end of the Cold War. A commitment to preserving jobs, to establishing links to local suppliers and to transferring technologies would go a long way toward blunting the nativist outcry.

The reality is that for California there is no reasonable alternative to developing long-term partnerships with Asian and other foreign interests. Globalism, not nativism, is our future.