COMMENTARY ON COMMERCE : FREE...
Californians in recent years traditionally looked westward--around the Pacific Rim, with its rapid industrialization and burgeoning markets--in search of economic opportunities. But it is to the south--among the dynamic economies of Latin America, especially Mexico--that the greatest promise for growth and prosperity may lie.
The North American Free Trade Agreement is a historic and visionary effort to establish the world’s largest and most competitive economic zone. And there are several reasons for California to be among the prime beneficiaries of this partnership.
Just as California is logically positioned for a pivotal role in Pacific Rim commerce, geography also makes this state a logical hub for free-trade pact activity. There is easy access to Mexico, which already ranks third among California’s trading partners.
Trade between the United States and Mexico has grown rapidly--more than doubling in just three years. California has a long history of doing business with Mexico, and much of the state’s or U.S.? exports originate in the Los Angeles/Orange County region.
The trade pact’s elimination of most tariffs and other trade barriers will spur even more economic activity. It has been estimated that the agreement would result in 130,000 new jobs in the United States over the next 10 years.
Many Americans do not realize the degree to which Mexico consumes imported goods. Mexicans spend about 20% of their income on imported products, and 70% of those imports come from the United States. Based on that, about 15% of the average Mexican’s income is spent on U.S. goods.
Significantly for Californians, many of the state’s? products also are the items most in demand today in Mexico. A recent study by J. Vernon Henderson of Brown University projected that, with the free-trade agreement in force during the final portion of the 1987-95 period, imports of U.S.-made plastics will increase by 350%. Henderson also forecasts a 300% rise in demand for U.S. electrical apparatus in Mexico, 200% higher imports of computer, textiles and electrical machinery, and a 150% increase of U.S. instruments and machinery.
In each case, the benefit of the agreement is clear--more jobs for U.S. workers to make the products or provide the services in demand in Mexico.
Meanwhile, new investment in Mexico made possible by the free-trade agreement will generate more jobs and wealth. That will further increase Mexico’s demand for U.S. goods and services.
Prosperity in Mexico can also be expected to stem the flow of immigration toward the United States. Many Mexicans in recent years have immigrated because they could not find jobs in Mexico; opportunities created by the agreement will make that journey unnecessary.
Southern California’s large and growing Latino population will be another major asset under the pact. Because Latinos can operate easily within the cultures of both nations, businesses on both sides of the border will look to them as a link in new commercial ventures.
Free trade will mean more business opportunities for Latino entrepreneurs in California and more jobs for Latino workers in Mexico.
Mexico in recent years has undergone an astonishing economic and social transformation as it prepared to enter the new era of economic partnership with its northern neighbors.
Under Salinas, a long period of hyper-inflation and economic stagnation has ended; Mexico’s economy now is strong and getting stronger and is expected to grow by more than 4% during 1992.
Furthermore, Mexico is moving decisively to halt pollution and to clean up existing environmental problems.
Canada, the United States and Mexico today are at the threshold of a new era of partnership and cooperation--one which offers our nations a wide range of new economic opportunities.
California, especially Southern California, is ideally positioned to take advantage of these opportunities. It is the dawn of a new era all of us can look forward to with great optimism.
