COMMENTARY ON COMMERCE : FREE...

Have you been to Mexico City lately? I think most people would be surprised at the changes that have taken place. The government is making progress, in addition to the North American Free Trade Agreement, by altering its infrastructure, reducing taxes and privatizing industry.

We have a unique neighbor/business relationship with Mexico and these changes will facilitate Orange County business expansion. With a gross national product of $180 billion, Mexico is projected to grow 5% to 8% annually. While the United States is Mexico’s biggest export market, Mexico is also a big opportunity for the United States.

Opening up this market through the trade pact will provide impetus for Orange County businesses looking for growth markets, especially in the current economy. Another key advantage to Orange County is Mexico’s proximity and its strategic role as a gateway to Latin America.

The trade mission, organized by Rep. Christopher Cox, gave us the opportunity to explore ideas and discuss trade issues with President Salinas, key Mexican officials and businessmen. In talks with the President Salinas and his staff, AST presented its unique position as a personal computer manufacturer to provide Mexico with the tools to spur development and help raise its standard of living.

With a presence in Mexico since 1989 and with the recent subsidiary opening in September, AST could also share with Mexico our long-term commitment and ability to help the country automate, process information and boost productivity. However, tariffs levied on products, such as the personal computer, only serve to hinder rather than help Mexico’s efforts.

Issues such as tariff reduction or elimination need to be resolved before industries such as ours can offer the full advantage of technology. Fortunately, what many companies in Orange County have to offer is technology that does not compete with Mexican industry. Using AST as a case study, the following are issues that the agreement can address:

* Reducing tariffs. The 20% tariff levied on personal computers was originally meant to protect and develop internal industry. But in the case of computers, Mexico has no manufacturing industry that needs protection.

These tariffs hinder Mexico from purchasing the world-class technology it needs to fuel its own development. They also prevent legitimate businesses from flourishing and encourage black-market trading. Tariff reductions would make quality PCs more widely available and increase local jobs in sales and marketing.

* Eliminating excessive regulation of spare parts. Over-regulation of spare parts may mean a computer is out of commission for weeks because a new spare part cannot be shipped in. Instead, the part must be shipped out for repair. Again, this hinders their productivity and adds expense.

* Redefining “country-of-origin” restrictions, which are prohibitive when applied to a technology such as computing. In the computer industry many components are either not manufactured in any of the countries bound by the free-trade pact or would be at such high prices that the full package, the computer, would no longer be affordable. Country-of-origin rules should be based on “value-added” percentages, which include manufacture, labor and freight instead of complex formulas.

More than 280,000 PCs were sold in Mexico last year. PC sales are expected to grow 20% annually for the next five years. This represents a sales opportunity for our company while Mexico receives the tools necessary to realize its goals.

The recent trade mission gave me a great respect and insight into what President Salinas is hoping to accomplish through his ambitious economic reforms. Never before have I met such a group of qualified leaders, who have demonstrated such a dedication and enthusiasm to bettering their country.

Even without the agreement, these leaders are committed to cracking down on corruption and tackling environmental issues to improve living conditions. We can learn from their example, as well as benefit from freer trade.

The free-trade agreement will build on the progress being made in Mexico, resolve trade obstacles and make a mutually beneficial exchange possible. I strongly encourage companies to visit Mexico to see the progress and potential for themselves.