Pact Will Give O.C. Economy Lift, Leaders Say

Orange County business and political leaders hailed the North American Free Trade Agreement on Wednesday as opening the door to increased exports, offering access to reduced labor costs and giving a boost to the local economy.

“This is probably the best thing that has happened to Orange County during this recession,” said Lucia de Garcia, a Newport Beach trade consultant who has been in the forefront of mustering local support for the trade pact. “This will lift our economy out of the recession.”

Companies in Orange County, which is less than 125 miles north of the Mexican border, are expected to particularly benefit from the accord, especially those that make telecommunications, computer and medical equipment or those providing engineering, architectural and pollution control services. And bilingual professionals should be well-positioned to prosper under the agreement.

Rep. Christopher Cox (R-Newport Beach), who invited 10 Orange County business leaders on a fact-finding trip to Mexico earlier this year, said this region will flourish thanks to the free trade agreement.

“Opening up foreign trade with Mexico will, as a result, benefit Orange County disproportionately,” Cox said. “Our county is peculiarly situated in that almost all of our industries will do well.”

The trade agreement is expected to remain a divisive issue between industry looking to lower costs and labor unions concerned with job losses. However, the consensus is that while it will hurt some companies in the short term, the pact would bring more economic benefits to America’s manufacturing and service industries.

Rep. Dana Rohrabacher (R-Huntington Beach) said that with an expanding Mexican economy, the United States will be “getting in on the ground floor,” providing “our manufacturers with a lot of work for a long time.”

“It will be a big boost to the United States,” he said, adding that the United States is nothing more than a free trade zone among 50 states. “We are in good shape if what came out of the negotiations was true to the goal that we set out to achieve.”

Despite lower wages in Mexico, a flight of factories and jobs from Orange County is not expected.

“Most assembly manufacturing operations that wanted to leave (Orange County) have left already. I don’t think the impact will be very great,” said Luis Suarez-Villa, associate professor of social ecology at UC Irvine.

However, in Los Angeles and other areas where companies are dependent on low-skilled workers, such as in the manufacture of garments or the assembly of auto or electronic components, the trade pact could mean a shift in employment.

As some Southland business owners and employees evaluate the agreement’s impact, others are already forging ties with Mexican companies. Latino accountants, attorneys and trade consultants in Orange County who understand the business cultures of both the United States and Mexico expect a windfall as demand for their services increases.

Trade consultant De Garcia and her clients popped champagne bottles in her Newport Beach offices to toast a new era of expanded international trade. De Garcia, who specializes in U.S.-Latin American trade, said the future competitiveness of U.S. companies lies in Mexico, where it offers labor costs as high as 75% below those in this county.

Without a trade pact with Mexico and Canada, “the United States will be isolated because the economic environment of the 21st Century is toward formation of economic blocs,” said De Garcia.

Robert J. Miranda, whose Santa Ana-based R.J. Miranda & Co. is among the nation’s largest Latino-owned accounting and management consulting firms, is helping several U.S. companies form joint ventures with similar companies in Mexico. His clients include Brandon Birtcher, managing director of Birtcher Real Estate Development Ltd. in Laguna Niguel, who plans to build low-cost housing in Mexico and is considering developing commercial real estate in Mexico.

“Many American companies realize that they need people like us, people who understand the American and Mexican management and accounting style,” Miranda said.

Although the Mexican inflation rate has come down significantly in recent years, he said Mexican companies continue to report their balance sheets and income statements using an inflation-adjusted method. To reconcile the Mexican financial statements with U.S. accounting standards, bilingual accountants and managers are helpful, Miranda said.

Agricultural interests also predict good fortune. For example, citrus marketer Sunkist Growers Inc. strongly supports the pact, because Mexico does not currently allow the importation of much fresh citrus from California.

“This agreement means that there will be an opportunity for us to develop a fresh-fruit market in Mexico,” said Curtis W. Anderson, vice president for government relations.

Anderson, who is also vice chairman of the board of the Canada-California Chamber of Commerce, said the timber and building materials industries in Canada and the United States should benefit as Mexican developers build more housing and commercial properties.

Critics warn that the accord could be used to weaken existing U.S. environmental laws and expose an already polluted U.S.-Mexico border to greater damage.

But environmental companies, such as Metalclad Corp. of Anaheim, see this as an opportunity to expand. In January, Metalclad forged a joint venture with a group of Mexican businessmen to construct and operate a waste processing facility, handling 120,000 tons per year, in the state of Veracruz along the Gulf of Mexico.

And William G. Adams, a senior partner at the law offices of O’Melveny & Myers in Newport Beach, expects his firm to generate new business as more companies in Orange County seek to establish a presence in Mexico, either through a representative office or joint venture.

“American companies that have wanted to establish manufacturing operations in Mexico to take advantage of cheaper labor have already done so in the last few years through the maquiladora program,” he said.

“I believe that the net effect of the free trade agreement will be to increase economic activity in the U.S., and it will make U.S. companies more competitive, particularly those who join forces with Mexican companies,” he said.

William L. Allyn, executive vice president of Cal Pacifico of California Inc., a maquiladora consultant in Newport Beach, agrees that his 15 clients with operations in Mexico should not be affected immediately.

With additional competition to do business south of the border, Allyn said he is more concerned about traffic congestion at border crossings and to what extent the Mexican government is willing to finance road and other infrastructure improvements.

But one place where the international competitiveness is already being felt is at the Hitachi Home Electronics America Inc. factory in Anaheim, which will close at year-end and move its operations to Tijuana.

The Japanese electronics giant stopped assembling videocassette recorders in Anaheim in April and its workers will now test large-screen TV sets imported from Asia and Mexico until the shutdown. Since January, its work force has dropped by 32%, leaving just 170 employees.

Cox, for one, thinks Mexican-American free trade and the changes it creates are unstoppable.

“Increased trade with Mexico and Canada is already occurring even before” the agreement, he said. “Were the (free trade agreement) to fail in Congress, the march of progress would nonetheless go on. The wave of the future is integration of the North American economies.”

Times staff writer George Frank contributed to this story.

* ORANGE COUNTY VOICES: Executives and trade experts comment on the agreement. A7

Three-Way Partnership

The historic North American Free Trade Agreement would create the world’s biggest common market by eliminating most import and export barriers among the United States, Canada and Mexico.

1991 trade figures in billions of U.S. dollars: Canada $75.0 Canadian Imports from U.S. $2.1 Canadian imports from Mexico United States $93.7 U.S. imports from Canada $31.9 U.S. imports from Mexico Mexico $0.4 Mexican imports from Canada $33.2 Mexican imports from U.S. Impact on O.C.

Certain U.S. companies exporting goods and services will benefit under the free trade agreement. A sampling of what O.C. firms could provide.

Exports to Mexico:

* Computer equipment and software

* Engineering and maintenance equipment and services

* Telecommunications equipment and services

* Pollution control equipment and services

Exports to Canada:

* Medical/biomedical equipment and technology

* Computer software

* Electronic components

* Pollution control equipment

* Plastics material and resins

Sources: International Monetary Fund, KPMG Peat Marwick