Who’s Afraid of the Big Trade Pact?

I know, I know, it’s easy for me to talk. There’s not much chance that my employer will move to Mexico, where poorly paid pundits working in unsafe newsrooms will crank out cut-rate columns for export to the United States.

So of course I’m in favor of the proposed North American Free Trade Agreement. But you should be too, even if you grow tomatoes. Even, in fact, if you pick tomatoes.

There are two reasons: First, North American free trade will be good for California. With its physical proximity, cultural ties and enormous financial and technological wealth, this state is in a great position to benefit from a rapidly developing Mexico.

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And second, we really don’t have much choice. Protectionism doesn’t work for advanced societies, and U.S. tariffs on Mexican goods are already so low that we have free trade now, only one way. Any jobs that are going to flee south will go with or without NAFTA.

There’s so much fog surrounding free trade that it might as well be San Francisco, so let’s take the arguments against NAFTA one by one.

* Mexico will drain the United States of jobs. The attraction of Mexico is cheap wages, which already exist, and since U.S. tariffs on goods from Mexico now average less than 4%, there is little barrier to goods from there. Mexican tariffs on U.S. goods generally exceed 10%.

* Mexico will drain the U.S. of investment. The tiny Mexican economy--less than half the size of California’s--can’t possibly soak up any noticeable quantity of capital from anywhere.

* Mexico will undercut Southern California firms by paying slave wages in dangerous sweatshops. Many Mexicans now get no wages and live in dangerous squalor. For a while, some will work very cheap, in very bad conditions, which still beats starving. As employment grows, so will productivity and wages. With mass affluence will come political power, bringing greater health and safety protections in the workplace. But first Mexicans need a workplace.

* Mexico will undercut us by despoiling its environment. Talk about North American imperialism--and from the world’s largest consumer of natural resources, yet. Except to the extent that the pollution comes north, who are we to tell the Mexicans what balance of environmental protection and business development is appropriate for them? This argument is the height of arrogance.

* Poor Californians will lose out. Poor Californians have the most to gain. Their wages have been under attack for years from competition posed by eager Mexican immigrants who can’t find work at home. Poor Californians are also likelier to have relatively low skills and thus are likelier to work in service jobs, which are precisely the kind least prone to being exported. And free trade means cheaper goods in the stores, which will benefit the poor most.

* California agriculture will lose market share. Translation: You get cheaper food. By freeing land and water from uneconomic farming, NAFTA could even improve California’s business climate. Unfortunately, U.S. farm interests have managed to get phase-in periods of up to 15 years for some of NAFTA’s agricultural provisions, so cheaper food may be a long way off. On the other hand, Mexico’s agricultural markets will likely be open before ours, a potential boon to California growers.

* George Bush wants it. That makes me suspicious too, but you have to look at this thing on its merits.

Personally, I believe that California has a lot to gain from free trade with Mexico. Ted Gibson, an economist with the state Department of Finance, agrees: “We feel that--net, net, net--it’s a plus.”

Even if it isn’t, it won’t be much of a minus. University of Michigan economist Robert M. Stern, who has studied the agreement’s likely impact on the States, says NAFTA’s effect on California is likely to be infinitesimal. He figures that about 1,000 jobs will be lost over a number of years, from a work force exceeding 13 million. (And remember, the benefits go far beyond jobs.)

But Stern says the changes by sector will be greater, and they’re surprising: Gainers include agriculture, textiles and clothing, furniture, chemicals, non-electrical machinery and rubber. Losers include glass, non-ferrous metals, electrical machinery and transportation equipment.

Economist Raul Ojeda, a professor of urban planning at UCLA who has also studied NAFTA, says the biggest effect will involve immigration. He says that, in keeping with Mexico’s market-oriented policies, Mexican agriculture will undergo a radical restructuring in the years ahead.

In the short run, that will send more immigrants north--particularly those who had been making a living growing corn. But as Mexico grows more affluent, more employment opportunities will open up at home, and people will have less reason to leave.

All this points to the obvious need to pay the adjustment costs. Retraining for displaced workers, investment in rural Mexico and better control of the border will be sorely needed. Ojeda proposes a North American development bank to fund retraining, border infrastructure improvements and environmental amelioration.

It’s a great idea, but we needn’t wait for anything so grand. Someone in California should form a rural development bank--it would work well privately--to promote enterprise in the Mexican countryside, where a little capital goes a long way (and where healthy returns are possible too). That might help ease the flow of immigrants to urban California.

We’ll also need to develop and fund a comprehensive statewide retraining policy, and since knowledge will be the only path to prosperity, we need to make our children study.

We’ll have to do all these things because free trade isn’t coming. It’s here.