Dennis Aigner on How Free Trade Plan Affects County

During 1992, many Orange County residents wrote about their thoughts and feelings in articles for Orange County opinion pages. As we look back on the year, some of those thoughts are recalled in these excerpts.

A good deal of analysis and even more published discussion has appeared in the past year or so regarding the pros and cons of a free trade agreement with Mexico.

What about the likely impact of an agreement on Orange County?

Some recent work by UCLA economics professor Edward Leamer makes such an analysis possible.

Under a free trade agreement we would expect increased production in Mexico of certain food products, furniture and footwear, all sectors that use a lot of low-skilled labor. Textiles, apparel, beverages and printing and publishing are areas of possible increased Mexican exportation in the longer run. Expect Mexico to expand its imports of products that are intensive in highly skilled labor such as steel, chemicals, aircraft, computers, metal-working and electrical machinery.

If we look closely at some of these key industries for Orange County, we find startling results. Take the vulnerable textile and apparel industries for instance. From 1972 to mid-1992, Orange County employment in these industries grew over 230%. From 1972 to 1990, the taxable earnings of Orange County workers in the textile and apparel industries grew by 860%.

In the high-skilled employment area of computers and office equipment, which is likely to benefit enormously from a United States-Mexico agreement, Orange County has again outpaced the nation in job creation, averaging an almost 9% annual rate of employment growth since 1972. The aggregate taxable earnings of Orange County employees in this industry have grown by 1,270% since 1972 and now total more than $345 million.

By no means have I explored the entire range of Orange County industries that might be affected. We lose some jobs in industries in which our trade partners have comparative advantage, we gain some jobs in industries where we enjoy comparative advantage.

A free trade agreement with Mexico allows for a controlled transition to economic integration to take place over 15 years. Orange County stands to gain much by participating in this process.

Dennis Aigner is dean of the Graduate School of Management at UC Irvine.