A proposed free-trade agreement between the United States and Mexico would cause an economic boom for recession-torn Orange County, creating about 10,000 new jobs by 1999, according to a Cal State Fullerton study to be released today.
In the first report to specifically measure the economic impact of the North American Free Trade Agreement on Orange County, economist Vincent Dropsy predicted that sales of Orange County-made goods to Mexico would increase as much as fivefold--to more than $1 billion a year--if U.S. trade barriers with Mexico were lifted.
“The results were surprisingly optimistic,” said Dropsy, a professor at Cal State Fullerton’s Institute for Economic and Environmental Studies.
“I think this is great,” added Tom Wilck, a public relations consultant and president of the Orange County Chamber of Commerce. “I had an instinct that NAFTA was good for us, but those numbers support everything we have been saying.”
The study came as President Clinton began turning his attention to Congress for the agreement’s passage. If the administration persuades legislators to pass the trade pact with Mexico and Canada, it could become law by Jan. 1, NAFTA observers said.
As expected, the three-month Cal State Fullerton study spurred debate between the business community, which generally supports NAFTA, and opponents, such as labor unions.
“This will mean jobs, jobs, jobs,” said David Anast, publisher of the Biomedical Market Newsletter in Costa Mesa. Anast is preparing to publish his own study next month on NAFTA’s effect on the biomedical industry. “If there’s one thing that can pull us out of recession, this is it. It’s critical that people realize that.”
But opponents are not convinced that the proposed agreement would provide more Americans with jobs.
“In fact, we predict the opposite is true,” said Diane Kimberle, research director for United Food and Commercial Workers Local 324 in Buena Park.
She questioned whether the Cal State Fullerton study on the value of NAFTA was accurate, saying that studies by the U.S. Department of Commerce and Department of Agriculture and by other universities have “totally different outcomes.”
“What is important is that this agreement doesn’t seem to solve our problems,” Kimberle said.
Dropsy said his research confirms what he and other local economists had predicted, but not studied until now: that the lowering of tariffs between the United States and Mexico would have an immediate effect on Orange County’s business dealings with Mexico.
For instance, Orange County medical device manufacturers now shipping to Mexico see an additional 16% cost added to their products at the border, he said. NAFTA would eliminate those tariffs entirely, while tariffs on other goods would be substantially lowered.
The increased demand for lower-priced, U.S.-made goods would spur growth in Orange County’s manufacturing industries, especially for machine parts, medical instruments, electronics and computers, Dropsy said.
Dropsy said the trade agreement would result in some job losses in Orange County, but that eight to 10 jobs would be created for every one lost. By the end of the decade, the county should experience a net increase of some 10,000 jobs as Mexican workers become wealthier and more able to afford Orange County’s goods.
The study predicts that the $227-million annual trade surplus that Orange County enjoys with Mexico would increase five times by the end of the decade under NAFTA.
“Growth will come rapidly,” he said.
Pro-NAFTA business leaders in Orange County also believe NAFTA would pump new economic life into the county, now in its third year of recession.
“I am very excited,” said Reesa Ryder, Southern California executive director for the grass-roots organization Californians for NAFTA. “It just proves my point that it will help small and mid-sized companies be more competitive.”
While there remains deep skepticism in Washington about NAFTA, the proposal enjoys strong support in Orange County.
On Friday, NAFTA supporters, including heads of such companies as Western Digital Corp., Allergan Inc. and AST Research Inc., begin a weekend forum on the issue at the Fluor Corp. headquarters in Irvine.
But Lee Miller, financial secretary for Carpenters Union Local 803 in Orange, said that those who support the trade agreement and write about the issue “are not the ones who will be affected by it.”
With thousands of union members out of work, Orange County cannot afford to allow NAFTA to pass, he said. Proponents play down the threat that businesses will relocate to Mexico for cheap labor, he said.
Effects of NAFTA
The value of Orange County exports to Mexico will continue to grow through the 1990s. However, enactment of the North American Free Trade Agreement would increase their worth at a faster rate. Projected exports to Mexico, in millions:
Without NAFTA With NAFTA 1999 1,606 1,994
Source: Institute for Economic and Environmental Studies, Cal State Fullerton
Researched by JANICE L. JONES / Los Angeles Times