State Looking for Big Gains From GATT : Trade: From agribusiness to computer business to movie business, California has the most at stake.
Central Valley farmers fantasize about a cheaper journey for their goods to foreign grocery shelves. Executives in San Jose call for lower taxes on high-tech exports. Hollywood filmmakers seek easier access to theaters overseas.
And those are just a few items from the catalogue of controversies in Geneva, where U.S. trade negotiators are struggling to conclude a global business treaty of monumental proportions.
For the battered economy of California, the trade talks have more significance than for any state in the nation, most economists agree, with optimists forecasting a long-run payoff of hundreds of thousands of jobs.
Indeed, issues that are central to agriculture, movies and high tech--growing, global industries with deep California roots--are among the most sensitive areas in GATT, the General Agreement on Tariffs and Trade. But the outcomes remain uncertain as negotiators quietly attempt to settle a range of disputes before the Dec. 15 deadline.
“Where can California look to growth, to new markets and opportunities?” asks Edward E. Leamer, an economics professor at UCLA. “The answer is the Pacific Rim, Southeast Asia, Latin America. Agreements such as GATT are extremely important.”
California’s stake in the global talks is so high because its stake in the global economy is so vast. Perched on the Pacific and home to a massive if embattled factory base, the Golden State has little choice but to export, analysts say.
And it does: Last year, the state exported $69 billion in goods--15% of the U.S. total--and more than $35 billion in services, according to the California World Trade Commission.
In a distinct counterpoint to defense, real estate and the whole gallery of economic headaches in California, exports have continued to grow, more than doubling since the mid-1980s.
“California benefits more than any other state” as trade barriers fall, said Richard Drobnick, an international economist at USC. “It’s America’s biggest exporter. That’s true in goods, and it’s probably even more true in services.”
But that doesn’t mean GATT will prove California’s economic salvation, interviews with economists and industry representatives suggest. The final product from Geneva, if there is one, will probably embody many compromises and departures from the overarching goal of freer trade.
U.S. filmmakers have been enmeshed in a public tiff over barriers to American movies and television shows in France. California farmers are anxious over the final rules on subsidies that have boosted their overseas competitors and restrained U.S. export growth.
California semiconductor manufacturers, who employ 55,000 people and represent more than a fourth of the U.S. computer chip industry, worry that tariffs charged by European countries will continue to hurt their exports.
“The Europeans are refusing to lower the tariff walls, and other countries are trying to reduce whatever protections we have for our technology,” said Andrew A. Procassini, president of the Semiconductor Industry Assn. in San Jose.
In other cases, California-centered industries would be first in line to benefit from GATT provisions.
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Intellectual property rights, which affect patents, copyrights and trademarks, may be protected more effectively from unauthorized use. Such protections would be especially meaningful in California, home to much of the U.S. software industry, not to mention producers of movies, television and compact discs.
Overall, economists say that the pluses and minuses of a successful GATT deal would balance out in favor of consumers and strong, efficient industries.
“With any kind of trade agreement there’s going to be some losers,” said Reuven Glick, head of international research at the Federal Reserve Bank of San Francisco. “But the general perception of economists is that there will be a lot more winners.”
It is too soon to be sure what a successful conclusion to GATT would mean to California’s jobs base.
Enthusiasts, however, maintain that continuing efforts to liberalize world trade--embodied in the North American Free Trade Agreement, the recent Asia Pacific Economic Cooperation meeting in Seattle and GATT--could prove the single greatest hope for the state’s economic resurrection.
U.S. trade officials have forecast that GATT would add a total of $1 trillion in expanded goods and services to the U.S. economy over the next decade. By any account, California would reap a sizable share of the benefit.
In an admittedly rough estimation, Philip J. Romero, chief economist for Gov. Pete Wilson, predicted that such levels of economic growth would gradually translate to more than 100,000 new jobs a year in California.
“Cumulatively, over seven years, that would wipe out all the job losses of the recession,” he said.
He added that GATT’s impact on California could be “three to five times as great” as that of NAFTA, which he expects will add 30,000 to 40,000 jobs annually in California.
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Clearly, GATT is so big--encompassing more than 100 countries and the enormous markets of America, Western Europe and Japan--that virtually every industry in California could be affected sooner or later.
In the South Bay, ground zero for much of Southern California’s beleaguered defense industry, a non-defense firm known as Telemobile illustrates the point.
The company, which makes telephone equipment used in remote regions, has staked its future on overseas markets. As much as 80% of its Torrance-made products are exported all over the world.
GATT, said Daniel E. Thomas, marketing manager of the 150-employee firm, is expected to promote greater uniformity in equipment specifications--a change that would save his company time, paperwork and money.
“We’re betting almost 100% on growing world trade,” he said.
For California’s most competitive industries, such statements are almost a mantra.
The movie industry employs more than 100,000 people in the state--about half the U.S. total--and has been expanding, in contrast to much of the economy. In the future, it will grow “almost exclusively because of exports,” Romero said.
At ranches, farms and nurseries, the view is surprisingly similar: California accounts for 17% of U.S. agricultural exports, according to the California Department of Food and Agriculture, and export growth is a key to the future.
Japan, Canada and Western Europe are the largest markets for the commodities, which include beef, timber, cotton, almonds, grapes and a multitude of other commodities.
Take just one: California is home to virtually the entire, $1-billion-a-year U.S. almond industry; exports now account for two-thirds of sales, up from half in the late 1970s.
“Anything that reduces barriers is extremely good for business,” said Rodger L. Wasson, president of the Almond Board of California in Modesto, adding this caution: “If the trade environment deteriorates, that would have a severe impact.”
For various farm products, export growth has been slowed by foreign tariffs that push up prices and foreign subsidies that assist overseas growers. These days, farm leaders in the state are jittery about what a final version of GATT would mean for these subsidies and for U.S. access to overseas markets.
“We’re very concerned and very apprehensive” about the the final provisions, said Bob L. Vice, a San Diego nurseryman who is president of the California Farm Bureau Federation.
Others worry that the GATT negotiations will leave high tariff levels overseas while easing protections against dumping of foreign products in America at below-market prices.
“The fat lady hasn’t sung yet,” said William K. Krist, senior vice president at the American Electronics Assn., alluding to how GATT will affect a spectrum of high-tech industries, including computer parts, finished computers, telecommunications and instruments. “It’s going to depend a lot on what her song is.”
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Whatever happens, GATT’s full impact will take years to seep through the economy, as executives and entrepreneurs gradually develop the kinds of business relationships overseas that yield new opportunities.
“It’s a long-term process,” said Jay K. Winter, executive secretary of the Foreign Trade Assn. of Southern California.
