Trade Panel Calls NAFTA a ‘Success’ for California

A top-level gubernatorial advisory panel said Monday that the North American Free Trade Agreement with Mexico has been “an unquestionable success” for California and called for similar pacts with Chile and other Latin countries.

In a preliminary assessment to be made public today, the California State World Trade Commission reports that the state has boosted its exports to Mexico by $2.6 billion--or 40%--since 1993, when NAFTA took effect, and has enjoyed “significant” new investment and created thousands of jobs.

The commission strongly urged the Clinton administration to speed implementation of the pact, particularly a plan to increase access for border crossings by commercial trucks. The White House delayed the plan last fall after labor groups and other NAFTA opponents objected.

The 51-page document is expected to provide some political cover for lawmakers of both parties--particularly those from California--to support NAFTA and to back “fast-track” legislation designed to pave the way for similar trade pacts with Chile and other countries.

California Gov. Pete Wilson is scheduled to lead a group of business executives to present the report to the state’s congressional delegation today and to push for approval of the fast-track legislation.

Julie Meier Wright, secretary of the California state Trade and Commerce Agency, warned that if the United States does not move aggressively to take advantage of emerging markets in Latin America, then European and Asian countries will beat American companies to the punch.

The commission’s conclusions, based on hearings in 1995 and ’96 and on research by its own staff, sharply contradict contentions by NAFTA opponents that the pact, which also includes Canada, has been draining jobs from the United States.

The left-of-center Economic Policy Institute said in a report last month that NAFTA is to blame for the loss of between 392,000 and 484,000 U.S. jobs between 1993 and 1995, mostly in the production of motor vehicles and electronic parts.

Robert Philibosian, a member of the California panel, said Monday that despite all the adverse publicity, job loss to Mexico has been relatively modest from the start and has slowed markedly since Mexico slashed tariffs, reducing the incentive for U.S. firms to move jobs there.

“There is no ‘giant sucking sound’ of U.S.-based jobs rushing to Mexico,” Philibosian said, referring to charges by NAFTA’s opponents that the pact has served as a vacuum pump, drawing American firms--and the jobs they provide--across the border to Mexico.

Even so, Alan Tonelson, analyst with the anti-NAFTA U.S. Business and Industrial Council, said that the export figures cited by the panel tell only part of the story of NAFTA’s impact on jobs in California.

He said that any evaluation of the pact should also reflect the success with which imports are competing with U.S.-made goods in California, and those figures are not easily available. As a result, the commission’s assessment is “highly incomplete,” he asserted.

While the commission’s report was unabashedly positive about the overall impact of NAFTA, it complained that both Mexico and the United States had impeded some of the potential benefit by lagging behind schedule in implementing some of the pact’s provisions.

Most important, the panel said, the president should order the Transportation Department to ease restrictions on cross-border truck traffic by approving a California plan to set up state-run inspection stations at the boundary line to check trucks for safety problems.

The Clinton administration signaled that it planned to approve the California plan last fall but announced a one-year delay in February after the Teamsters’ Union sued to block it. The state has spent $25 million building facilities and training inspectors to operate them.

The report also lists a spate of other provisions that it wants all three countries to put into effect more rapidly, including revamping health and sanitation regulations covering farm products. The United States and Mexico recently resolved such a dispute over avocados.

The commission’s report said that the “most direct and immediate” benefits from NAFTA were around the Baja California area, where it said the increased trade flows from maquiladora firms had attracted sizable new investment in California and created thousands of jobs.

In addition, the benefits have had an impact on companies of all sizes throughout California, the report said, and come despite a 1994 financial crisis in Mexico that forced Mexicans to reduce their purchases of U.S. imports far below expectations.

The 15-member commission, designed to advise the governor on trade issues, is made up primarily of business executives whose firms are engaged in exporting, along with two members of the state Legislature. Both Wilson and the commission have been active proponents of NAFTA.

The panel conducted three days of hearings in Los Angeles and San Diego during 1995 and one in Mexico City last year, hearing primarily from executives of companies who do business in Mexico.

The panel’s study showed that California’s exports to Canada also have risen sharply since NAFTA took effect, increasing to more than $11 billion in 1996, from about $8 billion in 1994. California’s exports of manufactured goods to Canada and Mexico exceeded $20 billion in 1996.