Presidential politics often distort the public conversation. That was never more clear than in the lead up to the Ohio primary where each of the Democratic candidates sought to outflank each other in their opposition to the North American Free Trade Agreement. Senator Clinton said, for example, that she had always been skeptical of the agreement and expressed those views behind the scene during her husband’s administration. Senator Obama said that he believed NAFTA was responsible, in part, for the economic hardship he saw in Chicago during his days as a community organizer. During the last debate each promised that if elected President they would move to bring Canada and Mexico back to the table to renegotiate. If Mexico City or Ottawa balked, both pledged to abrogate the agreement.
If the rhetoric of March actually influences policy choices, San Diego and the rest of Southern California stand to lose. In 2006, total trade between the San Diego region and Mexico exceeded $42 billion. Since NAFTA was enacted in 1993, San Diego’s trade with Mexico has increased 364% and accounts for nearly 76% of the imports that come through the San Diego customs district and 98% percent of exports. In the San Diego Association of Governments’ recent report, “Economic Impacts of Wait Times at the San Diego–Baja California Border”, researchers found that more than 730,000 trucks and 46 million passengers cross the San Diego/Baja border every year.
The results of this increased level of trade are evident all along the border. The new Las Americas Premium Outlets cater to customers from both San Diego and from Baja, many of which have seen their buying power increase as a result of the agreement. There has been a boom in construction in Otay Mesa, which is likely to be further facilitated once SR 905 is finally completed. The explosive growth in trade has underscored to policy makers the imperative of completing a third border crossing and linking it, via SR 11, to the rest of the US interstate system. Scores of San Diego manufacturing companies continue to grow their operations on both sides of the border. One study estimated that purchases made by Mexican citizens account for $1 out of every $12 in retail sales in San Diego.
As trade theory predicts, there have been losers as well as winners from NAFTA. There have been some negative impacts on certain manufacturing sectors. One study, for example, suggests that employment in Ohio’s auto parts sector has suffered during the 15 years the agreement has been in place. Yet even in the Buckeye State, unemployment is significantly lower than it was when the treaty came into effect and exports to Mexico and Canada from Ohio nearly doubled between 1993 and 2003.
With respect to Mexico, most researchers have concluded that the trade agreement, along with the peso crisis of 1994 and 1995, has had a negative impact on Mexico’s agricultural sector. While Baja Norte and the other Mexican states along the border have generally done well since NAFTA was signed, the South and the interior have not shared in the gains seen in the north.
In addition, Mexico has grappled with explosive growth in the size of its workforce. According to a report on NAFTA’s impact commissioned by the Carnegie Endowment for International Peace, the Mexican labor force grew from 32.2 million just prior to NAFTA to 40.2 million in 2002. That meant just to keep pace the Mexican economy would have needed to create, on average, almost a million jobs a year. One of the reasons that the period of NAFTA has not seen rapid increases in wages and productivity is the sheer challenge of dealing with this demographic bubble.
There is a reason that political campaigns are called the “silly season.” Candidates often feel compelled to stake out positions that do not allow for nuance and subtlety. But the next time that the two democratic candidates make one of their regular fundraising trips through San Diego, those attending would be wise to remind them that San Diego is not Youngstown and that our economy has thrived over the past 15 years, in part because of NAFTA and the rapidly expanding trade ties between our region and Mexico.
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