Report Studies NAFTA Impact on California

The benefits of the proposed North American Free Trade Agreement will be overshadowed by employment and other disruptions in California unless steps are taken to mitigate them, according to a study to be released today.

The study, by researchers at UCLA and UC Berkeley, finds that California will benefit from modest job gains under the agreement, which would remove trade barriers among Canada, Mexico and the United States.

But without policies to moderate the agreement’s effects, those gains will be outweighed by possible increases in immigration of displaced Mexican farmers into California, as well as by shifts in the state’s industry that will fall hardest on Latino workers here, the study found.

“Only . . . trade liberalization with policies to generate Mexican development and address adjustment issues in both countries can generate economy-wide output (gains), employment (gains) and more equitable wage growth on both sides of the border,” the study concludes.

The study was commissioned by Assemblyman Richard Polanco (D-Los Angeles), chairman of the Select Committee on California-Mexico Affairs, who has argued for creation of an international development bank to help stimulate the Mexican economy and mitigate some of the agreement’s effects.

“The free trade agreement alone cannot maintain high levels of growth; it needs a funding mechanism for continental development,” he said in a statement.

Specifically, the study argued that job gains in California will be modest if NAFTA is approved without any other programs. About 7,000 jobs may shift within the state’s economy, said Raul Hinojosa-Ojeda, an assistant professor at UCLA’s Graduate School of Architecture and Urban Planning and one of the study’s authors.

But the modest gains will be offset by the economic effects of increased immigration from Mexico as that nation’s agricultural sector faces U.S. competition. Without intervention to prop up the Mexican economy, job losses there could result in a net increase of 750,000 immigrants into the U.S., with about 300,000 in California, over a five- to 10-year period, Hinojosa-Ojeda said.

Rejecting NAFTA would not help either, he said. Under a scenario where the U.S. stiffens trade protections against Mexico, California would lose 50,000 jobs and see an increase of 50,000 new immigrants, the study says.

With NAFTA and measures to ease some negative effects, however, both nations would benefit.

California would gain 59,870 new jobs while losing 25,540, for a net gain of 34,330 jobs. Programs would be needed to help the primarily low-skilled, low-wage workers who would be displaced from certain California industries, such as fruits and vegetable agriculture, furniture fixtures, garment, electrical and electronic equipment and food processing.

With enough stimulation, immigration pressures from Mexico could even be reduced to zero, the study says. But that would require the Mexican economy to grow at a rate of 6% to 7% a year for the next 10 years--a tall order.

“This points up even more the seriousness of having targeted adjustment programs in certain communities and industries that will pay the higher price. It’s a price we should be willing to pay . . . because the overall effect is a benefit to the continent,” Hinojosa-Ojeda said.