LAREDO, TEXAS — WILL the free trade hoped for by the passage of NAFTA mean a better economy for cities on the US-Mexico border? That depends on who you talk to.
Daniel Hastings sits in his office adorned with the three flags of the North American Free Trade Agreement - the American, the Mexican, the Canadian - and says without the trace of a doubt that free trade means boom time for the US-Mexico border.
Across this south Texas border town, however, James Giermanski makes no bones about his own view: Free trade means removing borders, he argues, so cities like Laredo that have lived off their positioning on a border are going to lose much of their economic reason for being. NAFTA, he says, is the US-Mexico border's death knell.
Mr. Hastings, a customs broker whose company is Texas's fourth-largest freight forwarder, and Mr. Giermanski, a border economics specialist at Texas A&M International University here, frame a raging debate about the economic future of the US-Mexico border.
On the one hand is optimism that the fast growth border cities experienced after the passage of NAFTA in 1993 is only a foretaste of things to come. ''Mexico's economy will come back and trade will continue to grow,'' says Hastings, ''that can only be positive for people who live and work on the border.''
On the other are warnings that as goods move with fewer bureaucratic obstacles across the border and as Mexican shoppers find at home more of the foreign products they used to travel across the border to buy, the border's traditional bread and butter will turn stale. A trip to the dress shops and household supply stores on the US side will be less necessary, and stops to handle customs and other bureaucratic matters will be faster. The border, says Giermanski, will ''increasingly be a place you pass through.''
The debate over the border economy continues just as a larger controversy over free trade and its effects on America's economic well-being catches fire in the 1996 presidential campaign. Republican Pat Buchanan attracts the sympathies of workers worried about jobs going south by telling them that as president he would cancel NAFTA and other international free-trade agreements. At the same time, other political leaders in states as varied as Wisconsin and Texas publish solid but less flashy figures on the number of jobs exports have created.
On the border, the optimistic argument that more trade means an era of prosperity would at first glance appear to have the upper hand. The 4,000 trucks of freight that roll through Laredo every day - making it the busiest land port in the country - are projected to triple to almost 12,000 by 2000. All those truckers, the argument goes, have to eat, sleep, and warehouse their goods somewhere.
In 1993 and 1994, Laredo was the second-fastest-growing city in the US, while cities like Tijuana, Ciudad Juarez, Nuevo Laredo, and Nogales make the border Mexico's fastest-growing region.
In addition, Mexico's maquiladora industry - the mostly foreign-owned factories that employ cheap Mexican labor to assemble foreign components into products for export - continues on a rocket-trajectory growth boosted by a devalued peso.
Maquiladoras are also growing because NAFTA rules stipulate that in order for the pact's lower tariffs to apply, a percentage of a product's parts must come from the NAFTA countries.
Those rules have sent Asian electronics manufacturers scurrying for NAFTA-based suppliers and for manufacturing sites in the NAFTA region - and have helped turn the San Diego-Tijuana area into the world's largest manufacturer of television sets. Some 10 million TV sets will be manufactured annually in the area by 1997, creating new jobs and helping to keep down the price of America's TV sets.
But a second look suggests that many cities on the US side of the border will find a return to prosperity difficult even after Mexico sees a return to economic growth. Increasingly, what skilled jobs do come to the border go to the Mexican side, as companies take advantage of Mexico's skilled but low-cost work force.
Here on the border ''we're on the fault line of the new international division of labor,'' says Steven Colantuoni, executive director of the Nogales-Santa Cruz (Ariz.) County Economic Development Foundation. ''The Mexican work force is developing the skills to do the more sophisticated jobs, while on this side we're happy to get a new warehouse or an Arby's,'' he says. ''It's a dangerous trend for the US.''
''NAFTA is changing the rules these cities lived by,'' says John Blake, a small-business adviser with the Small Business Administration in Tucson, Ariz. ''Either they diversify'' into areas like tourism, cut school dropout rates, and improve education to attract good-paying jobs, he says, ''or they're in trouble.''
One of the traditional founts of US border prosperity is retailing, but NAFTA is no friend to the region's locally owned businesses. NAFTA helped open up Mexico to such US retail giants as Wal-Mart and K-Mart - meaning that Mexicans who used to drive half a day to cross the border and shop for US goods can stay home and find the same products.
Then came the Mexican peso's devaluation in December 1994 - making dollar-priced products more than twice as expensive for peso-holders. Some long-time border observers insist that local retailers will weather this Mexican downturn as they have others, but others are less sure.
''This is not like the slowdowns we've had in the past,'' says Alexander Kory, a 25-year clothing retailer in Nogales, Ariz., whose Christmas sales dropped 50 percent. ''I'm afraid this time the shoppers and sales won't come back.''
NAFTA accounts for part of the change, Mr. Kory says. But he also says the border has become a ''less-friendly place'' as increased concerns about illegal immigration and drug-trafficking have translated into more suspicious treatment at the border of Mexican shoppers.
''Some of our regular Mexican customers have had some pretty nasty experiences'' at US border-crossing stations and with US Customs officials, says Kory, ''so they're coming back less and less.'' He also criticizes what he calls the ''demeaning'' metal wall that the US Immigration and Naturalization Service built a few years ago through the middle of what previously were the two contiguous downtowns of Nogales, Ariz., and Nogales, Mexico. ''Such a monument doesn't say 'Welcome to the USA,''' says Kory.
The US side of the border could also become less important as a warehousing and freight-distribution hub - a sector that boomed in the initial NAFTA aftermath - as new technologies make customs inspections possible at points other than on the border, some experts insist. ''Why not save time, manpower, and warehousing costs by shipping from Mexico straight through to destination'' and handling customs by computer there, says Mr. Blake.
Already some San Antonio leaders and federal officials are talking about turning the Texas city's phased-out Kelly Air Force Base into a giant customs inspection and processing center.
But others call such proposals nonsense. ''Laredo has the experience and the know-how that has made it the most efficient inland port in the world,'' says Gary Jacobs, president of Laredo National Bank. ''San Antonio is just a little frustrated that they've yet to figure out how to participate in NAFTA, so they're trying to do it by moving the border 150 miles north,'' he adds. ''It's not going to happen.''
NAFTA, he says, ''is not about eliminating sovereign nations, it is not about eliminating customs or immigration inspections; those things are best done on the border.''
Such reasoning leaves trade promoters like Giermanski fuming. NAFTA is supposed to be about reducing costs so North American products are more competitive, he says. ''The border is a cost center and not a value-adding center, so I would say get rid of it,'' says Giermanski. ''But I'm not surprised when the economic powers of these border communities promote trade impediments like inspections, because that's what keeps money in their pockets.''
The December decision by the US Department of Transportation to postpone a NAFTA-mandated opening of the border to transnational trucking is one example of the kinds of impediments Giermanski expects to arise as border cities and other interests confront the implications of an increasingly free flow of goods.
Still, if the border region is to ever grow out of its traditionally high poverty rates, it will be skilled and good-paying jobs that will do it, not border inspections. And some experts insist that skilled jobs on the US side of the border will be part of a broad trend toward locating industry on the border for the low-labor costs it offers.
''That kind of shared development is what the border is going to be about,'' says Neil Whiteley-Ross, vice president of the San Diego Economic Development Corp. He points to Sony's operations, with 4,000 employees on the Tijuana side and 2,400 on the San Diego side; or Matsushita with 5,000 jobs in Tijuana and 200 ''R&D, top-paying jobs'' on the US side.
San Diego, with its diversifying economy, may be the border's exception, some experts say. But as defense jobs shrink and low-paying service jobs increase, per capita income will fall 28 percent below California's average by 2015, according to a 1993 study conducted by San Diego Dialogue, a US-Mexico development partnership at the University of California at San Diego.
As he strives to land new business for Nogales, Ariz., falling income for Americans is what Steve Colantuoni worries about. He likes to visit United Technologies' Otis Elevator plant across the border in Nogales, Mexico, where white-coated employees assemble elevator ''brains'' in what are mostly high-skilled and demanding jobs.
''It reassures me about what this border can be,'' he says. ''But then I come back to our side and see the kids flipping burgers on fast-food row, and I have to wonder if it's such a bright glimpse of the future.''