Trade Pact May Benefit Arizona

But cheap retailers, other businesses may be hurt by North American Free Trade Agreement

EL Campos Tires owner Spencer Gifford sold $1 million in tires to Mexican buyers across the border last year. He says the potential for growth under the new North American Free Trade Agreement (NAFTA) is somewhere between "staggering" and "unlimited."

Produce-seller Louis Canez from nearby Nogales, Ariz., says his small business could be wiped out by the influx of far-cheaper vegetables and fruits from Mexico.

"NAFTA is only good for the big stores with big money," he says. "Just like always."

Other businesses believe the trade pact will have little or no effect. "I already do lots of business with Mexicans," says Bill Palsers, owner of Truck Country, a truck retailer. "I don't see how that will change much."

While individual expectations may vary, the collective result of dropping trade barriers between the United States, Canada, and Mexico is expected to be a major boon for Arizona.

The NAFTA agreement was signed by representatives of the three countries on Oct. 14. If approved by lawmakers, the agreement will begin a process of removing all tariffs and other barriers to trade, services, and investment between the three countries over a 15-year period, starting in January 1994.

Great expectations are already turning into increased revenue for businesses. One large Tucson mall sold over $100 million more to Mexicans this year than last.

"There is much good about [NAFTA] for Arizona, and very little bad or ugly," says Gov. Fife Symington (R).

Governor Symington has been trying to jump-start a state economy that flourished during a decade-long real estate boom but was stopped cold by the savings-and-loan scandal of 1989. He calls NAFTA the brightest prospect on his horizon. The governor believes the trade deal could produce 20,000 new jobs in the export trade alone.

State economists are generally sanguine, as well. "The great majority of studies say there will be significant job growth for Arizonans over the years," says Dorothy Bigg, director of international trade for the Arizona Department of Commerce.

But she does foresee possible short-term negatives for mid- to low-price retailers like Wal-Mart and K-Mart. "When these kinds of stores are available in Mexico, thousands will no longer come to Tucson," Ms. Bigg says.

Arizona is in perhaps the best position to benefit as a distribution center for US-Mexican trade. The cost of doing business here is less than in neighboring states such as California. And the existing labor pool is both well-trained and Spanish-speaking. "What we lose in retail, we will make up in distribution, manufacturing, and the ancillary services of moving products in and out of Mexico," Bigg says.

That assessment is markedly different from surveys in other border states. In California, for example, a recent study by the Los Angeles and Berkeley campuses of the University of California shows the benefits of NAFTA could be far overshadowed by unemployment and other disruptions.

"Only ... trade liberalization [in generating] Mexican development and address[ing] adjustment issues in both countries can generate ... employment gains on both sides of the border," the study said.

Among the "adjustment issues" that have to be addressed before free trade can become a reality are legal, bureaucratic, and cultural barriers between the US and Mexico.

Mr. Gifford of El Campos Tires, for instance, tells long stories of paperwork tie-ups, billing and scheduling hassles, language and cultural barriers. Though he speaks fluent Spanish and has a second home in the Mexican state of Sonora, he says he has yet to fathom Mexicans' views about how to do business.

To harmonize trade laws between the three countries, the US, Canada, and Mexico have helped fund the National Law Center for International Free Trade at the University of Arizona, Tucson.

"We are here to do away with all the legal and bureaucratic differences so that free trade can happen quickly and efficiently," says director Boris Kozolchyk, a veteran of the European Economic Community. "Arizona will be the first to benefit."

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