Economics With A Face

It got me thinking. A degree in economics, working for an economic consulting firm headed by a University of Chicago economist, and plowing through books by authors such as Milton Friedman and Russell Roberts had all giving me a strong basis in the benefits of free trade. Yet couldn’t all this theory be summed up into one simple question: Where was the justice in the fact that I was able to buy an avocado from someone named Richard in Fallbrook, California, but I could go to jail if I bought an avocado from Ricardo simply because he lived in Uruapan, Mexico? Should the random chance of being born on the opposite side of a border restrict our association in that way?

Put in these terms it seemed much clearer. Yes, any economist can tell you that free trade is efficient, but there was also a strong moral argument to be made. Individuals, I felt, could identify with someone trying to better their life, not by theft or fraud, but through the simple act of voluntary exchange. I, living in San Diego, want guacamole and Ricardo, living in Uruapan, wants to sell me his avocados. Why should anyone have the power to stop such a transaction?

This past August, some five years after I first read the article, I found myself in Uruapan attempting to track down the man who had inspired this thought. Arriving in the small city with only his name I quickly learned a bit more about Ricardo Salgado. It turns out that he was not only an avocado farmer with a small orchard, but he was also the head of APEAM, the group that has been leading the charge to help Mexican avocados gain entry into the U.S. markets. While he was initially a little thrown off when I called his office out of the blue, he agreed to meet with me the following day at 5:00pm.

With time to kill before my meeting with Mr. Salgado, I hired a taxi the next day and spent time touring both avocado packing houses and the orchards that supplied them. In the time since the WSJ article had been published quite a bit had changed with regards to the importation of Mexican avocados. As of January 31st of this year the Mexican fruit is now allowed to enter 47 states year-around and in 2007 importation will expand to all 50 states.

At the San Lorenzo packing house they were clearly taking full advantage of this opportunity. My wife and I toured the facility as workers were getting ready for the arrival of thousands of avocados that would shortly be on their way to Texas. In both the plant, and touring nearby orchards, it was made clear to us that the increased business had boosted their business and the local economy.

More proof of this point was the fact that while the San Lorenzo Empacadora was the largest Mexican owned plant, they were not the largest exporter. Anticipating a change in the law, U.S. companies such as Calavo Growers, Inc. entered the city, bringing with them state-of-the-art technology and jobs to boot. Clearly, Uruapan was benefiting.

Back in California, to many people’s surprise, competition from Mexico was not having the dire effects on growers that many had predicted. This past July, regarding the increased competition from Mexico, the owner of the Del Ray Avocado Packing House in Fallbrook, CA was quoted in the North County Times saying: "It's gone amazingly well… The U.S. market is more developed than we thought. Avocado lovers are eating more of the fruit, and we're getting new consumers."

So, in summary, the Uruapan economy is getting a shot in the arm, California growers are surviving better than expected, and U.S. consumers are now able to enjoy some of the best avocados the world has to offer. It makes you wonder, why didn’t all this come about sooner?

About this same time Mexican newspapers proudly displayed a major bust by the Mexico City police. Two hundred and eighty tons of contraband had been seized in Tepito, an area of the capital known as a market for guns, drugs, and an assortment of stolen merchandise. So what was this illegal merchandise that the papers displayed? Actually, it was none of the previously mentioned items. Instead, the illegal goods were Chinese shoes.

The city of Leon, in the state of Guanajuato, Mexico is dependent on the sale of locally produced shoes like Uruapan is dependent on the sale of avocados. When the importation of inexpensive shoes from China made it very tough for local shops in the last few years, politicians passed laws practically prohibiting the sale of Chinese shoes in Mexico. According to one local I spoke to about the matter getting caught with just one pair of illegally imported Chinese shoes could land you in prison.

Was there not a parallel here to the avocado trade between Mexico and the U.S.?

When I told people I met in my travels across Mexico that during my current trip I’d be writing on economics I often got confused looks in return. Statistics on job creation? GDP? What exactly was I going to be writing about?

When I explained that I wanted to write about how economics affects real people and gave the example of how avocados from Uruapan cannot be sold in my home state of California, not only did the confused looks leave their faces but it generally changed into one of enthusiasm. Residents from Sonora to Chiapas would say “That’s a great thing to write about. Why aren’t Mexicans allowed to sell their avocados in California?” It was easy for many to relate with growers in Michoacan and see the injustice in our laws.

Alas, I did not receive a similar reaction when talking about Chinese shoes. Even after pointing out the similarities between California growers lobbying politicians to ban the import of Mexican avocados and shoe makers in Leon lobbying politicians to ban the import of Chinese shoes, many still were not convinced. “It’s different though,” I would hear people say, “We need those laws. The Chinese can make everything so cheap.”

But it isn’t different.

Lost in this government policy designed to protect shoe producers is the fact that the balance of payments must equal zero. If someone in Mexico wants to buy a pair of shoes made in China then there has to be a corresponding person in China that wants to buy something in Mexico. In short, the protection afforded to the shoe producers means less money going to other sectors of the Mexican economy. Why should shoe makers be protected at others’ expense? In addition, no one seems to be looking out for the interests of Mexican consumers who would prefer less expensive footwear.

What's more, the same basic principle of voluntary exchange among two parties applies. But again, despite these arguments, it was harder to evoke the same enthusiasm for people in China that had been displayed for people in Uruapan. But to my pleasure, one noteworthy person did see eye-to-eye with me on these principles: Ricardo Saldago.

After a long talk about all the work he and his organization had put into gaining access to the U.S. markets, I asked him about China. I noticed that one of their recent publications had “Ahora China” written on the front cover along with a picture of a boat outside Shanghai. Earlier in the day, I relayed to Ricardo, some had expressed a concern that China might start producing avocados itself and run Uruapan growers out of business. What did he think of the issue?

“Well,” he replied, “the world is changing. I can’t stop that.” But he continued to say that the way he looked at it he didn’t see China as some sort of enemy. He saw them instead as a billion potential customers. “If I could just get each person in China to buy one avocado a week, wouldn’t that be great for business?”

It was an admirable attitude and Ricardo’s words hit the nail on the head. The world is in fact changing and the truth is that change can be horribly tough. No one wants to make less money, struggle to keep customers, or even change professions altogether. But challenges are a part of life and are not restricted to producers.

Consumers face challenges as well. People have limited incomes and have to pick and choose what they spend their money on. More earnings going to avocados from California or shoes from Leon means less money to spend on other items. It should also go without saying that consumers and producers are not two groups at odds with one another. In real life they are one and the same people.

And while a world with increased trade can make life tumultuous, there is no denying that there are huge benefits to a dynamic economy that is the product of international commerce. Changes in the structure of the economy also create new opportunities. Think if there had been laws protecting all the agricultural jobs that once made up 80% of the U.S. economy? Desirable professions in computer programming, engineering, finance, biotechnology, and loads of other industries might never have been created.

As our meeting came to an end I expressed to Ricardo that, for me, the issue of international trade came down to the belief that individuals should be free to trade with whomever they want, even if that someone lived on the opposite side of a border. He replied that this was how he too viewed the world.

I believe it is here that one the most convincing argument in favor of trade is found. Whether Chinese shoes or Mexican avocados, we must remember that these are goods that are being purchased from another human being. They are individuals who have families, desire better lives, face challenges, yet they happen to live in a different country. What difference should that really make?

In that sense, Ricardo Salgado, by helping to knock down trade barriers, accomplished a noble goal. Back home in California I will soon be able to enjoy Mexican avocados just as I now enjoy my New Balance tennis shoes that happen to have been made in China. Not only does my freedom to buy such products lead to a more efficient economy, but it also leads to a more just one as well. That is an important point for people from the U.S, Mexico, and the rest of the world to remember as we debate globalization in the years to come.