What NAFTA means to NYC's economy

Real Estate Weekly, Dec 15, 1993 by Leon Manoff

Now that the dust has settled, most Americans are scratching their heads and wondering what the North American Free Trade Agreement (NAFTA) will actually mean. The marathon debate in the U.S. House of Representatives is over, and the Senate has passed the agreement with little fanfare. Even now, can anyone really be certain what is in store for New York City's fragile economic future now that NAFTA has become a full-force reality?.

In plain and simple language, NAFTA will eliminate restrictions on trade and commerce permitting an increased flow of goods and cross-border services between the U.S. and Mexico. Of particular importance to the real estate industry will be the open access to Mexico's $146 billion services market including finance, accounting, real estate, construction, and architectural engineering and design.

Unfortunately, the focus of the NAFTA controversy centered on heavy manufacturing; meanwhile benefits for New York City's burgeoning, multi-billion dollar, service-driven economy were overlooked. Home to the wealthiest investment banking houses, insurance firms, real estate concerns and other service industries, New York City has carved its niche in the world economy as the leading provider of services. New York City's stature as the leader in services has been achieved by combining innovative expertise and a renowned intellectual infrastructure in a carefully-crafted package called the "service widget." With its product highly sought abroad, New York's economy greatly benefits from the export of the service widget. NAFTA facilitates the export of New York's service widget to Mexico.

In anticipation of NAFTA's passage, Mexico planted the seeds for tremendous economic growth. As a result of austere stabilization efforts, the Mexican rate of inflation has plummeted from 150 percent annually just a few years ago to less than 10 percent annually today. Concurrent with the fall in debilitating inflation, Mexicans have enjoyed a significant increase in their disposable income. In addition, another promising economic factor is that 60 percent of the Mexican population consists of a key consumer group under the age of 25. These ingredients are similar to the "baby boom" dynamics experienced in the United States. Predictions are that such meteoric economic growth will be replicated in Mexico.

Like other products, the high demand for the service widget in Mexico has created a modern-day Mexican "god rush," generating a fierce battle between the giants of the service economies -- New York City, London and Tokyo. NAFTA ensures preferential treatment for the U.S., providing New York City with a competitive advantage in the Mexican market over competing London and Tokyo counterparts. With this added leg-up, New York City will be-positioned to capitalize on investment opportunities.

The real estate industry - one of the largest and most important industries in New York City - illustrate show NAFTA will create growth opportunities. In order to maintain a foot-hold in the Mexican market, U.S. exporters will need to open offices in Mexico. Similarly, New York City-based firms that will invest in Mexico's economic revolution will expand here as well. In both cases, New York's real estate industry stands to benefit from NAFTA.

The "United States Standard" of site selection and evaluation provides three expanding companies the most advanced and cost-effective real estate advice available. U.S. companies interested in expanding to Mexico are accustomed to the New York City experts and will depend on the guidance from the well-developed and long-established New York City real estate service widget. Because modern communications and technology allow the service widget factory -- the brain power -- to remain in its home office, the economic opportunities and jobs created by the demand for New York service widgets will also remain here in New York City.

As the end of the twentieth century approaches, New York City has decidedly shifted its economic-base from heavy manufacturing to service-oriented industries, relying on the export of the service widget for economic survival. Because NAFTA has become a reality, New York City's service widget has gained a market advantage over foreign competitors in Mexico, conquering a bigger share in the increasingly global economy.