IMPACT OF NAFTA VICTORY : Uniqueness of <i> Maquiladora</i> Could Fade : Trade: With tariff and tax advantages set to end, it becomes just another Mexican manufacturing operation.

TIJUANA — The detractors, they are squalid sweatshops of Dickensian dimensions that steal jobs from America, dump chemicals during midnight runs and exploit poor Mexicans who dwell in nearby shantytowns.

To proponents, they are state-of-the-art plants, the best hope to raise the standard of living for Mexican workers and border cities and a cornerstone of America’s global trade strategy.

They are maquiladoras, the foreign-owned plants that have blossomed in Mexico over the last three decades. And they may soon be history, at least officially.

The North American Free Trade Agreement, approved Wednesday by the U.S. House of Representatives, will in effect transform the maquiladora into just another Mexican manufacturing operation, removing the tariff and tax advantages-as well as the market restrictions-that made them unique.

But don’t expect any quick changes in the operations of the 2,200 maquiladoras that now employ nearly 600,000 Mexicans mainly in border areas, or in the burgeoning frontier economies that support them.

Mexico still has low labor costs and proximity to U.S. markets that motivate companies from Levi Strauss to Motorola to open plants in Tijuana, Nogales and Ciudad Juarez. Workers make as little as $7 a day.

Ed Brekke, manager of the Square D Co. maquiladora in the Mesa de Otay barrio of Tijuana, said it’s “business as usual” at his plant that employs 640 people making circuit breakers for houses and factories.

“The majority of our products will still go back to the U.S. for sale,” Brekke said.

Maquiladoras, which have been around since 1965, are Mexican-based, usually foreign-owned plants that can bring parts or equipment from outside the country without tariffs, provided the finished goods are shipped outside Mexico for sale. The U.S. imposes duties only on the value added in Mexico, and the goods are exempt from certain Mexican taxes. But the plants are restricted from selling more than 50% of their production in Mexico.

NAFTA changes everything. It will eliminate most tariffs and trade barriers between the United States and Mexico. And it will let maquiladoras sell all their production in Mexico if they choose.

“Maquiladoras as they exist today . . . will finish in seven years,” said Alfred Rich, chairman of the Western Maquiladora Trade Assn. in Chula Vista. “Which is not to say the plants will disappear . . . . They’ll become integrated into the Mexican economy.”

NAFTA will especially benefit maquiladoras that want to attack the Mexican market. Those may move closer to more populated areas such as Guadalajara, Mexico City, Chihuahua and Monterrey, said A.W. (Tony) Ramirez, executive vice president of Made in Mexico Inc., a Chula Vista-based maquiladora consulting firm.

“I don’t think there’s much danger of maquiladoras shutting down here, but they may want to expand closer to the major markets,” he said.

But that would mean giving up the convenience, support and transportation advantages of a border operation.

Maquiladoras can also expect more scrutiny of their working conditions, environmental practices or union busting, said economist Gary Hufbauer at the Institute for International Economics.

Robert Jezak, general manager of Mattel’s Tijuana operation, said NAFTA will help cut red tape and open up the Mexican market, already the toy maker’s third-largest after the United States and Japan. Mattel, which employs 1,800 in Tijuana, now sells about 10% of its Tijuana-produced products in Mexico because of high tariffs.

But that will change when NAFTA reduces the toy tariff to 10% from 20% on Jan. 1 and eliminates it entirely over the next three years. Mattel covets the Mexican market where 40% of the population is under the age of 15 years. Because Mattel’s primary market remains the United States, the toy maker has no plans to move from Tijuana, Jezak said.

For their part, several maquiladora employees interviewed Thursday seemed to greet NAFTA with equal measures of hope and skepticism.

“We don’t know if it benefits us or not,” said Socorro Zamora, a worker at the Square D plant. “We won’t know until our salaries go up or they begin to exploit us. How can any of us know?”

Felipe Constantino, a worker at the Industria Sandelos maquiladora, a maker of bathroom accessories, said: “It may be good for big and small companies, but what’s important to us are higher wages and more jobs. Who knows how long that will take?”

For border regions, NAFTA could be a boom. Hufbauer said the treaty will increase the Mexican government’s motivation to improve roads, communications and housing on its side of the frontera.

In San Diego, city officials say NAFTA will compound the stimulus maquiladoras have given to San Diego’s economy. A large share of the city’s $1.3-billion worth of exports to Mexico are due to the 640 maquiladoras in Tijuana.

City officials conservatively expect that economic benefit to increase by $1 billion over the next five years, adding 20,000 jobs to the San Diego region, said Neil Whiteley Ross, a researcher with the San Diego Economic Development Corp.

Lee reported from Los Angeles and Kraul from Tijuana.

* MARKET REACTION: Mexico’s Bolsa gained 17 points, but the Dow dropped 19 amid profit-taking. D2