Pluses, Minuses of Free Trade With Mexico
It will enhance US trade and competitiveness
LATER this spring, the United States, Mexico, and Canada expect to begin negotiations to eliminate trade and investment barriers among our three countries. Thanks to a 1988 agreement, US trade with Canada already is largely free. Now we have the opportunity to establish a more prosperous and secure economic relationship with our southern neighbor.
But let's not fool ourselves. These negotiations won't be easy and the specific terms negotiated will determine whether the agreement is a good one for US businesses and US workers.
I support moving ahead with negotiations because I believe a free-trade agreement can provide solid economic benefits to the US. In 1990, two-way trade with Mexico approached $60 billion, up $8 billion over the previous year and double the 1984 total.
Our exports to Mexico are growing far faster than our imports, reducing what was a $6 billion trade deficit in 1986 to just over $1 billion today. And these growing US sales to Mexico mean new jobs - 100,000 more just from last year's $4 billion increase in exports.
The time is also right to strike a favorable deal with Mexico. President Salinas continues to change the face of the Mexican economy, cutting inflation five-fold since 1988, selling unprofitable state-owned firms, eliminating red tape, opening new areas to foreign investment, and reducing many trade barriers.
Free-trade negotiations can address the important Mexican barriers that remain, including numerous auto trade restrictions and import licenses on many agricultural goods.
But we cannot be satisfied with just any agreement. Trade agreements create both winners and losers, and this one will be no exception.
We must be certain an agreement is fair to all US workers and industries, to all segments of our society. And we must not ignore other issues of real concern to many Americans, including cross-border pollution and other environmental problems.
The impact of an agreement on US manufacturing and agriculture is especially important. Mexico sees some of its greatest export opportunities in areas where the US already faces stiff import competition - such as textiles, steel, fruits and vegetables, and glassware.
With Mexican wages a fraction of US levels, many fear an agreement will do nothing except shift jobs south of the border.
We must pay attention to those who see peril, not promise, in an agreement. US barriers must be reduced gradually, not abruptly, in sensitive areas, and assistance must be provided to help workers and companies adjust.
At the same time, Mexico needs to do more to enforce environmental protection laws and protect the rights of workers. Without attention to these concerns, any agreement will face a dim future in Congress.
Properly negotiated, a free-trade agreement can keep and create good jobs in the US. In recent years, many US manufacturing jobs have been lost to lower-cost operations, especially in Pacific Rim countries. When firms move there, they often relocate all of their production.
In contrast, the maquiladora program, under which US firms have built plants just over the border, shows how production sharing with Mexico can create jobs in this country as well. Last year, maquiladoras bought over $9 billion in components and supplies from US companies. That certainly beats shifting production 10,000 miles away to Asia.
A free-trade agreement also can help us to compete globally in the 21st century. The European Community is creating a trading bloc with a population of 325 million and an economy of almost $5 trillion, and Japan is strengthening its trade ties with its Pacific Rim neighbors.
The result is greater European and Asian export competitiveness. Free trade with Mexico and Canada can help us face that competition.
Free-trade negotiations will be difficult and may not achieve everything that either side desires. Given differences in the economies, challenges are considerable.
But these negotiations also carry great potential for a stronger economic relationship with our southern neighbor. That is an opportunity that holds great promise, one we cannot afford to ignore.