Will Treaty Give US Global Edge?
PRESIDENT Clinton warns that if the United States rejects the proposed free-trade pact with Mexico, it will open the door for Japanese businesses to capture the Mexican market.Skip to next paragraph
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The House will weigh that and other arguments when it votes today on the North American Free Trade Agreement.
Mr. Clinton's remarks set off a debate. NAFTA critics discount his ``Japan threat.'' But proponents suggest that a NAFTA defeat would hand Japan, Germany, and other major exporters a golden opportunity.
What does the president say will happen if the House rejects NAFTA?
During a broadcast to business groups in 200 cities Nov. 1, Clinton predicted that a US rebuff of NAFTA would set off a frenzy of Japanese activity.
He said if the pact were rejected, and if he were the Japanese prime minister, ``I would jump on this like flies on a June bug. I mean, I would be there on the next day. If Congress votes this down on the 17th of November, I would ... have the finance minister of my country in to see the president of Mexico on the 18th of November.... I'd say, `We've got more money than they [the US] do, anyway. Make the deal with us.' ''
How do NAFTA opponents respond?
Donald Huddle, an economist at Rice University in Houston, says: ``I don't see that happening. The Japanese could have moved into Mexico a long time ago. And they could still do it under NAFTA.''
Larry Birns, director of the Council on Hemispheric Affairs in Washington, says Japan invested $60 million in Mexico last year, about the same amount that it put into Bangladesh. He notes that before NAFTA was negotiated, Mexican officials tried to sell Japan on a similar idea - without success.
So is the risk of losing business to Japan a minor one?
NAFTA gives US business an advantage in selling to Mexico. For example, US- and Japan-made computer parts have about a 20 percent duty tacked on going into Mexico. With NAFTA, the duty on US-built parts eventually drops to zero. But Japan must keep paying.
Then what worries NAFTA foes?
They point out that Japan could use Mexico under NAFTA as an ``export platform'' to sell their products, duty free, into the huge US market. Combining new, highly efficient factories in Mexico with $1-an-hour labor, Japanese firms could push US-built products out of the North American market.
Proponents of NAFTA reject that. They say even though NAFTA was pending, German automakers BMW and Mercedes-Benz decided recently to build assembly plants in South Carolina and Alabama. It takes more than cheap labor to attract capital investment, they say.
William Orme, author of ``Continental Shift: Free Trade and the New North America,'' notes in the latest issue of Foreign Affairs magazine that ``Japanese companies have never been that interested in Mexico.'' Most of their North American investments go into the US.
The bottom line:
Mr. Orme foresees US pressure to keep Japanese investments out of Mexico. But as US-Mexico trade becomes more lucrative, Japan's actions cannot be predicted.