Don't Short-Circuit Free Trade

GENERATION ago, "trade, not aid" was a popular rallying cry in the seemingly endless debate about the ever-unpopular foreign-aid program. The idea was that if we would let the third world sell us more, we would have to aid it less. Now the idea has been turned around. Thomas R. Donahue, secretary-treasurer of the AFL-CIO, sounds aggrieved when he complains that the proposed free-trade agreement with Mexico is a substitute for foreign aid. The development of Mexico, he suggests, ought to be financed by the taxpayer. Otherwise, he fears that Mexican development will come at the expense of jobs in the United States as American companies move

south to take advantage of lower wages and freer trade. In other words, aid, not trade. That's expecting a lot from the taxpayer.

If that were really the choice, then the outcome might be neither aid nor trade. But things are probably not that bleak. Full implementation of a free-trade agreement, if there is one, is years away. When and if it comes, it will bring a great many changes in both Mexico and the US. There will be winners and losers on both sides of the border; but on balance, as trade increases, there will be more winners than losers. Notable among the winners will be consumers, who will get better products more cheaply .

And the demand for those products will create jobs in the US as well as in Mexico.

The most important reason for the US to pursue a free-trade agreement with Mexico, however, is political. The fact that Mexico wants such an agreement represents an astonishing change of policy, a change so enormous that it is mind-boggling.

NOT very long ago, Mexico would not even consider joining the General Agreement on Tariffs and Trade (GATT), because accepting GATT rules was seen as an infringement of Mexican sovereignty. Hesitant American suggestions that Mexico take such a step in its own interest were slapped down as yanqui imperialism. Mexican industrial policy was based on import substitution: tariffs and licenses kept out foreign products so that they could be made in Mexico and sold at protected prices. The issuance of import l ic

enses was a fertile source of corruption.

Mexico joined GATT in 1986. Now the Mexican government under President Carlos Salinas de Gortari has gone further and has opened the country to a process of economic integration with the US and with Canada as well. This is certainly the death knell for import substitution and for the politically powerful industrialists who benefited from it.

A policy change of this magnitude can only be explained by a sense of desperation. The Mexican foreign debt is $100 billion, and even the interest cannot be paid. The economy is depressed. Political opposition to the long entrenched PRI, the government party, is growing.

It can be argued, with some force, that Mexico brought all (or most) of these problems on itself and that solving them is no responsibility of the US. It was, after all, successive governments of Mexico that postponed economic and social reforms while their leaders grew rich and perpetuated political control through rigged elections.

But the present government of Mexico is not like its predecessors, perhaps out of desperation, perhaps out of rational analysis. One does not want to overstate the situation, but possibly a new day is dawning in Mexico. If that is indeed the case, the US should certainly encourage it.

One reason is the border - 1,950 miles, almost all of them uncontrolled and uncontrollable. The AFL-CIO is worried about US workers losing jobs if American companies move to Mexico under a free-trade agreement. It should also think about US workers losing jobs to Mexican immigrants if there is no free-trade agreement.

THE state of US law is such that movement toward a free-trade agreement will continue (but not irreversibly) unless Congress acts this month to stop it. Letting it continue would keep alive the possibility that trade might indeed relieve the taxpayer of aid (without taking it out of the hide of US workers). And stopping it would be an unwarranted rebuff to a courageous Mexican president.

It's been said that a country can choose its friends, but not its neighbors. A current excellent book on US-Mexican relations, by Prof. Sidney Weintraub of the University of Texas, is aptly titled, "A Marriage of Convenience." It is in everybody's interest that this marriage work because, married or not, we're going to keep living together.