TEXANS are following with particular interest the progress toward a North America free trade agreement because their state would experience much of the impact of adding Mexico to the existing United States-Canada arrangement. Two-thirds of US exports to Mexico pass through Texas.Emerging from a meeting with Mexican President Carlos Salinas de Gotari earlier this month, President Bush emphasized that he still strongly supports a pact to create the world's largest free- trade area, with a $6 trillion economy and 360 million consumers. Bush called for negotiators from the three countries to complete by late January a preliminary text that shows where they agree and diverge. Mexican officials had worried that negotiations could be derailed by US politics. Free trade is widely expected to cause some companies to move jobs from the US to Mexico, and jobs have become an issue in next year's US presidential election as the recession continues to erode employment. Democratic presidential candidate Tom Harkin and Republican candidates Patrick Buchanan and David Duke have all opposed free trade with Mexico on those grounds.
Job gains and losses NAFTA, as many people refer to the still-unwritten North America free trade agreement, "won't benefit everybody" in Texas, says Gary Williams, coordinator of the Texas Agriculture Marketing Center at Texas A&M University. But winners will outnumber losers, he says. A new report by the Texas state comptroller's office reached the same conclusion. It concluded that by 2000, NAFTA would cause an 113,000-job increase in direct employment. Five-figure gains in electronic equipment, industrial machinery, and transportation equipment would be partially offset by losses in crop production and the apparel industry. NAFTA could also boost two-way trade between Texas and Mexico by 13 percent, to $29.2 billion, by 2000. Texas currently enjoys an $8 billion trade surplus with Mexico. "We think in the long run it will be beneficial," says Clyde Walter, a spokesman in the Texas comptroller's office. "But along the way it will be hard on a lot of people." Dr. Williams notes that NAFTA would lead to economic restructuring on both sides of the Rio Grande. For instance, he believes growers of feed grains in Texas and other states would compete so effectively in Mexico's domestic market that millions of small farmers in Mexico would be driven out of business. At the same time, he says, the availability of that cheaper feed grain to Mexican ranchers would make their beef less expensive than Texas beef. That might cause processing plants to move south. Many ranchers would have nowhere to sell their cattle if that happened.
Gradual adjustments The Texas citrus and vegetable crops grown in the Rio Grande valley could face competition from imports when tariffs come down, he notes. But the process of integrating the US and Mexico economies in the valley has been going on for some time, so there won't be a sudden impact on the day NAFTA is signed, Williams says. Williams, who is also a member of the Texas agriculture commissioner's select committee on NAFTA, says the committee supports negotiations and fast-track authority for the president. But they will reserve judgment on the resulting agreement until they see "what has been given away in return for what." "We are discussing something that does not exist," agrees Michael Landeck, director of the Institute for International Trade at Laredo State University. The US agreement with Canada "by no means" serves as a model because the bilateral issues are very different. Some of the most important bilateral issues where Texas is concerned are access to Mexico's petroleum and banking industries and infrastructure development on both sides of the border, says Jared Hazelton, director of the Center for Business and Economic Analysis at Texas A&M. Although the Mexican Constitution forbids private ownership of petroleum reserves, Texas-based oil companies will only invest their capital in developing reserves in which they have an ownership interest, Dr. Hazelton says. Mexican economists have told him that their country eventually would likely find a way to accommodate US oil companies on that. Massive investment in infrastructure has to happen before the flow of trade could be increased by NAFTA, he adds. Roads, bridges, and rail connections are in terrible shape. On the US side, the federal government would likely fund most of the construction, which would inject money into the Texas construction industry.