Thumbs Down on Mexico Pact
THE proposed US-Mexico free-trade agreement amounts to a shotgun marriage between two radically clashing political and economic systems.
Let's cut through the happy talk about the North American Free Trade Agreement (NAFTA) and our would-be Mexican marriage partner. Yes, the Salinas administration has begun an admirable process of reform. But the immediate effect of NAFTA is to prop up Mexico's one-party state and the corrupt oligarchy that controls Mexico's politics and economy.
As Sen. Daniel Patrick Moynihan (D) of New York put it, "You can't have a free trade agreement with a country that hasn't had a free election."
In the 1970s, the rich, democratic nations of the European Community (EC) set tough standards for admission of Spain, Portugal, and Greece to their free-trade area. Spain and Portugal were required to hold free and fair elections and to agree to minimum standards for wages, worker safety, and the environment.
The EC eased transition of these less-developed countries by establishing social funds and massively subsidizing their infrastructure development.
Today the United States is doing no such preparatory spadework with Mexico. Instead, NAFTA would abruptly pitch the US middle class into a brutal head-to-head competition with Mexican workers earning $1-per-hour wages.
Massachusetts Institute of Technology economist Lester Thurow shocked me and other senators by testifying that NAFTA only makes sense if Washington is willing to spend billions of dollars to retrain the one-third of the US work force that will be forced to work for Mexican-style wages.
A further threat is posed by European and Asian companies that plan to exploit NAFTA by turning Mexico into a duty-free platform for blitzing the US with their exports. The Bank of Tokyo has announced it is "bullish" on NAFTA; the South Korean government is giving tax breaks to companies that move to Mexico; China is setting up a yarn-spinning operation in Mexico; and Volkswagen closed its Pennsylvania facility and expanded its Mexican plant.
NAFTA advocates say that lower tariffs will lead to a boom in US exports to Mexico. Nonsense. So poor is the Mexican economy that only 5 percent of Mexicans have sufficient disposable income to purchase American products. What's more, fully 55 percent of US exports to Mexico never enter the Mexican market; these are parts shipped to Mexico for final assembly by low-wage labor before being transported back to the US for sale.
Five years ago, I supported the landmark US-Canada free-trade agreement because it was a win-win arrangement between countries with comparable standards of living.
In contrast, the proposed US-Mexico deal is a sure loser. It pits the US against Mexico in a beggar-thy-neighbor competition based on low wages and a declining standard of living. It promises more of the same "free trade" magic that has created huge US trade deficits while gutting America's manufacturing base.
We need an alternative strategy for building up Mexico without dragging down the American middle class. For starters, why not take China's huge textile quota and reassign it to Mexico (China was allotted $4 billion in legal exports to the US in 1992)? Why not forgive a big portion of Mexico's crippling international debt? And, by all means, let us reclaim the vision of John Kennedy's "Alliance for Progress" by promoting democracy and a genuine multiparty political system in Mexico.