In Mexican Vision of Free Trade, NAFTA Is Only the Beginning

FREE trade is a meal, Mexican officials say, that should be served with something more than North American hamburgers. It is best enjoyed with a duty-free dessert of Chilean grapes and Colombian coffee.

While one team of Mexican negotiators is crossing the T's on the North American Free Trade Agreement (NAFTA), another is crisscrossing Central and Latin America working on other trade pacts.

By the end of this year, Mexico expects to sign a free trade agreement linking Mexico, Colombia, and Venezuela (the Group of Three). Mexico also is holding talks with Costa Rica and a bloc of four other Central American nations. During an Aug. 16 visit to La Paz, Bolivia, Mexican Foreign Minister Fernando Solana told Bolivia's new president, Gonzalo Sanchez de Lozada, that Mexico was ready to negotiate a NAFTA-type deal. Mexico has expressed a willingness to begin talks with other South American as well as Asian and European nations.

"Mexico is working hard in parallel with NAFTA on its other free-trade pacts. The goal is to diversify trade," says Rocio Mejia, economist at Macro Asesoria Economica, a Mexico City-based consulting firm. "Seventy percent of our trade is with the United States. Only 4 percent comes from Latin America," she notes.

The push is part of Mexico's multifaceted strategy of opening its economy to trade and foreign investment. The initial advance came under President Miguel de la Madrid Hurtado with Mexico's 1986 joining of the General Agreement on Tariffs and Trade (GATT). President Carlos Salinas de Gortari has continued liberalization policies with remarkable success, analysts say.

On Aug. 18, Mexican Commerce Undersecretary Pedro Noyola boasted that the Salinas administration has attracted $31.4 billion in foreign capital since 1988. A recent International Monetary Fund study puts Mexico - for the first time ever - among the top 10 nations in the world in terms of attracting overseas investment and No. 1 among developing nations.

That record, coupled with the near-completion of the NAFTA deal, has other nations looking to Mexico to tie free-trade knots. "There's an interest on the part of all of Latin America not to be left behind," says Roberto Salinas Leon, an economist at the Center for Free Enterprise Research in Mexico City.

Chile and Mexico already cut a quasi-free-trade deal back in September of 1991. Except for a short list of exempted products, all tariffs will drop to zero by 1996. The result has been a 42 percent jump in trade between the two nations since the signing, and it continues to increase.

"We're very satisfied with the arrangement," says Julio de la Fuente, the commercial attache at the Chilean Embassy in Mexico City. Indeed, there is discussion of shortening the tariff phaseout period and broadening the pact to include services and government purchases.

Mexican officials say the NAFTA talks and the Chilean agreement give them valuable experience that should speed the negotiation process with other nations.

But the trade talks have their challenges. On Aug. 18, negotiations with Costa Rica were suspended by what Mexican officials described as "a lack of preparation" on the part of the Costa Ricans, who made some changes in their negotiating team.

The Group of Three talks have also faced obstacles. A Venezuelan official, quoted in the Venezuelan press on Aug. 16, said Mexico was holding up the pact by refusing to agree to asymmetrical accords - that is, Venezuela wants differing rates of tariff reduction to smooth the transition to an open market by taking into account each nation's industrial strengths and weaknesses.

Many Latin American nations are embracing bilateral and multilateral trade deals with Mexico as a politically expedient way of developing competitive industries at home and bolstering exports. But these pacts are also seen as bringing them a step closer to the relatively wealthy North American consumer market.

Strategically, the free trade deals give Mexico an opportunity to expand into new markets, says Mr. Salinas, the economist. But he adds, "Clearly a goal of Mexico is to function as an economic bridge or intermediary between Latin America and North America as Mexico will be both Latin American and North American."

If NAFTA is ratified and goes into effect Jan. 1, 1994, the next step that many nations will be looking to take will be to join the North American pact. To stay within the GATT rules governing international trade, NAFTA cannot be exclusionary. So NAFTA has an accession clause - an open door - for other nations to join if all three signers agree.

"Chile and Argentina are next in line," says Salinas, the economist. Poland, Taiwan, Costa Rica, and New Zealand have also expressed interest in using the accession clause.

"The beauty of it is, for Argentina to join NAFTA, it won't take 14 months, it will take 14 days," he says rhetorically. "You're not starting from scratch. The guidelines and legal framework are established. Twenty to 30 years down the road, NAFTA could rival GATT," he adds.