NAFTA Will Bring Prosperity to Both Sides of the Border
IF I'm known for anything in national politics, it's for trying to put the federal government on a budget. But in terms of our nation's overall well-being, the deficit is small potatoes compared with trade.
Since the end of World War II, trade has built and fueled the world's greatest wealth-generating machine - a machine that rebuilt Germany and Japan and made economic powers out of Taiwan and Korea. In the process, that growing trade base so changed the economic, and ultimately the military, balance of power that the Berlin Wall collapsed, Eastern Europe was liberated, and the Soviet Union was transformed.
Today we have negotiated a free-trade agreement with Mexico. If ratified by Congress, the North American Free Trade Agreement will establish the world's largest free-trade zone. But two principal objections have been raised against ratification: It would hurt the environment and cost America jobs.
No poor country does a good job protecting its environment. But because NAFTA would expand trade and raise living standards in the US and Mexico, for the first time it would give Mexico the capacity to enforce its environmental laws and invest in improving the quality of its environment. The strongest environmental argument is, in fact, for approving NAFTA.
The jobs issue has been taken up by my famous constituent, Ross Perot, who has spoken in vivid terms about the ``giant sucking sound'' of American jobs going across the border. That claim defies reason and experience. In the entire history of the world, in 5,000 years of recorded data, never has a free-trade agreement denuded a country of jobs.
Free trade is not a new idea to Americans. Since our nation was created, we have forged a free-trade zone that embraces 50 separate jurisdictions. Within that zone, some states pump oil, some grow wheat and some make motion pictures, but all Americans benefit. If free trade causes high-wage areas to lose jobs to low-wage areas, then Florida should have lost all its jobs to Mississippi a long time ago. But it hasn't.
It took them a while, but eventually the nations of Western Europe recognized the virtues of free trade. After World War II they formed a ``Common Market,'' and their economies skyrocketed. If high-wage nations are disadvantaged in free trade, then political leaders in wealthy Germany (where the gross domestic product is $16,700 per person) would have moved heaven and earth to keep Greece (where the GDP is $7,730 per person) and Portugal (where the GDP is $8,400 per person) out of the European Community. But because economic enlightenment prevailed, the Greeks and Portuguese were welcomed into the EC. The result has been increased prosperity for Greece, Portugal, and Germany.
Before relying on striking imagery and public relations to make policy, we should look at the existing trade situation with Mexico. Currently, the average American product entering Mexico faces a 10 percent tariff. The average Mexican product entering the US faces a 4 percent tariff. Under these circumstances, we already have something approaching free trade, only it goes in one direction. If Mexico enjoys inherent, insurmountable advantages in competing against the US and if higher tariffs increase those advantages, why do they have a trade deficit with the US of $6 billion today?
For all the talk about US capital flowing south, the simple fact is that it doesn't. In fact, during the early 1980s, Mexican capital came into the US. Why? Because Mexico had a restrictive trade policy, had not joined the General Agreement on Tariffs and Trade, and had effective government control of major segments of its economy. Mexican investors had no confidence in the future of the Mexican economy and struggled to get private capital out of their country and into ours, where it could be put to work. Mexico's President Carlos Salinas de Gortari has changed all that. The real economic miracle of the last five years has not taken place in Eastern Europe or the former Soviet republics. It has occurred in Mexico. As a result, the Mexican economy has started to grow, and with it, US exports to Mexico have grown.
The United States has the world's highest living standard because our workers are the most productive in the world. The average industrial worker in Texas, for example, produces $90,000 in output each year. Our superior productivity is what makes us so competitive. That's the basic reason why NAFTA is not a threat, but an opportunity to open a big and growing market. In the process we can create hundreds of thousands of American jobs, hasten our economic recovery, and clean up the environment on our Southern border. On NAFTA, politics and fear say, ``No,'' but reason and history say, ``Yes.''