On the positive side, administration officials argue, increased investment in Mexico will create prosperity there--and expanded markets for U.S. goods, thus creating jobs in the United States.  According to testimony by Robert Zoellick before the Senate Foreign Relations Committee, more than 100,000 jobs have been created in the U.S. to support maquiladora facilities, and during the period of Mexican economic liberalization since 1986, U.S. exports to Mexico have increased from $12.4 billion to $28.4 billion, manufacturing exports have increased from $10 billion to $24 billion, and capital goods exports have increased from $4.6 billion to $9.1 billion.  The U.S. trade deficit with Mexico has shrunk from $4.9 billion in 1986 to $1.8 billion in 1990.  Not counting Mexican oil exports, the United States had a trade surplus of $2.7 billion with Mexico in 1990.  The administration claims that the prosperity associated with Salinas' reforms has created 264,000 new American jobs.

In September 1990, in an effort to resolve the economic dispute over NAFTA, the chairman of the House Ways and Means Committee, Dan Rostenkowski, and the chairman of the Senate Finance Committee, Lloyd Bentsen, requested a study of the subject from the U.S. International Trade Commission, an independent government regulatory agency.  In February 1991, the ITC reported back that

an FTA with Mexico will benefit the U.S. economy overall by expanding trade opportunities, lowering prices, increasing competition, and improving the ability of U.S. firms to exploit economies of scale.  Since these gains are likely to outweigh the costs, the U.S. economy will probably gain on net.  However, there are likely to be shifts in production so that certain U.S. industries--such as horticultural products--will be disproportionately affected.

The ITC added that the effects of an agreement would be much greater in Mexico than the United States, owing to the difference in the size of the two economies and the fact that Mexico accounts for only 7 percent of U.S. exports, while the United States accounts for more than 70 percent of Mexican exports.  The AFL-CIO hotly disputed the ITC's report, but it was extensively cited by the administration in congressional debate and the two legislators who requested it both strongly supported the extension of fast-track authority.

The second major point of contention over fast track involved the environmental effects of NAFTA.  The AFL-CIO, various environmental groups, and several major newspapers pointed to severe pollution problems in the maquiladora region along the U.S.-Mexican border, including the dumping of toxic wastes and sewage into rivers and ground water.  Shortly before fast track was voted on, however, some environmental groups withdrew their opposition in response to administration assurances that it would work with the Mexican government on a pollution-control plan and in response to evidence from the Mexican government--notably, the closing of a major oil refinery in Mexico City--that it was prepared to enforce its comprehensive environmental laws.  Influential environmental lobbyists warn, however, that they will oppose NAFTA unless the administration mounts a significant clean-up program for the border area and guarantees that Mexico will not provide a haven for corporations fleeing U.S. pollution standards.

The Gephardt Factor

A pivotal figure in the fast-track debate--and certain to be one, as well, in the ratification process--was House Majority Leader Gephardt, a 1988 Democratic presidential candidate, and often regarded as one of his party's leading exponents of trade protectionism.  Gephardt disputes this characterization, however, contending that his purpose has always been to open up foreign markets to U.S. exports and to promote trade agreements that are ``fair to American workers.''  In an interview, he said he doubts that free trade with Japan is possible ``because our societies and philosophies are so different'' and he favors trade quotas instead.  With Mexico, however, Gephardt said he does believe that an equitable agreement is possible, if the right terms are negotiated.  He supported fast track, but only after inducing the administration to prepare a detailed ``action plan'' covering job training, environmental protection, worker rights, rules of origin, and other issues.  Gephardt told me that he "might well" oppose NAFTA if the administration fails to propose a plan for training American workers to make them productive enough to compete with third world workers earning $1 an hour or less.

Much to the unhappiness of labor and environmental groups, jobs and the environment are to be handled separately from the main trade negotiations over NAFTA and will not be part of the official agreement.  Negotiators have formed seventeen working groups to handle specific trade issues, with serious problems to be passed up to chief negotiators (for the United States, Carla Hills's deputy, Julius Katz) and to cabinet ministers who confer at least weekly by telephone and monthly in person.  Negotiating teams have only begun drafting their opening positions, but trade officials and outside observers in Congress and various industry groups expect the most contentious issues to include protection for U.S. agriculture, glassware, and apparel, rules of origin for autos, U.S. efforts to enter the constitutionally restricted Mexican energy industry, investment rules for U.S. entry into the Mexican financial services industry, and methods of dispute settlement.

If principles from the U.S.-Canadian free-trade agreement are transferred to NAFTA, tariff and non-tariff barriers will be lowered on various products on four different schedules--immediately, gradually over five years, ten years, and more than ten years.  The United States is likely to seek more than ten years of protection for its most vulnerable industries, notably fruits and vegetables.  Horticulture will also be the subject of intense negotiation over national and state pesticide and fertilizer standards.  In the auto field, the U.S.-Canadian agreement provided that at least 50 percent of a vehicle's content had to be manufactured in one of the two countries in order for it to be traded duty-free.  Labor is pressuring the administration to seek a 60 percent requirement in NAFTA.  Besides the percentage of required North American content, there will be extensive discussion on how the percentage is to be calculated: Are indirect costs of production (such as advertising and insurance) to be counted toward a Japanese manufacturer's 40 percent?  Should an auto be counted as wholly or partly North American if a major component (say, its engine) contains parts 50 percent fabricated in Japan and 50 percent in North America?  How do the parties police for compliance with such rules?  In negotiations, each nation will seek rules that facilitate Asian and European investment within its borders, but bar the use of the others' territory for ``unfair'' penetration of its market.

Mexico's constitution reserves ownership and exploitation of the nation's petroleum reserves for the public, which has translated over the years into a government monopoly over all phases of exploration, refining, and marketing of energy products--and into inefficiencies such as lagging oil production and an inability to take advantage of natural gas reserves.  U.S. negotiators will press for means to allow American companies to involve themselves in exploration, extraction, refining, petrochemical production, pipelines, and retailing.  Mexican negotiators want to gain the benefit of U.S. efficiency without sacrificing control or stimulating internal political criticism that Salinas has allowed Mexico's patrimony to be exploited by the United States.  One matter as politically sensitive in the U.S. as energy is in Mexico--rules on ``labor mobility,'' i.e.  immigration--has simply been ruled out as a matter for discussion.

Another complexity lies in dispute settlement.  The U.S.-Canadian agreement created a binational commission to handle appeals, but it is empowered to evaluate only whether the countries' own trade laws were fairly administered.  Canada and the United States, however, have similar English legal systems, whereas Mexico's is based on Napoleonic tradition and its judiciary is accused (especially by U.S. opponents of NAFTA) of being subject to political influence and bribery. 

Richard Gephardt and others point out that the U.S.-Canadian agreement--220 pages long and nearly two inches thick--required three years to negotiate and then was the central issue in Canada's 1988 national election campaign.  Gephardt doubts that it will be possible for three countries that do not share a common language, standard of living, or political system to conclude such a complex agreement within six or nine months.  However, other observers--such as Timothy Bennett, a former U.S. trade negotiator now representing the Mexican private sector--believe it is entirely possible, given the precedents established in U.S.-Canadian negotiations.  Carla Hills is endeavoring to speed the process along by conducting close consultations with dozens of industry advisory groups and with Congress about what positions to take in negotiations.  She is, in effect, lobbying for ratification of NAFTA even as she negotiates it.

Assuming that Hills is successful in satisfying industry, and that other administration officials can work out adequate programs on the environment and worker training, there is one final set of issues that opponents of NAFTA conceivably could raise in a ratification debate (although they did not in the fast-track debate): human and political rights in Mexico.  In 1988, Salinas and his Institutional Revolutionary Party (PRI) were declared to have won the presidential election with 51 percent of the vote, but it is widely believed that he actually received fewer votes than his leftist opponent Cardenas and that only PRI domination of the government and of Mexico's electoral machinery allowed him to take office.  Salinas is far more popular today than he was in 1988 and Cardenas has faded as a political force.  Also, Salinas has instituted a number of political reforms, including the holding of primary elections in some states.  But the PRI continues to be accused of voter fraud and U.S. human rights groups such as Freedom House and Americas Watch allege that the PRI and police agencies still use violence to put down labor and political dissidents.  Before a final vote is taken on NAFTA, Salinas is likely to be called upon to make assurances to advance glasnost in Mexico to match his unquestioned record on perestroika.

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