U.S., Mexico Open Talks on Free-Trade Pact

The United States and Mexico have begun quietly exploring the possibility of negotiating a sweeping free-trade agreement similar to the one that Washington signed with Canada in 1988, U.S. officials said Tuesday.

Completion of a broad-scale free-trade agreement could have major economic and social implications for both countries, paving the way for sharply increased trade and transfer of technology and expertise. Mexico needs U.S. investment and can supply inexpensive labor.

Both U.S. and Mexican officials warned that the consultations still are preliminary. The two governments will not formally decide whether to go ahead with a full-scale agreement until the initial studies have been completed.

“We really haven’t gone very far down that road yet,” White House Press Secretary Marlin Fitzwater said.

Nevertheless, other Administration officials said the groundwork could be completed in time for announcement of broader-scale negotiations during a visit to Washington, now planned for mid-June, by President Carlos Salinas de Gortari.

Although the exploratory talks initially were suggested by the Mexicans, U.S. officials said the Administration’s willingness to go along reflects a personal desire on the part of President Bush to strengthen ties with Mexico and with Latin America in general.

During the 1988 presidential campaign, Bush called for elimination of trade barriers throughout the Northern Hemisphere. Washington already has signed a full-scale trade accord with Canada, negotiated in 1987 and 1988.

Officials on both sides had been keeping the new talks under wraps because of political sensitivity in Mexico, which traditionally has feared it would lose sovereignty--and be overwhelmed in economic and financial terms--by linking itself to the huge U.S. economy.

However, U.S. officials said that Salinas more recently has come to favor broader trade ties with the United States on grounds that they offer the best hope for spurring the soft Mexican economy.

Trade between Mexico and the United States has grown dramatically in recent years as Mexico has steadily opened its markets to more trade and foreign investment. A comprehensive free-trade agreement would open the way for further increases by eliminating trade barriers and creating the legal framework to protect foreign investment and guarantee that foreign businesses would be able to function in Mexico.

Mexico is now America’s fourth-largest trading partner, after Canada, Japan and the European Community. U.S. figures show that trade between the United States and Mexico totaled $52.1 billion in 1989, up from $43.9 billion in 1988.

Two years ago, in a major reversal of its protectionist policies, Mexico joined the 97-country General Agreement on Tariffs and Trade, the Geneva-based organization that sets and administers the rules governing the world trading system.

Administration officials now view Mexico as a model for countries seeking to move toward a more market-oriented system. In addition, officials said that Bush and Salinas have an unusually good rapport.

Even so, U.S. officials warned that negotiating a free-trade agreement will not be easy. For one thing, the two economies are far different in size and sophistication. And Mexico’s still is made up primarily of state-owned companies.

As a result, it could take months, or even years, to hammer out a satisfactory agreement. The accord that the United States signed with Canada was three years in the making, even though there were relatively few major differences.

U.S. officials said the exploratory talks now under way were launched after a visit last February of high-level Mexican economic policy-makers, led by Commerce Secretary Jaime Serra and Salinas’ chief economic adviser, Jose Cordoba.

The two countries have been hinting for years at the possibility of a free-trade pact, but the idea never took hold during the Reagan Administration. Bush, who calls Texas his home, considers himself more sensitive to U.S.-Mexican relations.

Under recent trade patterns, the United States has been selling Mexico a wide range of manufactured products, capital goods and farm products, while Mexico exports oil, petroleum products, textiles and appliances to the United States.

Reaction in Mexico to Tuesday’s announcement was generally favorable. Miguel Aleman, a senior Mexican trade and economic official and son of the late President Miguel Aleman Valdes, said that although the decision to liberalize trade initially was controversial, the results have proved beneficial.

Pine reported from Washington and Darling from Mexico City.