PREVIEW / MEXICO TRADE TALKS : Salinas Is Eager to Nail Down a Pact

Not long ago, free trade was considered a very American idea that good Mexicans didn’t promote in public. More often, they denounced it as a U.S. plot to undermine Mexico’s economy.

But when President Carlos Salinas de Gortari visits Washington on Sunday, he will be the one urging the United States to move quickly on a free trade agreement, which he considers key to the success of his economic policies.

In meetings with President Bush, congressional leaders and corporate executives, Salinas will emphasize that his country cannot afford to wait the four years it took Canada and the United States to reach a similar accord.

“This is a long and complicated process,” said presidential spokesman Otto Granados. “We hope it won’t take as long as it did with Canada.”

The Obstacles

Mexico, the United States and Canada agree they need North American trade pacts to counter economic integration in Europe and Asia. But U.S. officials say that an accord with Mexico is likely to take years, due to opposition from organized labor and some industries in the United States, and to Mexico’s proposal to include the flow of immigrant workers in the negotiations.

“You have 435 members of Congress each with an industry in his district to protect,” said one U.S. official. “Salinas is going to have to do a lot of spade work, and this trip is part of that.”

What Mexico Wants

Salinas needs to boost Mexican exports to the United States and to draw foreign investment to Mexico. After years of a trade surplus, Mexico last year incurred a $645-million world trade deficit, which is expected to double this year.

Mexico had hoped its economic policies--an international debt reduction pact, sale of state-owned banks and industries, lowered tariffs and liberalized investment rules--would draw $5 billion a year in foreign investment. But not even half of that has materialized.

Mexico had not anticipated facing stiff competition from the Soviet Union and Eastern Europe for foreign investment.

The International Trade Commission will issue a report shortly that is “positive” about a free-trade agreement with Mexico, and the Business Roundtable, a group of corporate executives whom Salinas will address Monday, is to come out “very strongly in favor” of free trade, according to the U.S. official, who declined to be identified.

What U.S. Wants

And yet many investors and U.S. lawmakers who eventually will consider a free trade agreement are still skittish about Mexico. They want the government to overturn its foreign investment law requiring 51% Mexican ownership of companies. They want access to the off-limits petroleum, agriculture and financial markets. And they want the Mexican government out of banking.

“They think the basic economic structure is still weak,” said Carlos Ramirez, a columnist for El Financiero newspaper.

To sell the free trade idea, Mexico has been drawing parallels to Western Europe’s plan to use Eastern Europe as a source of cheap skilled labor. In private meetings with members of the U.S.-Mexico Chamber of Commerce this week, Salinas and his commerce secretary, Jaime Serra Puche, argued that Mexico could play that role for the United States “to keep the United States competitive” internationally.

Likely Outcome

What the Mexican president is likely to get out of his trip is a joint statement with Bush that the two countries are committed to free trade and preliminary negotiations. “That should give Salinas what he needs, which is notice to investors around the world that this is going to happen. I think that is what he is looking for,” said the U.S. official.