House Panel Embraces Idea of Mexico Pact : Trade: Lawmakers cautioned that they will not enact an agreement that sends U.S. jobs south of the border.

Members of a congressional panel signaled Thursday that they will support a comprehensive free-trade agreement with Mexico if one is negotiated next year but served notice that they will scrutinize the pact closely to protect U.S. domestic interests.

In the first formal hearing since the two governments embraced the idea this week, members of the House Ways and Means subcommittee on trade warmly endorsed the notion of a free-trade agreement.

“A proper agreement will raise the standard of living in both countries,” declared Rep. Sam M. Gibbons (D-Fla.), chairman of the subcommittee.

But lawmakers cautioned that they want to ensure that an accord does not cause an outflow of industrial jobs to Mexico, as U.S. manufacturers rush to build factories south of the border to take advantage of lower wages.

Rep. Don J. Pease (D-Ohio), who frequently voices organized labor’s concerns, warned: “Before we try to enter into an agreement, let us try to figure out what the likely impact would be. There are bound to be some winners and losers.”

Despite several such caveats, the hearing indicated that there is widespread support for the idea, both in Congress and in the private sector. Many U.S. and Mexican business groups, including the Business Roundable, an organization of U.S. industrialists, endorsed the pact.

At the same time, U.S. Trade Representative Carla Anderson Hills warned that Washington will ask Mexico to agree to major market-opening measures as part of an accord--from protecting foreign ownership and intellectual property to letting in more service industries.

She said Mexico also would have to codify trade-liberalization steps that it has taken the last two years, many of which have been praised as groundbreaking. She said most have been adopted by executive decree and easily could be reversed.

Hills’ assessment was bolstered by a study by the U.S. International Trade Commission, which reached similar conclusions. It cited banking, insurance, trucking and fishing as industries where foreign participation is severely restricted in Mexico.

Organized labor’s fear that a free-trade pact could cause U.S. jobs to be exported to Mexico appeared to be the most significant potential snag that the proposal will face over the next several months.

Labor also wants the pact to include stringent restrictions on movement of Mexican workers to the United States. Mexico has said it believes the issue should be taken up in a separate accord, and the Bush Administration seems prepared to go along with that.

While generally endorsing the idea of a free-trade agreement, some lawmakers indicated that the White House may come under pressure to include other issues, such as drug-enforcement and environmental problems, as the price for congressional approval.

Rep. Charles B. Rangel (D-N.Y.) broached the idea Thursday and was supported by Rep. Thomas J. Downey (D-N.Y.). Hills told reporters later that she is willing to consider the suggestion but believes the accord should deal solely with trade.

At the same time, Hills and some private economists sought to assuage labor’s fears that a free-trade accord would spur an outflow of jobs from the United States. They argued that an agreement need not result in a net job loss.

Rudiger Dornbusch, a Massachusetts Institute of Technology economist, said creation of a wider market for each country would likely create new jobs that would enrich both economies.

And he contended that most slots that might end up moving to Mexico would have been transferred to Asia anyway. In that case, it would be better to have the jobs in Mexico, he said, because more of the extra income would be spent in the United States.

The push toward a free-trade agreement began Monday, when President Bush and Mexican President Carlos Salinas de Gortari agreed to begin preliminary consultations, in hopes of starting formal negotiations by December.