DIPLOMACY : For Mexico, the Issue Is Jobs : Bush-Salinas talks will focus on free trade and its impact on both nations.

When Presidents Bush and Carlos Salinas de Gortari sit down Monday afternoon to an outdoor lunch near the city hall of Agualeguas, a small farming community in northern Mexico, one issue will overshadow all others: jobs.

The two leaders will be meeting for the sixth time--they first met as presidents-elect late in 1988. As other sensitive issues have slipped slightly from the top of the agenda in the touchy U.S.-Mexican relationship, the question of free trade and its impact on jobs in each country has only been magnified.

Bush, who is scheduled to return to Washington early today after a grueling weeklong trip to Europe and the Middle East, will set out for the 27-hour visit after spending barely two days at home.

Although he could have easily added it to his five-country Latin American trip that begins Dec. 2, the President decided to make it a separate event to demonstrate the Administration’s special interest in Mexico and its desire for improved economic cooperation.

ISSUES: In the White House view, Salinas “is a new kind of Mexican leader,” a Bush aide said. The 42-year-old Harvard-educated economist has tried to move his country toward market-oriented reforms, “and we want to encourage that process,” the official explained.

While Bush leads the applause, the cheering section will include Commerce Secretary Robert A. Mosbacher. Even as Bush and Salinas confer, he will be taking a delegation of U.S. business executives around Mexico to talk on a more nitty-gritty level about trade and business prospects with their counterparts.

As it is, Mexico is the United States’ third-largest trading partner, behind Canada and Japan. U.S. exports to Mexico last year were worth $25 billion, according to White House statistics.

But unlike past years, when U.S. and Mexican leaders each had reasons for shying away from free-trade agreements, Salinas is now actively courting them, having proposed a free-trade agreement to Bush in June. The reason: to hang onto some of the capital now heading toward the competitive, low-cost production centers in Asia and Eastern Europe.

OBSTACLES: But here’s the rub: Although Bush and Salinas are likely to find themselves approximately on the same side of the fence on this issue--a rarity in the often-acrimonious U.S.-Mexican relationship--they are both likely to face opposition at home.

As viewed by some on the U.S. side of the border, the opening up of trade could mean a further seepage of investment--and jobs--southward, prompting protests from Congress. And among Mexican opposition leaders, there is concern that a trade agreement, with the resulting expansion of foreign parti- cipation in the Mexican economy, would bring about exploitation of Mexican workers.

While possible approaches and safeguards for those concerns may dominate the presidential sessions in northern Mexico, two other longstanding topics, drugs and immigration, will also require attention.

“Mexico wants to make sure the border remains open and people can come across, and we’ll express our concerns about drug smuggling,” the White House official said.

OUTLOOK: An actual free-trade agreement could be several years away. Complicated terms must be negotiated. But Bush appears willing to count the trip a success if it produces merely harmonious discussions with the Mexican president and a sense of progress in the future toward eliminating tariffs between the two nations.

“We’ll come away re-emphasizing the importance of an agreement and of getting to work on it quickly,” said one White House official. “Keeping the economic relationship on track is the main thing.”