Bush, Salinas: Redefining the Relationship in North America

Before Mexican President Carlos Salinas de Gortari arrives in Canada later today, he will stop off in Houston for a quick summit with President Bush. The symbolism couldn’t be better. Canada, the United States and Mexico are currently engrossed in an extraordinary three-way negotiation that, if successful, would link the three American giants in the economic embrace of a free-trade common market.

That would be a historic accomplishment, with worldwide reverberations. With careful architecture, a free-trade triangle in North America could help the economies of all three sovereign states dramatically. But the political and historical impediments to such economic harmony are extraordinary, too, and possibly equal to the task of frustrating the ambitions of Presidents Salinas and Bush and Prime Minister Brian Mulroney.

THE POTENTIAL DYNAMIC: The key to the U.S. economy now and in the years to come is its ability to export at least as much as it imports. In recent times U.S. trade exports have been expanding--one of the few areas of real, vibrant growth in the economy. America will only stagnate unless it works to lower the fences between nations and intensify international trade. That means reducing artificial and political barriers to the free flow of goods and services. All three national leaders, to their credit, recognize that need, despite substantial political opposition to a free trade agreement in their countries.

In Mexico, the main fear is the voracious appetite of the gringo giant to the north. Mexican politicians who appear to be in Washington’s back pocket tend to have a short and not so sweet political life. The 1938 decision by Mexican President Lazara Cardenas to nationalize the Mexican holdings of U.S. and British oil companies is to Mexican history what the Declaration of Independence was to U.S.-British relations. As a just released Gallup Poll shows, Canadian public opinion is far less enthusiastic about the proposed North American free trade zone than the Americans or the Mexicans, who by a strong majority (72% and 66%, respectively) back the idea. Indeed, a majority of Canadians believe that a free-trade deal with their two southern neighbors would be “mostly bad for Canada” and only 5% can imagine their country coming out of this triangle as the big winner. Canadian unions, for instance, are desperately fearful of losing jobs not just to Mexico but to the United States.

Similar fears haunt many Americans. Ugly protectionist sentiment in the halls of Congress threaten not only the North American free-trade pact but the multinational talks in Europe known as GATT. Labor, led by the powerful AFL-CIO, and textile interests have prevailed on powerful U.S. politicians, including the ambitious Rep. Richard Gephardt (D-Missouri), to take up the protectionist cause. The fear is that lower economic barriers will induce many U.S. firms to relocate in Mexico, thus costing many U.S. workers their jobs.

THE DOMESTIC HITCH: The truth is that any significant Mexican-Canadian-American free-trade zone will create a period of economic readjustment in all three societies. Up to now, however, the Bush Administration has dismissed the worries of labor. The way to deal with them is not to brush them aside but to propose appropriate safety nets, including retraining programs, to assuage workers’ fears.

The Bush Administration must also promise to commit to raising all the sticky issues of possible labor dislocation in trade talks with Mexico. Any lack of sensitivity, not to mention backsliding, on this issue will only play into the hands of the enemies of free trade.

All three leaders have taken the statesmanlike and visionary line on this issue and if their efforts prove successful, future generations of Canadians, Americans and Mexicans will be much the better for their courage and commitment. Indeed, in the United States the free-trade proposal is one of the few significant economic innovations of the Bush Administration, and it dwarfs anything else--e.g., a capital-gains tax cut--that the President has put on his economic front burner.

In Mexico, President Salinas has not only championed free trade but also opened a crack in the door long slammed shut on U.S. involvement in PEMEX, the country’s state-run oil monopoly. His significant concession last November was striking evidence of the forward-thinking president’s efforts to bring his economy up to speed. It will take a similar perspective in Canada to overcome all the domestic fear: While the Canadian economy--with a gross national product (1989) of $513.6 billion--dwarfs Mexico’s (1989 GNP: $187 billion), it remains in the tall shadow of the United States (1989 GNP: $5.233 trillion).

History provides few enough moments for nations to seize their destiny and alter peacefully the course of their relationship with their neighbors. But such an opportunity now presents itself to Ottawa, Washington and Mexico City. May it not be squandered.