A Gamble We Can’t Afford Not to Take : Mexico: A free-trade scare could deny our southern neighbor prosperity and inflict more social problems on the United States.

We have Mexico on our minds. The proposed U.S.-Mexico free-trade agreement raises the basic question of whether we should view Mexico as a threat or as an opportunity. The answer is that we need to make Mexico an opportunity, because if we don’t, it will surely end up as a threat.

There’s no mystery about the motives of Mexican President Carlos Salinas de Gortari in proposing the trade agreement or of President Bush in endorsing it. They hope that a more prosperous Mexico will inflict fewer of its social problems on us through immigration. The idea is to move Mexico’s economy away from state control by encouraging more trade, private enterprise and foreign investment. We ought to be flattered. They want to be more like us.

After decades of nationalistic suspicion and protectionism, this is a radical change. The long-term potential benefits for many of our mature industries--autos, machine tools and even computers--are obvious. Mexico’s population (82 million) is a third of ours, but poverty has limited the country’s purchasing power. Its gross national product is only 1/25 of America’s. Greater prosperity would ultimately create a big market for U.S. companies, which supply about 70% of Mexico’s imports.

But instead of opportunity, some Americans see threat. A coalition of unions, environmentalists and a few industries is portraying the agreement--which hasn’t even been negotiated--as an impending calamity. They say it would unleash a huge flight of U.S. factories to Mexico to take advantage of low wages and lax health, safety and environmental regulations. It’s true that low industrial-labor costs ($2.20 an hour in 1989 compared with $14.30 in the United States) have prompted hundreds of U.S. companies to build plants in Mexico. There will be more. You will read about them because plant closings in the United States or openings in Mexico are highly visible events. What you won’t read about is the spur to U.S. exports. Between 1987 and 1990, Mexico’s exports to the United States rose by $10 billion, and U.S. exports to Mexico increased by $13.8 billion. There’s no dollar-for-dollar match, but the two move together.

The scare stories err in another way, too. They imply that a free-trade agreement would instantly lead to big dislocations by permitting huge trade flows that are now blocked. This is simply wrong. Much U.S.-Mexico trade is already free, and many remaining barriers are modest. Potential job losses are much smaller than, say, the unemployment created by the current recession.

Today’s fuss is over whether Congress should authorize “fast-track” negotiations. This means that, once an agreement is signed, Congress can vote only yes or no on the entire package. It sounds more rigid than it is. As a practical matter, Congress has many opportunities to influence the details, including a three-month review period before the agreement is signed.

The importance of an agreement is political. Technically, the United States and Mexico can now unilaterally revoke many trade concessions each has granted in the past. A new agreement would presumably make these concessions permanent and, thereby, guarantees Mexico’s access to the U.S. market. The risks of investing in Mexico would be reduced, spurring economic expansion.

No one should minimize our problems with Mexico. They span the spectrum from drug trafficking to illegal immigration to Mexico’s dirty environment. There’s still plenty of mutual suspicion. Americans can be condescending, while Mexicans often resent us. Our political cultures are far apart. Mexico has a history of corruption and one-party rule. Although Salinas has pledged reforms, progress so far has not been convincing.

But we can’t deal with these problems by pretending that Mexico can be moved to Antarctica. A poor Mexico won’t be able to clean up its environment. A poor Mexico won’t want to curb child labor. A Mexico that thinks we are indifferent to its poverty won’t want to cooperate on drugs, immigration or raw sewage. Salinas says he wants to cope with common problems, and a richer Mexico will find that easier.

What we need to do is to improve the odds of success. A free-trade agreement is no panacea. It’s a gamble--but one we can’t afford not to take.