Job Forecasts Are Rosy; Reality Is Grim : The Administration claims a gain already of 264,000 jobs. When other data are factored in, there’s a 26,000 loss.

What effect would a U.S.-Mexico free-trade agreement have on our economy? Advocates and skeptics have made several claims, but there has been little attempt to look at the recent history of U.S.-Mexico trade. In attempting to peer into the future, the past can be serve as our guide.

The strongest argument in favor of a free-trade agreement that U.S. advocates have marshalled cites the boom in U.S. exports after Mexico began to drop its trade restrictions in 1986: The total more than doubled, from $12 billion in 1986 to $28 billion in 1990. In the process, an estimated 264,000 new jobs were created in export industries in the United States, according to the Bush Administration’s estimates.

This is certainly impressive. And if it is an indication of things to come, opposition to the free-trade agreement by U.S. labor would clearly seem misplaced. However, those who tout the surge in exports and the jobs they created are giving us only a small, selected slice of reality.

Neglected from this account is the explosion in the maquiladora, or assembly, plants along the border, which export finished goods to the United States. There are now nearly 2,000 of these facilities on the Mexican side of the border. Since 1986, employment in these plants has jumped by 192,000 workers. What is important to realize is that virtually all maquila jobs in Mexico represent jobs lost to the U.S. economy. The maquilas are overwhelmingly U.S.-owned plants engaged in the avoidance of U.S. regulations (safety, health, environmental) and/or plants taking advantage of Mexican government subsidies, and--above all else--firms attracted to cheap labor.

In essence, one maquila job created in Mexico is a U.S. job lost--in this case, 192,000 jobs lost since 1986.

Using the Bush Administration’s figures for jobs created through the export surge to Mexico--264,000--and subtracting the U.S. jobs lost to the explosion of the maquilas, we find a much more realistic estimate of the 1986-90 job gain for the United States: 72,000.

But even this adjusted estimate is incomplete. It is also necessary to consider the effects of the $18.5-billion U.S. trade deficit with Mexico since 1986. What effect has this $18.5 billion spent in Mexico (in excess of what Mexico buys from us) had on U.S. employment?

Using the Bush Administration’s own “jobs-created-by-exports” ratio, had this $18.5 billion been pumped through the U.S. economy instead, 77,000 jobs could have been created. Subtracting the 72,000 net jobs created (calculated above), we are left with an overall loss of 5,000 jobs in the U.S. economy.

There is also the question of the effect of non- maquila plants created by U.S.-based transnational corporations in Mexico in the past five years. These companies invested an estimated $4.2 billion in new factories, mines and tourist facilities in Mexico, 1986-90. Had that money been invested in the United States, it would have generated an additional 21,000 jobs.

The total job loss estimated here--26,000--is actually much higher, considering the secondary losses in related industry and the community as plants shut down. Thus, rather than creating 264,000 new jobs since 1986, as the Bush Administration’s statistics suggest, our economic relations with Mexico have cost our economy dearly.

If the U.S.-Mexico free-trade agreement is passed, as the Administration is pushing for, one should not expect an economic catastrophe. Rather, the slow and steady erosion in the earning power of the average U.S. worker, which began in the 1970s, will continue. Average weekly earnings in the United States declined by nearly 5% (adjusted for inflation) from 1986 through 1990--during the “Reagan boom.”

As more U.S.-based corporations slip across the border in the aftermath of the free-trade agreement, this tendency will be accelerated. The broad mass market for U.S. products will be undercut by the restricted purchasing power of the U.S. workers whose jobs will be lost to Mexican workers--who still will toil for one-tenth of average U.S. wages.