N. American Free Trade Progress Seen : Negotiations: After two days of meetings, draft texts of an agreement are ordered by U.S., Canadian and Mexican officials.

Top U.S., Mexican and Canadian trade officials Sunday instructed their negotiators to begin preparing draft texts of the proposed North American trade agreement.

“We have exchanged information and identified problems and are now ready to begin working on concrete texts,” Mexican Commerce Minister Jaime Jose Serra-Puche told reporters at a joint press conference after two days of meetings in this picturesque old mining town north of Mexico City. He said progress was made toward reducing tariffs, although no timetables have been set.

U.S. Trade Representative Carla Anderson Hills, Canadian Commerce Minister Michael Wilson and Serra-Puche left their third meeting since the talks began in May, agreeing to take a regional approach to international competitiveness in textiles and the automotive industry.

“This was a large part of the discussion and it was extremely useful,” said a senior U.S. trade official, who spoke on condition that he would not be identified. No specific decisions were made on quotas or tariffs on those products, he said, adding: “We are dealing with sectors that are highly regulated and distorted.”

Those two industries are extremely sensitive in the United States and Canada, which already have a bilateral trade agreement. They also are top priorities for Mexican negotiators, who see them as sectors where their country has a good chance to be competitive internationally.

U.S. and Canadian auto and garment workers have been among the most vocal opponents of the proposed agreement to eliminate tariffs and other barriers to trade among the three North American countries.

Cars and auto parts are already one-fourth of Mexico’s manufactured exports, and $5 billion in new investments are expected in that industry over the next three years. A study by the respected Mexico City-based research college El Colegio de Mexico found that opening the border to automotive trade would benefit Mexico’s economy in an amount equal to 1% of the current gross domestic product, which is was $200.6 billion in 1989. According to the same study, doubling Mexico’s quota for textile exports and eliminating tariffs on textiles could add another percentage point.

However, Ward S. Connolly, a professor at Trinity College in San Antonio who has studied the effects of free trade, said it was unrealistic to expect that even a free-trade agreement would make North America competitive in those industries.

“The United States is already so far behind Japan in automobiles and other Asian countries in textiles that I don’t think North America can be a world-class competitor,” he said in a telephone interview. “There will be some positive effects, but they have such a long way to go, it will be very difficult.”

About two-thirds of Mexico’s foreign trade is with the United States. Mexico, in third place among U.S. trading partners, accounts for about 7% of U.S. foreign trade.

Hills denied that the United States is concentrating on the Uruguay Round of negotiations for the worldwide General Agreement on Tariffs and Trade, slowing progress in the regional talks among the United States, Canada and Mexico. “The Uruguay round would be a spectacular backdrop for what we are trying to accomplish here,” she said. “We will carry out both negotiations at the same time with great energy.”

The GATT talks are tackling some of the stickiest issues in the North American negotiations, such as agriculture and non-tariff barriers to trade. Negotiators had expected the international trade agreement to set a base for talks on those subjects.

The other area in which Serra-Puche reported progress was tariff reduction schedules, although he added that no timetables have been set.

A technical team is now going through the first offers presented last month by each country to see where the sensitive areas are and how many there are, the trade official said. Their conclusions will determine the timetables.

He noted that some provisions of the U.S.-Canada 2-year-old agreement call for 20-year phase-out periods on tariffs, and the current negotiators have agreed to consider transition periods longer than those in the bilateral agreement.

The U.S. offer includes provisions that will allow Mexico to continue to receive the tariff breaks it now enjoys as a developing country under the General System of Preferences, Hills said. Mexico exports more goods to the U.S. under that program than any other country.

The U.S. trade official said that tariffs will be the easiest part of the negotiations.

A Mexican observer, Alejandro Ibarra Yunez, a professor at the Monterrey Technical Institute, agreed, adding that non-tariff barriers are actually more important obstacles to free trade than tariffs in many cases.

While the average U.S. tariff is 3%, he estimated that non-tariff barriers add another 9% to 10% to the cost of Mexican exports to the United States. The comparable figures for Mexico are 9.7% and 7% to 15%.

Talks took place in a former bull ring that has been converted into a hotel, sealed off to all but the negotiators.

Free-trade opponents from all three countries held an alternative forum at the state university, blasting both the proposed agreement and the secrecy of the negotiations.

Just outside of town, the local campus of the private Monterrey Technical Institute organized a distinct type of symposium, with presentations by business people and economic researchers. They demanded changes in Mexico’s domestic policies that would allow the country to become more competitive.