Questioning Benefits of a Free Trade Pact

The media drumbeat over a free trade agreement between the United States and Mexico has reached deafening proportions.

Under this agreement, goods produced in either country would be allowed to enter the other duty-free. Capital investment would be allowed to enter either country without penalty.

The hype ignores the fact that the United States reached its peak in industrial production under tariff protection. Japan and Korea are prospering under government protection of their markets from invasion by outsiders.

A free trade agreement was enacted between the United States and Canada months ago. Thousands of high-paying jobs left Canada for the United States, where they could pay lower salaries.

Even before the enactment of a free trade agreement with Mexico, industries were leaving the United States. Green Giant closed its cannery in California, fired 450 workers and moved to Mexico. A furniture manufacturer in Los Angeles, claiming the burden of environmental cleanup, fired 450 workers and moved to Tijuana. The payroll was $148,500 here in Los Angeles, while in Tijuana it is about $28,500.

The lower costs of doing business in Mexico will induce American business to move there. For example, the U.S. wage rate for Ford production workers is $16.50 per hour. In the Ford plant in Hermosillo, Mexico, the rate is $1.03 per hour. The average production worker in the United States receives $13.90 per hour. In the maquiladora zone in Mexico, the average hourly rate is 56 cents.

No one should believe that Mexico will clean up its environment when American firms flee to that country because they claim the cleanup costs in the United States are prohibitive. Nor should anyone believe that consumers will benefit because of lower production costs in Mexico. Business charges customers what the traffic will bear.

Amid a recession the free trade agreement, with the possible exodus of American firms, can be a disaster for U.S. workers. Job losses would be devastating.

Also, to compete with U.S. firms operating in Mexico, businesses that remain in the United States would be forced to further cut wages, benefits and environmental safeguards. Now, with the prospect of a stagnant U.S. economy, a free trade agreement with Mexico is particularly dangerous.

STANLEY W. CATE

Los Angeles